SECURITIES PURCHASE AGREEMENT
DATED AS OF
JANUARY 31, 1996
BETWEEN
GOLDEN PRESS HOLDING, L.L.C.
AND
WESTERN PUBLISHING GROUP, INC.
TABLE OF CONTENTS
Page
ARTICLE I. SALE AND PURCHASE
Section 1.1. Agreement to Sell and to Purchase............... 3
Section 1.2. Closing......................................... 3
Section 1.3. Purchase Price.................................. 3
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF BUYER
Section 2.1. Organization and Qualification.................. 4
Section 2.2. Authority Relative to this Agreement............ 4
Section 2.3. Financing Arrangements.......................... 5
Section 2.4. Investment Intent............................... 5
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1. Organization and Qualification.................. 5
Section 3.2. Capitalization.................................. 6
Section 3.3. Subsidiaries and Equity Investments............. 7
Section 3.4. Authority Relative to this Agreement............ 8
Section 3.5. Reports and Financial Statements; Undisclosed
Liabilities.................................... 9
Section 3.6. Absence of Certain Changes or Events............ 11
Section 3.7. Litigation...................................... 11
Section 3.8. Disclosure...................................... 11
Section 3.9. Employee Benefit Plans.......................... 12
Section 3.10. ERISA.......................................... 13
Section 3.11. Compliance with Applicable Laws................ 15
Section 3.12. Taxes.......................................... 15
Section 3.13. Certain Agreements............................. 16
Section 3.14. Takeover Provisions Inapplicable............... 17
Section 3.15. Company Action................................. 17
Section 3.16. Fairness Opinions.............................. 17
Section 3.17. Financial Advisors; Expenses................... 18
Section 3.18. Title to Property.............................. 18
Section 3.19. Intellectual Property.......................... 18
Section 3.20. Licenses, Permits and Authorizations........... 19
Section 3.21. Insurance...................................... 20
Section 3.22. Environment.................................... 20
Section 3.23. Related Party Transactions..................... 21
Section 3.24. No Company Material Adverse Effect............. 21
ARTICLE IV. CONDUCT OF BUSINESS PENDING THE SALE AND PURCHASE
Section 4.1. Conduct of Business by the Company.............. 22
Section 4.2. Notice of Breach................................ 25
ARTICLE V. ADDITIONAL AGREEMENTS
Section 5.1. Access and Information.......................... 26
Section 5.2. Company Proxy Statement......................... 26
Section 5.3. Stockholders' Meeting........................... 27
Section 5.4. HSR Act......................................... 28
Section 5.5. Additional Agreements........................... 28
i
Section 5.6. No Solicitation.................................. 28
Section 5.7. Transfer Restriction............................. 29
Section 5.8. Director and Officer Indemnification and
Insurance....................................... 30
Section 5.9. Board of Directors............................... 30
Section 5.10. Redemption of Company Preferred Stock........... 31
Section 5.11. Expenses........................................ 31
Section 5.12. Related Party Transactions...................... 31
Section 5.13. ▇▇▇▇▇ Termination............................... 31
ARTICLE VI. CONDITIONS PRECEDENT
Section 6.1. Conditions to Each Party's Obligation to Effect
the Sale and Purchase............................ 32
Section 6.2. Conditions to Obligation of the Company to Effect
the Sale and Purchase........................... 32
Section 6.3. Conditions to Obligations of Buyer to Effect the
Sale and Purchase............................... 33
ARTICLE VII. TERMINATION, AMENDMENT AND WAIVER
Section 7.1. Termination..................................... 34
Section 7.2. Effect of Termination........................... 36
Section 7.3. Amendment....................................... 36
Section 7.4. Waiver.......................................... 36
ARTICLE VIII. GENERAL PROVISIONS
Section 8.1. Non-Survival of Representations, Warranties and
Agreements...................................... 37
Section 8.2. Notices.......................................... 37
Section 8.3. Expenses; Termination Fees....................... 38
Section 8.4. Publicity........................................ 39
Section 8.5. Specific Performance............................. 40
Section 8.6. Interpretation................................... 40
Section 8.7. Miscellaneous.................................... 40
Exhibit A -- Form of Series B Certificate of Designations
Exhibit B -- Form of Warrant
Exhibit C -- Form of Registration Rights Agreement
Exhibit D -- Form of Opinion of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
Exhibit E -- Form of Opinion of Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇
ii
INDEX OF DEFINED TERMS
PAGE
Beneficial ownership........................................... 36
▇▇▇▇▇▇▇▇▇...................................................... 5
Business Combination Proposal.................................. 26
Buyer.......................................................... 1
Buyer Disclosure Schedule...................................... 3
Buyer Material Adverse Effect.................................. 3
CERCLA......................................................... 18
Closing........................................................ 2
Closing Date................................................... 2
Code........................................................... 11
Commission..................................................... 6
Companies...................................................... 6
Company Benefit Plans.......................................... 10
Company Common Stock........................................... 1
Company Disclosure Schedule.................................... 4
Company Material Adverse Effect................................ 4
Company Meeting................................................ 24
Company Preferred Stock........................................ 5
Company Proxy Statement........................................ 10
Company SEC Reports............................................ 8
Company Voting Matters......................................... 25
Confidentiality Agreement...................................... 23
Continuing Directors........................................... 27
Environmental Laws............................................. 18
ERISA.......................................................... 10
Exchange Act................................................... 3
Excluded_Employees............................................. 20
Expenses....................................................... 34
GAAP........................................................... 8
Governmental Entity............................................ 13
HSR Act........................................................ 3
Intellectual Property.......................................... 16
Interim SEC Reports............................................ 8
Irrevocable Proxies............................................ 31
▇▇▇▇▇.......................................................... 11
New Preferred Shares........................................... l
New Preferred Stock............................................ l
Purchase Price................................................. 2
Registration Rights Agreement.................................. 3
Securities Act................................................. 3
Series B Certificate of Designations........................... 1
Significant Agreements......................................... 14
Significant Subsidiary......................................... 6
▇▇▇▇▇▇......................................................... 19
Stock Option Plan.............................................. 5
Subsidiaries................................................... 6
Subsidiary..................................................... 6
Superior Proposal.............................................. 26
Tax_Subsidiaries............................................... 13
Third Party.................................................... 35
Third Party Business Combination............................... 35
Warrant........................................................ l
WPV............................................................ 25
iii
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of January 31,
1996, between Western Publishing Group, Inc., a Delaware corporation (the
"Company"), and Golden Press Holding, L.L.C., a Delaware limited liability
company ("Buyer").
W I T N E S S E T H:
WHEREAS, the Company desires to create a series of its
Preferred Stock, no par value, consisting of 13,000 shares ("New Preferred
Shares") designated as its "Series B Convertible Preferred Stock" (the "New
Preferred Stock"). The terms, limitations and relative rights and preferences of
the New Preferred Stock are set forth in the Certificate of Designations,
Number, Voting Powers, Preferences and Rights of Series B Convertible Preferred
Stock of the Company, substantially in the form of Exhibit A attached hereto
(the "Series B Certificate of Designations");
WHEREAS, the Company desires to issue a warrant (the
"Warrant") to purchase an aggregate of 3,250,000 shares (subject to adjustment)
of the common stock, par value $.01 per share, of the Company ("Company Common
Stock"), substantially in the form of Exhibit B attached hereto;
WHEREAS, Buyer desires to purchase the New Preferred Shares
and the Warrant from the Company, and the Company desires to sell the New
Preferred Shares and the Warrant to Buyer, in each case upon the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, the members of Buyer and the Board of Directors of
the Company have approved, and deem it advisable and in the best interests of
their members and stockholders, respectively, to consummate the purchase and
sale of the New Preferred Shares and the Warrant, upon the terms and subject to
the conditions set forth herein; and
WHEREAS, the Board of Directors of the Company, subject to
Section 5.3 hereof, has resolved to recommend approval of the purchase and sale
of the New Preferred Shares and the Warrant and the other transactions
contemplated herein to the holders of all the issued and outstanding shares of
Company Common Stock;
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein,
1
and for other good and valuable consideration, the parties hereto agree as
follows:
2
ARTICLE I.
SALE AND PURCHASE
Section 1.1. Agreement to Sell and to Purchase. On the
Closing Date (as defined below) and upon the terms and subject to
the conditions set forth in this Agreement, the Company shall
issue, sell, and deliver the New Preferred Shares and the Warrant
to Buyer, and Buyer shall purchase and accept the New Preferred
Shares and the Warrant from the Company.
Section 1.2. Closing. The closing of such sale and
purchase (the "Closing") shall take place (i) at the offices of
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇, at 10:00 a.m. on the day on which the last of the
conditions set forth in Article VI is satisfied or waived, or
(ii) at such other time and place as the parties hereto shall
agree in writing. The date on which the Closing is to occur is
herein referred to as the "Closing Date."
At the Closing, the Company shall deliver to Buyer or
its designees a stock certificate representing the New Preferred
Shares and the Warrant, each of which shall be duly executed on
behalf of the Company and registered in the name of Buyer (or its
nominee). In full consideration for the New Preferred Shares and
the Warrant, Buyer shall thereupon pay to the Company the
Purchase Price (as defined below) as provided in Section 1.3
hereof.
Section 1.3. Purchase Price. The aggregate purchase
price for the New Preferred Shares and the Warrant ("Purchase
Price")shall be $65,000,000. At the Closing, Buyer shall deliver
to the Company $65,000,000 by wire transfer of immediately
available funds to such account as the Company shall designate
not less than three business days prior to the Closing Date.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company as follows:
3
Section 2.1. Organization and Qualification. Buyer is
a limited liability company duly authorized and validly existing
under the laws of the state of Delaware and has the requisite
power to carry on its business as it is now being conducted and
currently proposed to be conducted. Buyer is duly qualified 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 would not,
individually or in the aggregate, reasonably be expected to have
a material adverse effect on its business, properties, assets,
condition (financial or otherwise), liabilities or operations (a
"Buyer Material Adverse Effect"). Complete and correct copies as
of the date hereof of the certificate of formation of Buyer have
been delivered to the Company as part of a disclosure schedule
delivered by Buyer to the Company on the date of this Agreement
(the "Buyer Disclosure Schedule").
Section 2.2. Authority Relative to this Agreement.
Buyer has the requisite power to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery
of this Agreement and the Registration Rights Agreement between
the Company and Buyer to be entered into on the Closing Date (the
"Registration Rights Agreement"), substantially in the form of
Exhibit C attached hereto, and the consummation of the
transactions contemplated hereby and thereby have been duly
authorized by all necessary actions on the part of Buyer. This
Agreement and the Registration Rights Agreement, upon its
execution, each constitute a valid and binding obligation of
Buyer, enforceable in accordance with its terms except as
enforcement may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights
generally and except that the availability of equitable remedies,
including specific performance, is subject to the discretion of
the court before which any proceeding therefor may be brought.
No other proceedings on the part of Buyer are necessary to
authorize this Agreement or the Registration Rights Agreement and
the transactions contemplated hereby and thereby. Buyer is not
subject to or obligated under (i) any operating agreement,
indenture or other loan document provision or (ii) any other
contract, license, franchise, permit, order, decree, concession,
lease, instrument, judgment, statute, law, ordinance, rule or
regulation applicable to Buyer or its properties or assets, that
would be breached or violated, or under which there would be a
default (with or without notice or lapse of time, or both), or
under which there would arise a right of termination,
cancellation or acceleration of any obligation or the loss of a
4
material benefit, by its executing and carrying out this
Agreement other than, in the case of clause (ii) only, (A) any
breaches, violations, defaults, terminations, cancellations,
accelerations or losses which, either singly or in the aggregate,
will not have a Buyer Material Adverse Effect or prevent the
consummation of the transactions contemplated hereby and (B) the laws
and regulations referred to in the next sentence. Except as
disclosed in Section 2.2 of the Buyer Disclosure Schedule or, in
connection, or in compliance, with the provisions of the ▇▇▇▇-
▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), the Securities Act of 1933, as amended (the "Securities
Act"), the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the corporation, securities or blue sky laws or
regulations of the various states, no filing or registration with, or
authorization, consent or approval of, any
public body or authority is necessary for the consummation by
Buyer of the transactions contemplated by this Agreement, other
than filings, registrations, authorizations, consents or
approvals the failure of which to make or obtain would not
reasonably be expected to have a Buyer Material Adverse Effect or
prevent the consummation of the transactions contemplated hereby.
Section 2.3. Financing Arrangements. Buyer has funds
available to it sufficient to effect the transactions
contemplated by this Agreement.
Section 2.4. Investment Intent. Buyer is acquiring
the New Preferred Shares and the Warrant for investment for its
own (or an affiliate's) account, not as a nominee or agent and
not with a view to the distribution of any part thereof in
violation of law. Buyer has no present intention of selling,
granting any participation in, or otherwise distributing the
same.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer as
follows:
Section 3.1. Organization and Qualification. The
Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the
corporate power to carry on its business as it is now being
conducted and currently proposed to be conducted. The Company is
5
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 would not reasonably be expected to
have a material adverse effect on the business, properties,
assets, condition (financial or otherwise), liabilities or
operations of the Company and its subsidiaries taken as a whole
(a "Company Material Adverse Effect"). Complete and correct
copies as of the date hereof of the Restated Certificate of
Incorporation and By-laws of the Company and each of its
subsidiaries have been delivered to Buyer or its representatives
as part of a disclosure schedule delivered by the Company to
Buyer on the date of this Agreement (the "Company Disclosure
Schedule").
Section 3.2. Capitalization. The authorized capital
stock of the Company consists of 40,000,000 shares of Company
Common Stock and 100,000 shares of preferred stock, no par value.
As of the date hereof, 21,276,074 shares of Company Common Stock
are validly issued and outstanding, fully paid and nonassessable
(which figure does not include shares issued upon exercise of
employee stock options granted after October 28, 1995), 208,800
shares of Company Common Stock are held in the Company's
treasury, 19,970 shares of preferred stock designated as Series A
Preferred Stock ("Company Preferred Stock") are outstanding, and
no shares of Company Preferred Stock are held in the Company's
treasury. As of October 28, 1995, employee stock options to
acquire up to 1,705,300 shares of Company Common Stock were
outstanding, and employee stock options to purchase 311,500
shares of Company Common Stock were issued from such date through
the date hereof. As of the date hereof, there are no bonds,
debentures, notes or other evidences of indebtedness having the
right to vote on any matters on which the Company's stockholders
may vote issued or outstanding. As of the date hereof, except
for (i) options to acquire up to 1,725,133 shares of Company
Common Stock issued to employees of the Company pursuant to the
Amended and Restated 1986 Employee Stock Option Plan of the
Company (the "Stock Option Plan") and (ii) 416,042 shares of
Company Common Stock issuable upon conversion of the Company
Preferred Stock, there are no options, warrants, calls or other
rights, agreements or commitments outstanding obligating the
Company to issue, deliver or sell shares of its capital stock or
debt securities, or obligating the Company to grant, extend or
enter into any such option, warrant, call or other such right,
agreement or commitment. Section 3.2 of the Company Disclosure
Schedule sets forth a complete and correct list of (a) all
agreements, offering memoranda, registration statements,
prospectuses or offering circulars concerning sales or attempted
sales of the Company's
6
securities (whether by the Company or by a substantial
stockholder) since January 1, 1992 and (b) all written proposals
concerning the acquisition or proposed acquisition of the
Company's securities since January 1, 1992. As of the date
hereof, the New Preferred Shares, including the Series B
Certificate of Designations, and the Warrant were duly authorized
by the Company's Board of Directors. On or prior to the Closing
Date, assuming approval of the Company Voting Matters (as defined
in Section 5.3 hereof) by holders of the Company Common Stock,
the Series B Certificate of Designations will have become
effective in accordance with the DGCL, and all of the New
Preferred Shares and all of the shares of Company Common Stock
issuable in payment of dividends in respect of or upon conversion
of the New Preferred Shares and upon exercise of the Warrant will
be, when so issued, duly authorized, validly issued, fully paid
and nonassessable and shall be delivered free and clear of all
liens, claims, charges and encumbrances of any kind or nature
whatsoever. The Company has duly reserved 3,250,000 shares of
Company Common Stock for issuance upon exercise of the Warrant
and 9,620,000 shares of Company Common Stock for issuance upon
conversion of the New Preferred Stock and upon payment of stock
dividends in respect thereof. The Company has not agreed to
register any securities under the Securities Act (other than
pursuant to the Registration Rights Agreement and the
Registration Rights Agreement, dated as of even date herewith,
between ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇") and certain of his
affiliates and the Company).
Section 3.3. Subsidiaries and Equity Investments.
(a) Section 3.3 of the Company Disclosure Schedule
sets forth (i) the name of each corporation that is a
"Significant Subsidiary" (as such term is defined in Rule 1-02 of
Regulation S-X of the Securities and Exchange Commission (the
"Commission") (such subsidiaries hereinafter referred to
collectively as "Subsidiaries" and individually as a
"Subsidiary", and collectively with the Company, the
"Companies")), (ii) the name of each corporation, partnership,
joint venture or other entity (other than the Subsidiaries) in
which any of the Companies has, or pursuant to any agreement has
the right or obligation to acquire at any time by any means,
directly or indirectly, an equity interest or investment; (iii)
in the case of each of such corporations described in clauses (i)
and (ii) above, (A) the jurisdiction of incorporation, (B) the
capitalization thereof and the percentage of each class of voting
capital stock owned by any of the Companies, (C) a description of
any contractual limitations on the holder's ability to vote or
alienate such securities, (D) a
7
description of any outstanding options or other rights to acquire
securities of such corporation, and (E) a description of any
other contractual charge or impediment which would materially
limit or impair any of the Companies' ownership of such entity or
interest or its ability effectively to exercise the full rights
of ownership of such entity or interest; and (iv) in the case of
each of such unincorporated entities, information substantially
equivalent to that provided pursuant to clause (iii) above with
regard to corporate entities.
(b) Each Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate
power and authority to own its properties and assets and to
conduct its business as now conducted. Each Subsidiary is duly
qualified to do business as a foreign corporation in every
jurisdiction in which the character of the properties owned or
leased by it or the nature of the business conducted by it makes
such qualification necessary, except where the failure to be so
qualified would not reasonably be expected to have a Company
Material Adverse Effect. All the outstanding shares of capital
stock of each Subsidiary have been duly authorized and validly
issued, are fully paid and non-assessable, and (except as
specified in Section 3.3 of the Company Disclosure Schedule) are
owned of record and beneficially, directly or indirectly, by the
Company, free and clear of any liens, claims, charges, security
interests or other legal or equitable encumbrances, limitations
or restrictions. There are no outstanding options, warrants,
agreements, conversion rights, preemptive rights or other rights
to subscribe for, purchase or otherwise acquire any issued or
unissued shares of capital stock of any Subsidiary. Except as
set forth in the Company's Annual Report on Form 10-K for the
fiscal year ended January 28, 1995 or as disclosed in Section 3.3
of the Company Disclosure Schedule, the Company does not own,
directly or indirectly, any interest in any other corporation,
partnership, joint venture or other business association or
entity.
Section 3.4. Authority Relative to this Agreement.
The Company has the corporate power to enter into this Agreement
and the Registration Rights Agreement and to issue the Warrant
and, subject to approval of the Company Voting Matters by holders
of the Company Common Stock, to carry out its obligations
hereunder and thereunder. The execution and delivery of this
Agreement, the Registration Rights Agreement and the Warrant and
the consummation of the transactions contemplated hereby and
thereby have been duly authorized by the Company's Board of
Directors. Each of this Agreement, the Registration Rights
Agreement (when executed) and the Warrant (when issued)
constitutes a valid and binding obligation of the Company
enforceable in accordance with its terms except as enforcement
may be limited by bankruptcy, insolvency or other similar laws
8
affecting the enforcement of creditors' rights generally and
except that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court
before which any proceeding therefor may be brought. Except for
the approval of the holders of Company Common Stock described in
Section 5.3, no other proceedings on the part of the Company are
necessary to authorize this Agreement, the Registration Rights
Agreement and the Warrant and the transactions contemplated
hereby and thereby.
Except as set forth in Section 3.4 of the Company Disclosure
Schedule, neither the Company nor any subsidiary is subject to or
obligated under (i) any charter, by-law, indenture or other loan
document provision or (ii) any other contract, license,
franchise, permit, order, decree, concession, lease, instrument,
judgment, statute, law, ordinance, rule or regulation applicable
to the Company or any of its subsidiaries or their respective
properties or assets, that would be breached or violated, or
under which there would be a default (with or without notice or
lapse of time, or both), or under which there would arise a right
of termination, cancellation or acceleration of any obligation or
the loss of a material benefit, or a right to receive a severance
or other similar payment, by its executing and carrying out this
Agreement and the transactions contemplated herein, except, in
the case of clause (ii), where such breach, violation or default
would not reasonably be expected to have a Company Material
Adverse Effect. Except as disclosed in Section 3.4 of the
Company Disclosure Schedule or, in connection, or in compliance,
with the provisions of the HSR Act, the Securities Act, the
Exchange Act, and the corporation, securities or blue sky laws or
regulations of the various states, no filing or registration
with, or authorization, consent or approval of, any public body
or authority is necessary for the consummation by the Company of
the transactions contemplated hereby, except where the failure to
so file or register or to receive an authorization, consent or
approval would not reasonably be expected to have a Company
Material Adverse Effect.
Section 3.5. Reports and Financial Statements;
Undisclosed Liabilities.
(a) The Company has furnished Buyer with true and
complete copies of its (i) Annual Reports on Form 10-K for the
fiscal years ended January 29, 1994 and January 28, 1995, as
filed with the Commission, (ii) Quarterly Reports on Form 10-Q
for the quarters ended April 29, 1995, July 29, 1995 and October
28, 1995, as filed with the Commission, (iii) proxy statements
related to all meetings of its stockholders (whether annual or
special) held since January 1, 1993 and (iv) all other reports
filed with, or registration statements declared effective by, the
Commission since December 31, 1992, except registration
statements on Form S-8 relating to employee benefit plans, which
9
are all the documents (other than preliminary material) that the
Company filed or was required to file with the Commission from
that date through the date hereof (clauses (i) through (iv) being
referred to herein collectively as the "Company SEC Reports").
From the date hereof through the Closing Date, the Company will
furnish to Buyer copies of any reports and registration
statements to be filed with the Commission (the "Interim SEC
Reports") within a reasonable amount of time prior to filing
thereof. As of the their respective dates, the Company SEC
Reports (or the Interim SEC Reports, as the case may be) complied
in all material respects with the requirements of the Securities
Act or the Exchange Act, as the case may be, and the rules and
regulations of the Commission thereunder applicable to such
reports and registration statements. As of their respective
dates, the Company SEC Reports (or the Interim SEC Reports, as
the case may be) did not contain any untrue statement of a
material fact or omit 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, or will be,
made, not misleading. The audited consolidated financial
statements and unaudited interim financial statements of the
Company included in the Company SEC Reports (or the Interim SEC
Reports, as the case may be) comply as to form in all material
respects with applicable accounting requirements of the
Securities Act or the Exchange Act, as applicable, and with the
published rules and regulations of the Commission with respect
thereto. The financial statements and the condensed financial
statements, as applicable, included in the Company SEC Reports
(or in the Interim SEC Reports, as the case may be) (i) have been
prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis (except as may
be indicated therein or in the notes thereto), (ii) present
fairly, in all material respects, the financial position of the
Company and its subsidiaries as at the dates thereof and the
results of their operations and cash flows for the periods then
ended subject, in the case of the unaudited interim financial
statements, to normal year-end audit adjustments and any other
adjustments described therein and the fact that certain
information and notes have been condensed or omitted in
accordance with the Exchange Act and the rules promulgated
thereunder, and (iii) are in all material respects in accordance
with the books and records of the Company.
(b) Except as set forth in Section 3.5(b) or Section
3.17 of the Company Disclosure Schedule and except for
indebtedness or liabilities that are reflected or reserved
against in the most recent financial statements included in the
Company SEC Reports or that have been incurred since October 28,
1995 in the ordinary course of business, the Company does not
have any liabilities, whether absolute, accrued, contingent or
otherwise.
10
Section 3.6. Absence of Certain Changes or Events.
Except as disclosed in the Company SEC Reports or as disclosed in
Section 3.6 of the Company Disclosure Schedule and except for the
transactions contemplated by this Agreement, since October 28,
1995, there has not been (i) any transaction, commitment, dispute
or other event or condition (financial or otherwise) of any
character (whether or not in the ordinary course of business)
individually or in the aggregate having, or which could
reasonably be expected to have, a Company Material Adverse Effect
(other than as a result of changes in laws or regulations of
general applicability), (ii) any damage, destruction or loss,
whether or not covered by insurance, which, individually or in
the aggregate, has had or, insofar as reasonably can be foreseen,
in the future would reasonably be expected to have, a Company
Material Adverse Effect, or (iii) any entry into any commitment
or transaction material to the Company and its subsidiaries taken
as a whole (including, without limitation, any borrowing or sale
or purchase of assets) except in the ordinary course of business
consistent with past practice.
Section 3.7. Litigation. Except as disclosed in the
Company's Annual Report on Form 10-K for the year ended January
28, 1995, or the Company's Quarterly Reports on Form 10-Q for the
quarters ended April 29, 1995, July 29, 1995 and October 28,
1995, or as disclosed in Section 3.7 of the Company Disclosure
Schedule, there is no claim, suit, action or proceeding pending
or, to the knowledge of the Company, threatened against or
affecting the Company or any subsidiary which, either alone or in
the aggregate, would reasonably be expected to have a Company
Material Adverse Effect, nor is there any judgment, decree,
injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or arbitrator outstanding
against the Company or any subsidiary having, or which in the
future could reasonably be expected to have, either alone or in
the aggregate, any such Company Material Adverse Effect.
Section 3.8. Disclosure. None of the information with
respect to the Company or its subsidiaries to be included or
incorporated by reference in the proxy statement of the Company,
including any amendments or supplements thereto (collectively,
the "Company Proxy Statement"), to be mailed to the stockholders
of the Company in connection with the transactions contemplated
herein will, at the time of the mailing of the Company Proxy
Statement and at the time of the Company Meeting (as defined in
Section 5.3), contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading;
11
provided, however, that this provision shall not apply to
statements or omissions in the Company Proxy Statement based upon
information expressly furnished by or on behalf of Buyer for use
therein. The Company Proxy Statement will comply as to form in
all material respects with the provisions of the Exchange Act and
the rules and regulations thereunder. No representation or
warranty made by the Company contained in this Agreement and no
statement contained in any certificate, list, exhibit or other
instrument specified in this Agreement, including without
limitation the Company Disclosure Schedule, contains any untrue
statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained therein,
in light of the circumstances under which they were made,
not misleading, and no fact or circumstance exists or has
occurred which has, or in the future can reasonably be expected
to have, a Company Material Adverse Effect which has not been
disclosed in this Agreement, the Company Disclosure Schedule or
the Company SEC Reports. Prior to the date hereof, the Company
has provided or made available to Buyer or its representatives
complete and accurate copies of (i) all unredacted minutes of
meetings and written consents of the Board of Directors of the
Company and committees thereof since January 1, 1993 and (ii) all
documents and agreements, including any amendments, renewals or
modifications thereof, referenced in the Company Disclosure
Schedule.
Section 3.9. Employee Benefit Plans. (a) Except as
disclosed in the Company SEC Reports or as disclosed in Section
3.9(a) of the Company Disclosure Schedule, there are no material
employee benefit or compensation plans, agreements or
arrangements, including, but not limited to, "employee benefit
plans," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and including,
but not limited to, plans, agreements or arrangements relating to
former employees, including, but not limited to, retiree medical
plans, maintained by the Company or any of its subsidiaries or to
which the Company or any of its subsidiaries has an obligation to
make contributions or material collective bargaining agreements
to which the Company or any of its subsidiaries is a party
(together, "Company Benefit Plans"). No default exists with
respect to the obligations of the Company or any of its
subsidiaries under any such Company Benefit Plan, which default,
either alone or in the aggregate, would reasonably be expected to
have a Company Material Adverse Effect. Since January 1, 1993,
there have been no disputes or grievances subject to any
grievance procedure, unfair labor practice proceedings,
arbitration or litigation under such Company Benefit Plans, that
have not been finally resolved, settled or otherwise disposed of,
nor is there any default, or any condition which, with notice or
lapse of time or both, would constitute such a default, under any
such Company
12
Benefit Plans, by the Company or its subsidiaries or, to the best
knowledge of the Company, any other party thereto, which failure
to resolve, settle or otherwise dispose of or default, either
alone or in the aggregate, would reasonably be expected have a
Company Material Adverse Effect. Since January 1, 1993 there
have been no strikes, lockouts or work stoppages or slowdowns, or
to the best knowledge of the Company and its subsidiaries,
jurisdictional disputes or organizing activity occurring or
threatened with respect to the business or operations of the
Company or its subsidiaries that, individually or in the
aggregate, have had or would reasonably be expected to have a
Company Material Adverse Effect.
(b) All of the approximately 175 employees of the
Company or its subsidiaries who, pursuant to letters distributed
in December 1993, were made beneficiaries of certain benefits
payable upon a "change of control" of the Company have
subsequently received letters in July 1994 effectively
terminating such benefits, and no such person has or will, or
could in the future, under any circumstances, become eligible for
such benefits. Section 3.9(b) of the Company Disclosure Schedule
sets forth in reasonable detail the amount of benefits that would
have been payable to such beneficiaries who are employed by the
Company or any of its subsidiaries on the date hereof pursuant to
such letters had all the requisite conditions therefor been
subsequently satisfied in December 1993 and assuming that such
benefits had never been revoked.
(c) The employment of ▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇") with the
Company and its subsidiaries was terminated as of January 26,
1996. The terms of such termination are set forth in Section
3.9(c) of the Company Disclosure Schedule.
Section 3.10. ERISA. All Company Benefit Plans have
been administered in accordance with, and are in compliance with,
the applicable provisions of ERISA, the Internal Revenue Code of
1986, as amended (the "Code") and all other Laws, domestic or
foreign, except where such failures to administer or comply would
not reasonably be expected to have a Company Material Adverse
Effect. Except as disclosed in Section 3.10 of the Company
Disclosure Schedule, each of the Company Benefit Plans which is
intended to meet the requirements of Section 401(a) of the Code
has been determined, or, as described in Section 3.10 of the
Company Disclosure Schedule, is in the process of being
determined by the Internal Revenue Service to be "qualified,"
within the meaning of such section of the Code, and the Company
knows of no fact which is likely to have an adverse effect on the
qualified status of such plans, including any failure to request
a determination letter from the Internal Revenue Service
regarding any such plan's compliance with the applicable
requirements of the Tax Reform Act of 1986 within the Code
Section 401(b) remedial amendment period.
13
None of the Company Benefit Plans which are defined
benefit pension plans have incurred any "accumulated funding
deficiency" (whether or not waived) as that term is defined in
Section 412 of the Code and, as disclosed in the Coopers &
▇▇▇▇▇▇▇ actuarial report dated April 7, 1995 delivered by the
Company to the Buyer prior to the date hereof, the fair market
value of the assets of each such plan equal or exceed the accrued
liabilities of such plan. To the best knowledge of the Company,
there are not now nor have there been any non-exempt "prohibited
transactions," as such term is defined in Section 4975 of the
Code or Section 406 of ERISA, involving the Company's Benefit
Plans which could subject the Company, its subsidiaries or Buyer
to the penalty or tax imposed under Section 502(i) of ERISA or
Section 4975 of the Code and which would reasonably be expected
to have a Company Material Adverse Effect. Except as set forth
in Section 3.10 of the Company Disclosure Schedule, no Company
Benefit Plan which is subject to Title IV of ERISA has been
completely or partially terminated; no proceedings to completely
or partially terminate any Company Benefit Plan have been
instituted by the Pension Benefit Guaranty Corporation under
Title IV of ERISA; and no reportable event within the meaning of
Section 4043(c) of ERISA has occurred with respect to any Company
Benefit Plan. Neither the Company nor any of its subsidiaries
has any outstanding liability under Section 4062, 4063 or 4064 of
ERISA with respect to any "single-employer plan", as defined in
Section 4001(a)(15) of ERISA, and, to the best knowledge of the
Company, no event has occurred which could reasonably be expected
to result in any such liability except for any such liability
which would not reasonably be expected to have a Company Material
Adverse Effect. Neither the Company nor any of its subsidiaries
has made a complete or partial withdrawal, within the meaning of
Section 4201 of ERISA, from any "multiemployer plan", as defined
in Section 4001(a)(3) of ERISA, which has resulted in, or is
reasonably expected to result in, any withdrawal liability to the
Company or any of its subsidiaries except for any such liability
which would not reasonably be expected to have a Company Material
Adverse Effect. Neither the Company nor any of its subsidiaries
has engaged in any transaction described in Section 4069 of ERISA
within the last five years except for any such transaction which
would not reasonably be expected to have a Company Material
Adverse Effect. The Company and its subsidiaries have complied
with all requirements of the Worker Adjustment and Retraining
Notification Act and any similar state or local "plant closing"
law with respect to the employees of the Company and its
subsidiaries, except for such failures to comply as would not
reasonably be expected to have a Company Material Adverse Effect.
Except as disclosed in Section 3.10 of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will
(i) result in any payment becoming due to any current, former or
retired employee of the Company and its subsidiaries, (ii)
increase any benefits otherwise payable under any Company Benefit
14
Plan or (iii) result in the acceleration of the time for payment
or vesting of any benefits under any Company Benefit Plan.
Section 3.11. Compliance with Applicable Laws. Except
as disclosed in the Company SEC Reports filed prior to the date
of this Agreement or in Section 3.11 of the Company Disclosure
Schedule, the businesses of the Company and its subsidiaries are
not being conducted in violation of any law, ordinance,
regulation, order or writ of any governmental or regulatory
authority, domestic or foreign ("Governmental Entity"), except
for possible violations that individually or in the aggregate do
not and would not reasonably be expected to have a Company
Material Adverse Effect. Neither the Company nor any of its
subsidiaries has received notice of violation of any law,
ordinance, regulation, order or writ, or is in default with
respect to any order, writ, judgment, award, injunction or decree
of any Governmental Entity, that would affect any of their
respective assets, properties or operations, except for such
violations or defaults as would not, individually or in the
aggregate, reasonably be expected to have a Company Material
Adverse Effect. Except as disclosed in Section 3.11 of the
Company Disclosure Schedule, no investigation or review by any
Governmental Entity with respect to the Company or any of its
subsidiaries (a) is pending, nor (b) to the knowledge of the
Company, (i) is threatened nor (ii) has any Governmental Entity
indicated an intention to conduct the same, other than those the
outcome of which would not reasonably be expected to have a
Company Material Adverse Effect. Section 3.11 of the Company
Disclosure Schedule sets forth a complete and correct list as of
the date hereof of all material filings and correspondence with,
reports to, and transcripts of any significant proceedings
(including dates thereof) before, any Governmental Entity since
January 1, 1993.
Section 3.12. Taxes.
(a) Each of the Company and the subsidiaries of which
it owns 50% or more of the capital stock (the "Tax Subsidiaries")
has filed all tax returns required to be filed by any of them and
has paid (or the Company has paid on its behalf), or has set up
an adequate reserve for the payment of, all taxes required to be
paid in respect of the periods covered by such returns, except
where the failure to pay would not reasonably be expected to have
a Company Material Adverse Effect. The information contained in
such tax returns is true, complete and accurate in all material
respects, except where a failure to be so would not reasonably be
expected to have a Company Material Adverse Effect. Except as
disclosed in Section 3.12 of the Company Disclosure Schedule,
neither the Company nor any Tax Subsidiary is delinquent in the
payment of
15
any assessed tax or other assessed governmental charge, except
where such delinquency would not reasonably be expected to have a
Company Material Adverse Effect. Except as disclosed in Section
3.12 of the Company Disclosure Schedule, no deficiencies for any
taxes have been proposed, asserted or assessed against the
Company or any of its Tax Subsidiaries that have not been finally
settled or paid in full, which would reasonably be expected to
have a Company Material Adverse Effect, and no requests for
waivers of the time to assess any such tax are pending.
(b) Neither the Company nor any of its subsidiaries is
a party to any contract or arrangement which would result in an
"excess parachute payment" within the meaning of Section 280G of
the Code as a consequence of the transactions contemplated
hereby, assuming for this purpose satisfaction of the
requirements of Section 280(G)(b)(2)(A)(i) of the Code.
Section 3.13. Certain Agreements. Neither the Company
nor any of its subsidiaries is in default (or would be in default
with notice or lapse of time, or both) under, is in violation (or
would be in violation with notice or lapse of time, or both) of,
or has otherwise breached, any indenture, note, credit agreement,
loan document, lease, license or other agreement, including,
without limitation, any Significant Agreement (as defined below),
whether or not such default has been waived, which default, alone
or in the aggregate with all other such defaults, would
reasonably be expected to have a Company Material Adverse Effect.
Section 3.13(a) of the Company Disclosure Schedule contains a
complete and correct list as of the date hereof of each
agreement, contract and commitment of the following types,
written or oral, to which the Company or its subsidiaries is a
party or by which they or any of their assets are bound: (a)
mortgages, indentures, security agreements, guarantees, pledges
and other agreements and instruments relating to the borrowing of
money or extension of credit; (b) employment, severance and
material consulting agreements; (c) licenses of patent, trademark
and other rights relating to any Intellectual Property (as
defined below) and any other licenses, permits and authorizations
relating to the businesses of the Company and its subsidiaries
(whether as licensor or licensee) that involve by their terms a
per annum payment in excess of $100,000 or resulted in a payment
obligation in excess of $100,000 in the calendar year ended
December 31, 1995; (d) joint venture or partnership contract or
agreement; and (e) consignment sales contracts and franchise
agreements (whether as franchisor or franchisee) granting the
franchisee the privilege to sell the franchisor's products or
services in a specified geographic area ((a) through (e)
collectively, "Significant Agreements"). Prior to the date
hereof, the Company has delivered or made available to Buyer or
its representatives complete and correct copies of all written
Significant Agreements together will all amendments thereto, and
accurate descriptions
16
of all oral Significant Agreements. Each Significant Agreement
is in full force and effect and is binding upon the Company and,
to the Company's knowledge, is binding upon such other parties,
in each case in accordance with its terms. There are no material
unresolved disputes involving the Company or any of its
subsidiaries under any Significant Agreement.
Section 3.14. Takeover Provisions Inapplicable. As of
the date hereof and at all times on or prior to the Closing Date,
Section 203 of the DGCL is, and shall be, inapplicable to the
transactions contemplated by this Agreement (including the
granting of an irrevocable proxy by ▇▇▇▇▇▇▇▇▇ to Buyer). Section
3.14 of the Company Disclosure Schedule sets forth a complete and
correct copy of the resolutions of the Board of Directors of the
Company to the effect that such section of the DGCL is, and shall
be, inapplicable to the transactions contemplated by this
Agreement.
Section 3.15. Company Action. The Board of Directors
of the Company (at a meeting duly called and held) has by
unanimous vote of the directors (i) determined that the
transactions that are the subject of the Company Voting Matters
(as defined in Section 5.3 hereof) are advisable and in the best
interests of the Company and its stockholders, (ii) recommended
the approval of this Agreement, the transactions that are the
subject of the Company Voting Matters and the other matters to be
voted upon at the Company Meeting as contemplated hereby by the
holders of the Company Common Stock and directed that the
transactions that are the subject of the Company Voting Matters
and the other matters to be voted upon at the Company Meeting as
contemplated hereby be submitted for consideration by the
Company's stockholders at the Company Meeting, and (iii) adopted
a resolution having the effect of causing the Company not to be
subject, to the extent permitted by applicable law, to any state
takeover law that may purport to be applicable to the
transactions contemplated by this Agreement.
Section 3.16. Fairness Opinions. The Company has
received, and has furnished the Buyer with a complete and correct
copy of, the written opinion of each of Bear, ▇▇▇▇▇▇▇ & Co. Inc.
("Bear ▇▇▇▇▇▇▇") and Jefferies & Company, Inc. ("Jefferies"), the
financial advisors to the Company, dated the date hereof, to the
effect that the consideration to be received by the Company for
the New Preferred Shares and the Warrant is fair to the Company
from a financial point of view, and such opinions have not been
withdrawn or otherwise modified.
17
Section 3.17. Financial Advisors; Expenses.
(a) Except for Bear ▇▇▇▇▇▇▇ and Jefferies, a complete
and correct copy of the engagement letter between each of whom
and the Company has been furnished to Buyer, no broker, finder or
investment banker is entitled to any brokerage, finder's or other
fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
(b) The fees, costs and expenses (including without
limitation, all attorneys' and accountants' fees and expenses but
excluding the fees, costs and expenses incurred by Buyer and its
affiliates) incurred through the date hereof by each of the
Company and its subsidiaries, any committees of the Company's
Board of Directors and ▇▇▇▇▇▇▇▇▇ in connection with the
transactions contemplated hereby, including, without limitation,
all severance and related costs, consulting fees, payments made
for non-compete agreements and all fees and commissions
(including expenses) payable to Bear ▇▇▇▇▇▇▇ and Jefferies, as
well as a good faith projection of all such fees, costs and
expenses that will be incurred by each such party from the date
hereof through the Closing Date, are set forth in reasonable
detail on Section 3.17 of the Company Disclosure Schedule.
Section 3.18. Title to Property. Except as set forth
on Section 3.18 of the Company Disclosure Schedule, the Company
and its subsidiaries have good, marketable and unencumbered
title, or valid leasehold rights in the case of leased property,
to all real property and all personal property purported to be
owned or leased by them or that is required for the conduct of
the businesses of the Company or its subsidiaries as presently
conducted, free and clear of all liens, security interests,
claims, encumbrances and charges, excluding (i) liens for fees,
taxes, levies, duties or governmental charges of any kind that
are not yet delinquent or are being contested in good faith by
appropriate proceedings which suspend the collection thereof,
(ii) liens for mechanics, materialmen, laborers, employees,
suppliers or other liens arising by operation of law for sums
which are not yet delinquent or are being contested in good faith
by appropriate proceedings, (iii) easements and similar
encumbrances ordinarily created for ▇▇▇▇▇▇ utilization and
enjoyment of property, and (iv) liens or defects in title or
leasehold rights that, in the aggregate, do not and would not
reasonably be expected to have a Company Material Adverse Effect.
Section 3.19. Intellectual Property. The Companies
own or possess adequate licenses or other valid rights to use all
patents, patent rights, copyrights, service marks, service ▇▇▇▇
18
rights, trademarks, trademark rights, trade names, trade name
rights, proprietary characters and products (or any likeness or
other attribute thereof) and proprietary information used or held
for use in connection with the businesses of the Company and its
subsidiaries (collectively, the "Intellectual Property") as
currently being conducted and are unaware of any assertions or
claims challenging the validity of any of the foregoing that,
individually or in the aggregate, would reasonably be expected to
have a Company Material Adverse Effect; and the conduct of the
businesses of the Company and its subsidiaries as now conducted
or now proposed to be conducted by the Company does not and will
not conflict with any patents, patent rights, copyrights, service
marks, service ▇▇▇▇ rights, licenses, trademarks, trademark
rights, trade names, trade name rights or copyrights of others in
any way that would reasonably be expected to have a Company
Material Adverse Effect. No known existing infringement of any
proprietary right owned by or licensed by or to the Company and
its subsidiaries would reasonably be expected to have a Company
Material Adverse Effect. Other than as set forth in the Company
SEC Reports or Section 3.19 of the Company Disclosure Schedule,
neither the Company nor any of its subsidiaries, since January 1,
1993, has transferred, assigned, hypothecated or otherwise
disposed of any rights to use, produce, market or in any way
exploit through any electronic medium (including computer
software) any Intellectual Property. Except as set forth in
Section 3.19 of the Company Disclosure Schedule, neither the
Company nor any of its subsidiaries, orally or in writing, has
assigned, transferred, hypothecated or otherwise disposed of (or
agreed to do any of the foregoing) any of its rights with respect
to any Intellectual Property to any affiliates of the Company, or
any officers, directors or affiliates of any officers or
directors of the Company, except to wholly owned subsidiaries of
the Company or the Company.
Section 3.20. Licenses, Permits and Authorizations.
No license, permit or authorization that is currently held by the
Company or any of its subsidiaries with respect to the businesses
of the Company and its subsidiaries, or which is required for the
conduct of the businesses of the Company or its subsidiaries as
presently conducted, is subject to any restriction or condition
that limits in any material respect the businesses of the Company
and its subsidiaries as presently conducted, and there are no
applications by the Company or any of its subsidiaries with
respect to any material aspect of the businesses of the Company
or its subsidiaries, or complaints by other persons or entities
pending or threatened as of the date hereof before any
Governmental Entity relating to any material licenses, permits or
authorizations applicable to the businesses of the Company or its
subsidiaries, where such complaints have or would reasonably be
expected to have a Company Material Adverse Effect. The Company
has provided the Buyer or its representatives with copies of all
material licenses, permits, and authorizations
19
that are currently held by the Company or any of its
subsidiaries. Except as set forth on Section 3.20 of the Company
Disclosure Schedule, no consents or approvals of a Governmental
Entity are necessary for the material licenses, permits and
authorizations of the Companies to continue in full force and
effect following consummation of the transactions contemplated by
this Agreement.
Section 3.21. Insurance. The insurance policies in
force at the date hereof, with respect to the assets, properties
or operations of each of the Company and its subsidiaries are in
full force and effect with reputable insurers in such amounts and
insure against such losses and risks (including product
liability) as are consistent with historical practices and
customary to protect the properties and businesses of the Company
and its subsidiaries.
Section 3.22. Environment.
(a) As used herein, the term "Environmental Laws"
means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants,
contaminants, or industrial, toxic or hazardous substances or
wastes into the environment, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of chemicals, pollutants,
contaminants, or industrial, toxic or hazardous substances or
wastes, as well as all authorizations, codes, decrees, demands or
demand letters, injunctions, judgments, licenses, notices or
notice letters, orders, permits, plans or regulations issued,
entered, promulgated or approved thereunder.
(b) Except as disclosed on Section 3.22 of the Company
Disclosure Schedule or in the Company SEC Reports, there are,
with respect to the Company and its subsidiaries, and all real
property currently or formerly owned, leased, or otherwise used
by the Company or its subsidiaries, no past or present violations
of Environmental Laws, releases of any material into the
environment, actions, activities, circumstances, conditions,
events, incidents, or contractual obligations which may give rise
to any common law or other legal liability, including, without
limitation, liability under the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980 ("CERCLA") or
similar state or local laws, which liabilities, either
individually or in the aggregate, would have a Company Material
Adverse Effect. Except as disclosed on Schedule 3.22 hereto or
in the Company SEC Reports, to the
20
knowledge of the Company, there have been and are no (i)
polychlorinated biphenyls, (ii) underground storage tanks, or
(iii) asbestos-containing materials located on, under, or in any
portion of real property currently or formerly owned, leased, or
otherwise used by the Company or its subsidiaries.
(c) The Company has provided to Buyer all
environmental studies and reports pertaining to the previous and
current real property and the improvements thereon of the Company
and its subsidiaries that they are aware of, have commissioned or
have in their possession. To the knowledge of the Company and
its subsidiaries, the information furnished by the Company to
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ under cover of a letter dated December
14, 1995 is true and correct in all material respects, and there
is no environmental condition or noncompliance that has resulted
in, or would reasonably be expected to result in, a Company
Material Adverse Effect.
Section 3.23. Related Party Transactions. Section
3.23(a) of the Company Disclosure Schedule and the Company SEC
Reports together set forth the transactions and agreements
(whether oral or written) during the past five years between the
Company and its subsidiaries on the one hand, and (i) any
employee, officer or director of the Companies, (ii) a record or
beneficial owner of five percent (5%) or more of Company Common
Stock, or (iii) any affiliate of any such employee, officer,
director or beneficial owner, on the other hand, other than
payment of employee compensation. Except as disclosed in the
Company SEC Reports or in Section 3.23(a) of the Company
Disclosure Schedule, during the past three years no employee,
officer or director of the Companies, or any spouse or relative
of any of such persons, has been a director or officer of, or has
had any direct or indirect interest in, any firm, corporation,
association or business enterprise which during such period has
been a supplier, customer, sales agent, or licensor or licensee
of real or personal property or Intellectual Property, of the
Company or any of its subsidiaries or has competed with or been
engaged in any business of the kind being conducted by the
businesses of the Company and its subsidiaries.
Section 3.24. No Company Material Adverse Effect.
Except as disclosed in the Company SEC Reports filed prior to the
date hereof or in Section 3.24 or any other Section of the
Company Disclosure Schedule, there does not exist any fact or
circumstance which, alone or together with another fact or
circumstance, would reasonably be expected to result in a Company
Material Adverse Effect.
ARTICLE IV.
21
CONDUCT OF BUSINESS PENDING THE SALE AND PURCHASE
Section 4.1. Conduct of Business by the Company. From
the date hereof through the Closing Date, unless either Buyer or
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇") shall otherwise agree in writing:
(i) the Company shall, and shall cause its subsidiaries to,
carry on their respective businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore
conducted, and shall, and shall cause its subsidiaries to, use
their best efforts to preserve intact their present business
organizations, keep available the services of their present
officers and employees and preserve their relationships with
customers, suppliers and others having business dealings with
them to the end that their goodwill and on-going businesses shall
be unimpaired on the Closing Date, except such impairment as
would not reasonably be expected to have a Company Material
Adverse Effect. The Company shall, and shall cause its
subsidiaries to, (A) maintain insurance coverages and its books
and records in a manner consistent with prior practices, (B)
comply in all material respects with all laws, ordinances and
regulations of Governmental Entities applicable to the Company
and its subsidiaries, (C) maintain and keep its properties and
equipment in good repair, working order and condition, ordinary
wear and tear excepted, and (D) perform in all material respects
its obligations under all contracts and commitments to which it
is a party or by which it is bound, except in each case where the
failure to so maintain, comply or perform, either individually or
in the aggregate, would not reasonably be expected to result in a
Company Material Adverse Effect;
(ii) the Company shall not, nor shall it propose to,
except as required by this Agreement, (A) sell or pledge or
agree to sell or pledge any capital stock owned by it in any
of its subsidiaries, (B) amend its Certificate of
Incorporation or By-laws, (C) split, combine or reclassify
its outstanding capital stock or issue or authorize or
propose the issuance of any other securities in respect of,
in lieu of or in substitution for shares of the capital
stock, or, except as contemplated by this Agreement,
declare, set aside or pay any dividend or other distribution
payable in cash, stock or property (other than dividends
payable on the Company Preferred Stock, to the extent
otherwise permitted), or (D) directly or indirectly redeem,
purchase or otherwise acquire or agree to redeem, purchase
or otherwise acquire any shares of its capital stock, except
as contemplated by this Agreement or except pursuant to (x)
22
the exercise of rights granted to such party to repurchase
shares of its capital stock from employees upon termination
of employment or (y) contractual obligations arising under
agreements existing on the date hereof and disclosed in the
Company Disclosure Schedule;
(iii) the Company shall not, nor shall it permit any
of its subsidiaries to, (A) except as required by this
Agreement, issue, deliver or sell or agree to issue, deliver
or sell any additional shares of, or stock appreciation
rights or rights of any kind to acquire any shares of, its
capital stock of any class, or any option, rights or
warrants to acquire, or securities convertible into, shares
of capital stock other than (x) issuances of Company Common
Stock pursuant to the exercise of warrants or stock options
outstanding on the date hereof and disclosed on Section
4.1(iii) of the Company Disclosure Schedule, or (y) the
grant of employee stock options and the issuance of Company
Common Stock upon exercise thereof, at fair market value at
the time of grant of the options, in each case in the
ordinary course of business and consistent with past
practice, to employees (other than ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇ ▇.
▇▇▇▇▇▇▇ (collectively, the "Excluded Employees")), provided
that such employees are not affiliates or immediate family
members of Excluded Employees, and provided further that the
sum of the number of shares of Company Common Stock issuable
upon exercise of all employee stock options outstanding on
the date hereof and the aggregate number of such options
granted pursuant to this clause (y) shall not exceed the sum
of 1,874,300 and such number of options outstanding on the
date hereof that expire or are canceled (but not exercised)
after the date hereof, (B) except for the sale of the
facility located in Fayetteville, North Carolina, acquire,
lease or dispose or agree to acquire, lease or dispose of
any capital assets or any other assets other than in the
ordinary course of business, (C) incur additional
indebtedness or encumber or grant a security interest in any
asset or enter into any transaction other than in the
ordinary course of business, (D) incur any liability or
obligation, or contribute any asset, to a subsidiary of the
Company other than in the ordinary course of business, (E)
acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in, or
by any other manner, any business or any corporation,
partnership, association or other business organization or
division thereof, in each case in this clause (E) which are
material, individually or in the aggregate, to the Company
and its subsidiaries taken as a whole, or (F) adopt, enter
into, amend or terminate any contract, agreement, commitment
or arrangement with respect to any of the foregoing that is
not otherwise permitted by the exceptions applicable to the
foregoing;
23
(iv) the Company shall not, nor shall it permit any of
its subsidiaries to, except as required to comply with
applicable law, (A) except as set forth in Section 4.1(iv)
of the Company Disclosure Schedule, adopt, enter into,
terminate or amend any bonus, profit sharing, compensation,
severance, termination, stock option, pension, retirement,
deferred compensation, employment or other Company Benefit
Plan agreement, trust, fund or other arrangement for the
benefit or welfare of any director, officer or current or
former employee, (B) increase in any manner the compensation
or fringe benefits of any director, officer or employee
(except for normal increases in the ordinary course of
business that are consistent with past practice and that, in
the aggregate, do not result in a material increase in
benefits or compensation expense to such party and its
subsidiaries relative to the level in effect prior to such
increase), (C) pay any benefit not provided under any
Company Benefit Plan disclosed to Buyer in Section 3.9(a) of
the Company Disclosure Schedule or any employee benefit or
compensation plan or agreement of the Company or any of its
subsidiaries which, by its terms, is not required to be
disclosed therein, in each case, that is in existence on the
date hereof, provided that the aggregate amount of bonuses
under the Company's Management Incentive Plan, which is the
only bonus plan for the Excluded Employees, paid pursuant to
this clause (C) to Excluded Employees shall not exceed
$375,000, (D) except for benefits that have already been
earned or vested without acceleration, grant any awards or
make any payments under any bonus, incentive, performance or
other compensation plan or arrangement or Company Benefit
Plan (including, without limitation, the grant of stock
options, stock appreciation rights, stock based or stock
related awards, performance units or restricted stock, or
the removal of existing restrictions in any benefit plans or
agreements or awards made thereunder), except for (x) making
of matching and annual contributions to 401(k) plans and (y)
the grant of employee stock options (and the issuance of
Company Common Stock upon exercise thereof), at fair market
value at the time of grant of the options, to employees
(other than Excluded Employees), provided that such
employees are not affiliates or immediate family members of
Excluded Employees, and provided further that the sum of the
number of shares of Company Common Stock issuable upon
exercise of all employee stock options outstanding on the
date hereof and the aggregate number of such options granted
pursuant to this clause (y) shall not exceed the sum of
1,874,300 and such number of options outstanding on the date
hereof that expire or are canceled (but not exercised) after
the date hereof, in the case of each of clause (x) and (y),
in the ordinary course of business and consistent with past
practice, (E) take any action to fund or in any other way
secure the payment of compensation or benefits under any
employee plan, agreement, contract or arrangement or Company
Benefit Plan, other than in the ordinary course of business
24
consistent with past practice, or (F) adopt, enter into,
amend or terminate any contract, agreement, commitment or
arrangement to do any of the foregoing that is not otherwise
permitted by the exceptions applicable to the foregoing;
(v) the Company shall not, nor shall it permit any of
its subsidiaries to, make any investments in non-investment
grade securities;
(vi) the Company shall not, nor shall it permit its
subsidiaries to make any change in its accounting policies
or procedures except as required under statutory accounting
practices or GAAP, as applicable;
(vii) the Company shall use its best reasonable efforts
to refrain from taking, nor shall it permit any of its
subsidiaries to take, any action that would, or reasonably
might be expected to, result in any of its representations
and warranties set forth in this Agreement being or becoming
untrue in any material respect, or in any of the conditions
set forth in Article VI not being satisfied, or (unless such
action is required by applicable law) which would adversely
affect the ability of the Company to obtain any of the
regulatory approvals required to consummate the transactions
contemplated hereby;
(viii) the Company shall use its best efforts to
maintain in full force and effect each of the Significant
Agreements;
(ix) the Company shall not terminate or materially
modify the employment arrangements of ▇▇▇▇▇▇, including the
employment agreement, dated as of even date herewith,
between the Company and ▇▇▇▇▇▇, other than for cause (as
defined in the 1/31/96 draft of the employment agreement to
be entered into between the Company and ▇▇▇▇▇▇ on the
Closing Date); and
(x) the Company shall not enter into any agreement to
perform any of the actions prohibited under this Section 4.1
and not otherwise permitted by the exceptions contained
therein.
Section 4.2. Notice of Breach. Each party shall
promptly give written notice to the other party upon becoming
aware of the occurrence or, to its knowledge, impending or
threatened occurrence, of any event which would cause any of its
representations or warranties to be untrue on the Closing Date or
cause a material breach of any covenant contained or referenced
in this Agreement and will use its best reasonable efforts to
prevent or promptly remedy the same. Any such notification shall
25
not be deemed an amendment of the Company Disclosure Schedule or
the Buyer Disclosure Schedule.
ARTICLE V.
ADDITIONAL AGREEMENTS
Section 5.1. Access and Information. The Company and
its subsidiaries shall afford to Buyer and to Buyer's
accountants, counsel and other representatives full access during
normal business hours (and at such other times as the parties may
mutually agree) throughout the period prior to the Closing to all
of its properties, books, contracts, commitments, records and
personnel and, during such period, the Company shall furnish
promptly to Buyer a copy of (i) each report, schedule and other
document filed or received by it pursuant to the requirements of
federal or state securities laws, and (ii) monthly financial
statements and all other information concerning its business,
properties and personnel as the Buyer or its representatives may
reasonably request. Buyer shall hold, and shall cause its
employees and agents to hold, in confidence all such information
in accordance with the terms of the Confidentiality Agreement,
dated May 19, 1995, between Buyer, ▇▇▇▇▇▇ and the Company (the
"Confidentiality Agreement").
Section 5.2. Company Proxy Statement.
(a) As promptly as practicable after the execution of
this Agreement, the Company shall prepare and file with the
Commission preliminary proxy materials which shall constitute the
preliminary Company Proxy Statement. Buyer shall furnish to the
Company such information regarding Buyer as the Company may
reasonably request in writing and as shall be reasonably required
in connection with preparation of the Company Proxy Statement.
As promptly as practicable after comments are received from the
Commission with respect to such preliminary materials and after
the furnishing by the Company of all information required to be
contained therein, the Company shall file with the Commission the
definitive Company Proxy Statement.
The Company shall mail the foregoing to its stockholders as
promptly as practicable after clearance by the Commission. The
Company shall provide Buyer for its review a copy of the
preliminary and the final Company Proxy Statement at least such
amount of time prior to its filing and mailing as is customary in
transactions of the type contemplated hereby and shall not file
or mail such Company Proxy Statement without the
26
prior written consent of Buyer, which consent shall not be
unreasonably withheld or delayed.
(b) The Company shall retain the services of a proxy
soliciting firm mutually acceptable to Buyer and the Company for
the purpose of communicating to the Company's stockholders the
recommendation of the Company's Board of Directors in favor of
the transactions contemplated hereby and of seeking to obtain
sufficient votes to satisfy the requirements of Section 5.3 and
of applicable law for the completion of the transactions
contemplated hereby.
(c) Buyer and the Company shall make all necessary
filings applicable to it with respect to the transactions
contemplated hereby under the Securities Act and the Exchange Act
and the rules and regulations thereunder and under applicable
Blue Sky or similar securities laws and shall use its best
reasonable efforts to obtain required approvals and clearances
with respect thereto.
Section 5.3. Stockholders' Meeting. The Company shall
take all action necessary, in accordance with applicable law,
including the rules and regulations of the National Association
of Securities Dealers, Inc., and the Company's Certificate of
Incorporation and By-laws, to convene a meeting of the holders of
Company Common Stock (the "Company Meeting") as promptly as
practicable for the purpose of considering and taking action to
authorize this Agreement and the transactions contemplated
hereby, including the transactions contemplated by Section 6.1(d)
hereof and (subject to the consummation of the transactions
contemplated hereby) the election as directors of the Company of
the individuals set forth on Schedule 5.9 hereof (collectively,
the "Company Voting Matters"), as well as amendments to the
Restated Certificate of Incorporation of the Company changing the
name of the Company to "Golden Press, Inc." and increasing the
authorized number of shares of Company Common Stock from
40,000,000 to 50,000,000 and the authorized number of shares of
preferred stock from 100,000 to 200,000. Subject to its
fiduciary duties as advised by outside counsel in connection with
the receipt by the Company of a Business Combination Proposal (as
defined in Section 5.6) that the Board of Directors of the
Company reasonably believes is likely to result in a Superior
Proposal (as defined in Section 5.6), the Board of Directors of
the Company will recommend that holders of Company Common Stock
vote in favor of and approve the Company Voting Matters and the
other matters described above at the Company Meeting. At the
Company Meeting, all of the shares of Company Common Stock then
owned by Buyer, each member thereof, any affiliates of any member
(other than of Warburg, ▇▇▇▇▇▇ Ventures, L.P. ("WPV")) and the
general partnership that acts as a general partner
27
of WPV, or with respect to which such persons or entities hold
the power to direct the voting, will be voted in favor of the
Company Voting Matters and the other matters described above.
Prior to Closing, the Company shall take all actions necessary to
permit the change of the name of the Company as contemplated
above, including changing the name of any subsidiary of the
Company that presently has the desired name and reserving the
desired name with the Secretary of State of the State of
Delaware.
Section 5.4. HSR Act. The Company and Buyer shall use
their reasonable best efforts to file as soon as practicable
notifications under the HSR Act in connection with the
transactions contemplated hereby, and to respond as promptly as
practicable to any inquiries received from the Federal Trade
Commission and the Antitrust Division of the Department of
Justice for additional information or documentation and to
respond as promptly as practicable to all inquiries and requests
received from any State Attorney General or other governmental
authority in connection with antitrust matters relating to the
transactions contemplated by this Agreement.
Section 5.5. Additional Agreements.
(a) Subject to the terms and conditions herein
provided, each of the parties hereto agrees to cooperate with
each other and use its best reasonable efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions
contemplated by this Agreement, including using its best
reasonable efforts to obtain all necessary waivers, consents and
approvals, and to effect all necessary registrations and filings
(including, but not limited to, filings under the HSR Act and
with all applicable Governmental Entities).
(b) In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of
this Agreement, Buyer and the Company shall take all such
necessary action.
Section 5.6. No Solicitation.
(a) Except as contemplated by this Agreement, the
Company shall not, nor shall any of its subsidiaries, directly or
indirectly, take (nor shall the Company authorize or permit its
subsidiaries, officers, directors, employees, representatives,
investment bankers, attorneys, accountants or other agents or
affiliates, to take) any action to (i) solicit or initiate the
28
submission of any Business Combination Proposal (as defined
below), (ii) enter into any agreement with respect to any
Business Combination Proposal or (iii) participate in any way in
discussions or negotiations with, or furnish any information to,
any person or entity in connection with, or take any other action
to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any
Business Combination Proposal; provided, however, that (A) the
Company may participate in discussions or negotiations with or
furnish information to any Third Party (as defined in Section
8.3(b)) which makes an unsolicited proposal of a transaction
which the Board of Directors of the Company reasonably believes
is likely to result in a Superior Proposal (as defined below) and
(B) the Company may recommend to its shareholders a Business
Combination Proposal which it has reasonably determined is likely
to result in a Superior Proposal. For purposes of this
Agreement, "Business Combination Proposal" shall mean, with
respect to the Company, any tender or exchange offer, proposal
for a merger, consolidation or other series of related
transactions in a business combination involving the Company or
any Subsidiary of the Company or any other proposal or offer to
enter into a Third Party Business Combination (as defined in
Section 8.3(b)), and "Superior Proposal" shall mean, with respect
to the Company, any Business Combination Proposal pursuant to
which a Third Party would, or would have the right to, acquire
more than 25% of the outstanding voting capital stock of the
Company and which the Board of Directors of the Company
reasonably determines, based upon advice of its financial
advisors, is financially superior than the transactions
contemplated hereby and is likely to be consummated.
(b) In addition to the obligations of the Company set
forth in Section 5.6(a), the Company shall promptly advise Buyer
of any request for information or of any Business Combination
Proposal, or any inquiry with respect to or which appears to be
intended to or could reasonably be expected to lead to any
Business Combination Proposal, the material terms and conditions
of such request, Business Combination Proposal or inquiry, and
the identity of the person or entity making any such request,
Business Combination Proposal or inquiry. The Company shall keep
Buyer fully informed of the status and details of any such
request, Business Combination Proposal or inquiry and shall
promptly furnish Buyer a copy of any written proposal in
connection therewith.
Section 5.7. Transfer Restriction. Until the earlier
to occur of (i) the second anniversary of the issuance of the
Warrant and (ii) the date on which a bona fide Business
Combination Proposal is publicly announced or a proxy
solicitation for control of the Company's Board of Directors is
initiated by any person or entity (other than Buyer, each member
thereof, any affiliates of such
29
members (other than of WPV) and the general partnership that acts
as a general partner of WPV), Buyer shall not sell, transfer or
assign the Warrant other than to any members of Buyer or to any
affiliate of Buyer or such members.
Section 5.8. Director and Officer Indemnification and
Insurance. From the date hereof through the third anniversary of
the Closing Date and for so long as any claim asserted prior to
such date has not been fully adjudicated by a court of competent
jurisdiction, the Company (i) shall at all times maintain
liability insurance coverage with respect to each of the
Company's and its subsidiaries' respective current and former
directors and officers and persons serving in a fiduciary
capacity at the direction of the board of directors or of any
officer of the Company or any of its subsidiaries (at least to
the extent covered by the current Company liability insurance
policies), insuring each such individual against liability for
their actions in such capacities occurring prior to the Closing
and in scope of coverage and in amounts and having deductibles at
least equivalent to that maintained by the Company on the date
hereof and otherwise reasonably comparable to the coverage
maintained by the Company on the date hereof and (ii) shall not
amend or modify any of the provisions of Article Eight of the
Company's Restated Certificate of Incorporation or Article 6 of
the Company's By-laws in any manner that would adversely affect
such individuals, unless required by law.
Section 5.9. Board of Directors. The individuals set
forth on Schedule 5.9 hereto (the "Continuing Directors"),
subject to their election at the Company Meeting by the holders
of Company Common Stock as contemplated by Section 5.3 and to the
applicable provisions of the Restated Certificate of
Incorporation and By-laws of the Company, shall be the directors
of the Company until their respective successors shall be duly
elected or appointed and qualified. A majority of the Continuing
Directors set forth on Schedule 5.9 shall be designated by Buyer
(the "Designated Directors"). Schedule 5.9 will be provided
subsequent to the date hereof but prior to the filing of the
preliminary Company Proxy Statement, and the Designated Directors
set forth thereon shall be approved by the Company's Board of
Directors, subject only to their fiduciary duties.
30
Section 5.10. Redemption of Company Preferred Stock.
Effective upon the Closing, the Company shall duly cause all of
the shares of the Company Preferred Stock then outstanding to be
redeemed for cash, including payment of all accumulated and
unpaid dividends thereon, pursuant to the terms of the Company's
Restated Certificate of Incorporation.
Section 5.11. Expenses. The expenses incurred (or to
be incurred) by the Company or its subsidiaries at any time from
the commencement of discussions among the parties hereto and
their representatives in connection with the transactions
contemplated hereby (including, without limitation, the proposed
transactions that ultimately evolved into the transactions
contemplated hereby) through the Closing Date relating to (i)
severance and related costs in respect of employees located at
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and payments made for non-compete agreements
and all fees and commissions (including expenses) payable to Bear
▇▇▇▇▇▇▇ and Jefferies and (ii) any independent committees of the
Company's Board of Directors, shall not exceed $3,925,000 in the
aggregate.
Section 5.12. Related Party Transactions. Except as
set forth in Section 5.12 of the Company Disclosure Schedule, any
and all transactions set forth in Section 3.23 of the Company
Disclosure Schedule between the Company or any of its
subsidiaries and any of the persons or entities described in
clauses (i), (ii) and (iii) of Section 3.23 shall be canceled by
the Closing Date such that the Company and its subsidiaries will
have no rights to any assets or properties of such persons or
entities or obligations whatsoever with respect to such
transactions, and such other persons or entities will have no
rights to any assets or property (including Intellectual
Property) of the Company or any of its subsidiaries or
obligations whatsoever with respect to such transactions.
Section 5.13. ▇▇▇▇▇ Termination. The Company shall
deliver to Buyer prior to the Closing Date copies of written
agreements duly executed by the Company (or the appropriate
subsidiary of the Company) and ▇▇▇▇▇, in form and substance
reasonably satisfactory to Buyer, implementing the terms of the
termination of ▇▇▇▇▇ as described in Section 3.9(c) of the
Company Disclosure Schedule.
31
ARTICLE VI.
CONDITIONS PRECEDENT
Section 6.1. Conditions to Each Party's Obligation to
Effect the Sale and Purchase. The respective obligations of each
party to effect the transactions contemplated by this Agreement
shall be subject to the satisfaction on or prior to the Closing
Date of the following conditions, any one or more of which may be
waived in a writing executed by Buyer and the Company subject to
and in accordance with Section 7.4 hereof:
(a) This Agreement and the other Company Voting
Matters shall have been approved and adopted by the requisite
vote of the holders of the Company Common Stock.
(b) The waiting period applicable to the consummation
of the sale and purchase of the New Preferred Shares under the
HSR Act shall have expired or been terminated.
(c) No preliminary or permanent injunction or other
order by any federal or state court in the United States which
prevents the consummation of the transactions contemplated hereby
shall have been issued and remain in effect, and no other legal
proceedings, challenge or litigation challenging the legality of
or threatening the consummation of, or otherwise arising out of,
the transactions contemplated hereby or seeking an injunction in
order to prevent the consummation of the transactions
contemplated hereby shall be pending.
(d) The amendments to the Stock Option Plan adopted by
the Company's Board of Directors on the date hereof and the
Company's Incentive Bonus Plan in the form delivered to Buyer on
the date hereof shall have been approved by the Company's Board
of Directors (and such approval shall not have been modified or
rescinded) and by the requisite vote of the holders of Company
Common Stock in a manner that complies with the requirements of
Rule 16b-3 of the Exchange Act and Section 162(m) of the Code.
Section 6.2. Conditions to Obligation of the Company
to Effect the Sale and Purchase. The obligation of the Company
to effect the transactions contemplated by this Agreement shall
be subject to the satisfaction on or prior to the Closing Date of
the additional following conditions, unless waived in writing by
the Company in accordance with Section 7.4 hereof:
32
(a) Buyer shall have performed in all material
respects its agreements contained in this Agreement required to
be performed on or prior to the Closing Date, and the
representations and warranties of Buyer contained in this
Agreement shall be true in all respects when made and on and as
of the Closing Date as if made on and as of such date (except to
the extent they are expressly made as of another specific date
and except if any breaches of such representations and warranties
have not, in the aggregate, resulted in, and would not reasonably
be expected to result in, a Buyer Material Adverse Effect), and
the Company shall have received, on behalf of Buyer, a
certificate executed by an authorized member of Buyer to that
effect. For purposes of this Section 6.2(a), all representation
and warranties qualified by materiality shall not be deemed to be
so qualified.
(b) All permits, consents, authorizations, approvals,
registrations, qualifications, designations and declarations set
forth in Section 2.2 of the Buyer Disclosure Schedule shall have
been obtained, and, to the extent required to be submitted prior
to the Closing, all filings and notices set forth in Section 2.2
of the Buyer Disclosure Schedule shall have been submitted by
Buyer.
(c) The Company shall have received an opinion of
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ relating to certain matters set forth in
Article II, substantially in the form of Exhibit D attached
hereto.
Section 6.3. Conditions to Obligations of Buyer to
Effect the Sale and Purchase. The obligations of Buyer to effect
the transactions contemplated by this Agreement shall be subject
to the satisfaction on or prior to the Closing Date of the
additional following conditions, unless waived in writing by
Buyer in accordance with Section 7.4 hereof:
(a) The Company shall have performed in all material
respects its agreements contained in this Agreement required to
be performed on or prior to the Closing Date, and the
representations and warranties of the Company contained in this
Agreement shall be true in all respects when made and on and as
of the Closing Date as if made on and as of such date (except to
the extent they are expressly made as of another specific date
and except if any breaches of such representations and warranties
have not, in the aggregate, resulted in, and would not reasonably
be expected to result in, a Company Material Adverse Effect) and
Buyer shall have received a certificate executed by the Chief
Executive Officer and the Chief Financial Officer of the Company
on behalf of the Company to that effect. For purposes of this
Section 6.3(a), all representation and warranties qualified by
materiality shall not be deemed to be so qualified.
33
(b) All permits, consents, authorizations, approvals,
registrations, qualifications, designations and declarations set
forth in Sections 3.4 and 6.3(b) of the Company Disclosure
Schedule shall have been obtained and, to the extent required to
be submitted prior to the Closing, all filings and notices set
forth in Sections 3.4 and 6.3(b) of the Company Disclosure
Schedule shall have been submitted by the Company.
(c) Neither the Board of Directors of the Company nor
any committee thereof shall have amended, modified, rescinded or
repealed the recommendation of the Company's Board of Directors
to the stockholders of the Company to approve the adoption of
this Agreement, and neither the Board of Directors of the Company
nor any committee thereof shall have adopted any other
resolutions in connection with this Agreement and the
transactions contemplated hereby inconsistent with such
recommendation of the consummation of the transactions
contemplated hereby.
(d) The Registration Rights Agreement shall have been
entered into by the Company.
(e) Buyer shall have received opinions from Milbank,
Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, substantially in the form of Exhibit E
attached hereto.
(f) The Irrevocable Proxies, dated as of even date
herewith, between Buyer and each of ▇▇▇▇▇▇▇▇▇ and certain of his
affiliates (the "Irrevocable Proxies") shall be in full force and
effect and no representation, warranty, covenant or agreement set
forth therein shall have been breached in any material respect on
the part of ▇▇▇▇▇▇▇▇▇ or any of his affiliates, as the case may
be.
ARTICLE VII.
TERMINATION, AMENDMENT AND WAIVER
Section 7.1. Termination. This Agreement may be
terminated at any time prior to the Closing, whether before or
after approval of the Company Voting Matters by the stockholders
of the Company:
(a) by mutual consent of the members of Buyer and the
Board of Directors of the Company;
(b) by either Buyer or the Company if the transactions
contemplated by this Agreement shall not have been consummated on
or before May 1, 1996 (provided the terminating party is not
otherwise (i) in material breach of its covenants or agreements
34
under this Agreement or (ii) in breach (determined without regard
to any materiality qualifier therein) of its representations and
warranties contained in this Agreement such that such breaches of
representations and warranties, in the aggregate, have resulted,
or would reasonably be expected to result in (A) if Buyer is the
terminating party, a Buyer Material Adverse Effect or (B) if the
Company is the terminating party, a Company Material Adverse
Effect);
(c) by the Company if any of the conditions specified
in Sections 6.1 or 6.2 have not been met or waived by the Company
at such time as such condition is no longer capable of
satisfaction, including the failure to obtain any required
approval of the Company Voting Matters at a duly held meeting of
stockholders or at an adjournment thereof (provided the Company
is not otherwise (i) in material breach of its covenants or
agreements under this Agreement or (ii) in breach (determined
without regard to any materiality qualifier therein) of its
representations and warranties contained in this Agreement such
that such breaches of representations and warranties, in the
aggregate, have resulted, or would reasonably be expected to
result in, a Company Material Adverse Effect, and provided
further that the failure to obtain such approval is not due to a
breach by ▇▇▇▇▇▇▇▇▇ or any of his affiliates of their respective
obligations under the Irrevocable Proxies);
(d) by Buyer if any of the conditions specified in
Sections 6.1 or 6.3 have not been met or waived by Buyer at such
time as such condition is no longer capable of satisfaction,
including the failure to obtain any required approval of the
Company's stockholders at the Company Meeting or at an
adjournment thereof (provided Buyer is not otherwise (i) in
material breach of its covenants or agreements under this
Agreement or (ii) in breach (determined without regard to any
materiality qualifier therein) of its representations and
warranties contained in this Agreement such that such breaches of
representations and warranties, in the aggregate, have resulted,
or would reasonably be expected to result in, a Buyer Material
Adverse Effect);
(e) by either Buyer or the Company if there has been a
breach on the part of the other of any of (i) its covenants or
agreements under this Agreement in a material respect or (ii) its
representations and warranties contained in this Agreement
(determined without regard to any materiality qualifier therein)
such that such breaches of representations and warranties, in the
aggregate, have resulted, or would reasonably be expected to
result in, (A) if Buyer is the terminating party, a Company
Material Adverse Effect or (B) if the Company is the terminating
party, a Buyer Material Adverse Effect), or by Buyer if there has
been a material breach on the part of ▇▇▇▇▇▇▇▇▇ or any of his
affiliates of any representation, warranty, covenant or agreement
set forth in any of the Irrevocable Proxies, which breach has not
35
been cured within fifteen business days following receipt by the
breaching party of written notice of such breach;
(f) by either Buyer or the Company upon written notice
to the other party if any Governmental Entity of competent
jurisdiction shall have issued a final permanent order enjoining
or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement, and in any such case the time for
appeal or petition for reconsideration of such order shall have
expired without such appeal or petition being granted; or
(g) by either Buyer or the Company if the Board of
Directors of the Company reasonably determines that a Business
Combination Proposal is likely to result in a Superior Proposal;
provided, however, that termination of this Agreement under this
Section 7.1(g) by the Company shall not be effective unless and
until (i) simultaneously with such termination the Company enters
into a definitive agreement to effect the Business Combination
Proposal and (ii) the Company has made payment in full of the fee
required in Section 8.3(b) hereof.
Section 7.2. Effect of Termination. In the event of
termination of this Agreement by either Buyer or the Company as
provided above, this Agreement shall forthwith become void and
(except for termination of this Agreement pursuant to Section
7.1(e) resulting from a breach of a covenant set forth in this
Agreement) there shall be no liability on the part of either the
Company or Buyer or their respective officers or directors;
provided that Section 3.17, the last sentence of Section 5.1,
this Section 7.2 and Sections 8.3, 8.6 and 8.7 shall survive the
termination.
Section 7.3. Amendment. This Agreement may be amended
by the parties hereto, by or pursuant to action taken by Buyer's
members and the Company's Board of Directors, at any time before
or after approval hereof by the stockholders of the Company, but,
after such approval, no amendment shall be made which in any 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 each of the parties hereto.
Section 7.4. Waiver. At any time prior to the
Closing, the parties hereto, by or pursuant to action taken by
Buyer's members and the Company's Board of Directors, may (i)
extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties of any other
party contained herein or in any documents delivered pursuant
hereto by any other party and (iii)
36
waive compliance with any of the agreements or conditions
contained herein; provided, however, that no such waiver shall
materially adversely affect the rights of the stockholders of the
Company or Buyer, as the case may be. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid
if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE VIII.
GENERAL PROVISIONS
Section 8.1. Non-Survival of Representations,
Warranties and Agreements. All representations and warranties
set forth in this Agreement shall terminate at the earlier of (x)
the Closing and (y) termination of this Agreement in accordance
with Article VII hereof. All covenants and agreements set forth
in this Agreement shall survive in accordance with their terms.
Section 8.2. Notices. All notices or other
communications under this Agreement shall be in writing and shall
be given (and shall 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 the Company:
Western Publishing Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Senior Vice President -
Legal Affairs
Western Publishing Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
and a copy to:
▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Buyer:
Golden Press Holding, L.L.C.
c/o Warburg, ▇▇▇▇▇▇ Ventures, L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as any party may have furnished to the
other parties in writing in accordance with this Section 8.2.
Section 8.3. Expenses; Termination Fees.
(a) Except in cases in which a fee is paid pursuant to
Section 8.3(b), all costs, fees and expenses incurred in
connection with this Agreement and the transactions contemplated
hereby (collectively, "Expenses") shall be paid by the party
incurring such costs and expenses, provided that (i) if the
transactions contemplated by this Agreement are consummated or if
they are not consummated as a result of a breach (determined
without regard to any materiality qualifier therein) by the
Company of any representation or warranty made as of the date
hereof in this Agreement (such that such breach, in the
aggregate, has resulted, or would reasonably be expected to
result in, a Company Material Adverse Effect), all Expenses
incurred by Buyer shall be paid by the Company and (ii) if the
transactions contemplated by this Agreement are not consummated
for any other reason, all Expenses incurred by Buyer from and
after December 14, 1995 shall be paid by the Company, in each
case not to exceed an aggregate amount of $4,000,000.
(b) If (i) the transactions contemplated by this
Agreement are not consummated as a result of a material breach by
the Company of Section 5.6 hereof, (ii) the Agreement is
terminated pursuant to Section 7.1(g) hereof, or (iii) a Third
Party Business Combination (as defined below) shall occur either
38
prior to the termination of this Agreement pursuant to Section
7.1(a), 7.1(b), 7.1(c) (other than by the Company as a result of
the failure of a condition specified in Section 6.2 to be
satisfied), 7.1(d) or 7.1(g) hereof or within nine months
following the date this Agreement is terminated pursuant to
Section 7.1(e) hereof (unless properly terminated by the Company
pursuant to Section 7.1(e)), then the Company shall pay to Buyer,
within five business days after receipt of a written request
therefor in the case of clause (i) and immediately after the
termination of this Agreement pursuant to Section 7.1(g) or the
occurrence of a Third Party Business Combination in the case of
clauses (ii) and (iii), respectively, an amount in same day funds
equal to $2,000,000. For purposes of this Agreement, the term
"Third Party Business Combination" of the Company hereto means
the occurrence of any of the following events: (A) the Company
or any Subsidiary of the Company is acquired by merger or
otherwise by any person, entity or group, other than the other
party hereto or any affiliate thereof (a "Third Party"); (B) the
Company or any subsidiary of the Company enters into an agreement
with a Third Party which contemplates the acquisition of 25% or
more of the total assets of the Company and its subsidiaries
taken as a whole; (C) the Company enters into a merger or other
agreement with a Third Party which contemplates the acquisition
of beneficial ownership of more than 25% of the outstanding
shares of the Company Common Stock (or securities convertible
thereinto or exercisable therefor); (D) a Third Party acquires
more than 25% of the total assets of the Company and its
subsidiaries taken as a whole; (E) a Third Party who, as of the
date 10 days preceding the date hereof, beneficially owns less
than 10% of the outstanding shares of the Company Common Stock
obtains beneficial ownership of such number of shares of Company
Common Stock such that it beneficially owns more than 25% of the
outstanding shares of the Company Common Stock, or any person,
entity or group which beneficially owns (or has the right to
acquire) 10% or more of the outstanding shares of the Company
Common Stock increases its beneficial ownership of the
outstanding shares of Company Common Stock by 10% or more; (F)
the Company adopts a plan of liquidation relating to more than
25% of the total assets of the Company and its subsidiaries taken
as a whole; (G) the Company repurchases more than 25% of the
outstanding shares of the Company's capital stock; or (H) there
is a public announcement or written proposal with respect to a
plan or intention by the Company or a Third Party to effect any
of the foregoing transactions (provided such transaction is
consummated during the nine month period following such public
announcement or written proposal). For purposes of this
Agreement, the term "beneficial ownership" shall have the meaning
set forth in Rule 13d-3 of the Exchange Act.
Section 8.4. Publicity. So long as this Agreement is
in effect, Buyer and
39
the Company agree to consult with each other in issuing any press
release or otherwise making any public statement with respect to
the transactions contemplated by this Agreement, and none of them
shall issue any press release or make any public statement prior
to such consultation. The commencement of litigation relating to
this Agreement or the transactions contemplated hereby or any
proceedings in connection therewith shall not be deemed a
violation of this Section 8.4.
Section 8.5. Specific Performance. The parties hereto
agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof 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.
Section 8.6. Interpretation. The headings contained
in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement.
Section 8.7. Miscellaneous. This Agreement (including
the documents, exhibits, schedules and instruments referred to
herein), together with the Confidentiality Agreement,
(i) constitutes the entire agreement and supersedes all other
prior agreements and understandings, both written and oral, among
the parties, or any of them, with respect to the subject matter
hereof, (ii) except for certain persons under Section 5.8 hereof,
is not intended to confer upon any other person or entity any
rights or remedies hereunder and shall be binding upon and inure
to the benefit solely of each party hereto, and their respective
successors and assigns, (iii) shall not be assigned by operation
of law or otherwise, and (iv) shall be governed in all respects,
including validity, interpretation and effect, by the laws of the
State of New York (without giving effect to the provisions
thereof relating to conflicts of law); provided, however, that
the law of the State of Delaware shall govern as to internal
corporate matters. This Agreement may be executed in any number
of counterparts which together shall constitute a single
agreement.
40
IN WITNESS WHEREOF, each of Buyer and the Company has
caused this Agreement to be duly signed on its behalf all as of
the date first written above.
GOLDEN PRESS HOLDING, L.L.C.
By: WARBURG, ▇▇▇▇▇▇ VENTURES, L.P.
Member
By:
----------------------------
Name:
Title: General Partner
WESTERN PUBLISHING GROUP, INC.
By:
----------------------------
Name:
Title:
41
EXHIBIT A
CERTIFICATE OF DESIGNATIONS, NUMBER, VOTING POWERS,
PREFERENCES AND RIGHTS OF SERIES B CONVERTIBLE
PREFERRED STOCK
OF
[WESTERN PUBLISHING GROUP, INC.]
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
The undersigned DOES HEREBY CERTIFY that the following
resolution was duly adopted by the Board of Directors of [Western Publishing
Group, Inc.], a Delaware corporation (hereinafter called the "Corporation"),
with the preferences and rights set forth therein relating to dividends,
conversion, redemption, dissolution and distribution of assets of the
Corporation having been fixed by the Board of Directors pursuant to authority
granted to it under Article FOURTH of the Corporation's Certificate of
Incorporation and in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware:
RESOLVED: That, pursuant to authority conferred upon the Board
of Directors by the Certificate of Incorporation of the Corporation, the Board
of Directors hereby authorizes the issuance of 13,000 shares of Series B
Convertible Preferred Stock of the Corporation, and hereby fixes the
designations, powers, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, of
such shares, in addition to those set forth in the Certificate of Incorporation
of the Corporation, as follows:
1. DESIGNATION AND AMOUNT. The shares of such series shall
be designated "Series B Convertible Preferred Stock" (the "Series B Preferred
Stock") and the number of shares constituting such series shall be 13,000.
2. DIVIDENDS.
(a) The holders of Series B Preferred Stock (i) shall receive
on the first day of February, May, August and November (each a "Dividend Date")
of each twelve-month period following the date of initial issuance of the Series
B Preferred Stock (the "Initial Issuance Date") through the fourth anniversary
of the Initial Issuance Date, a stock dividend per share of Series B Preferred
Stock equal to a number of shares of Common Stock of the
Corporation ("Common Stock") determined by multiplying the Conversion Rate (as
determined pursuant to Sections 5 and 6 below) by .03 (such that at the initial
Conversion Rate the holders of the Series B Preferred Stock shall receive in the
aggregate 195,000 shares of Common Stock on a quarterly basis, resulting in the
receipt of an aggregate of 780,000 shares of Common Stock in each of the first
four years after the Initial Issuance Date, subject to adjustment in the event
of any dividend, stock split, stock distribution or combination with respect to
any such shares), provided, however, that (x) in the event that the product of
the number of shares of Common Stock per share of Series B Preferred Stock to be
distributed in any quarter and the Market Price (as defined below) (the
"Dividend Value") is less than $93.75, then, in addition to such shares of
Common Stock, the holders shall receive on such date, out of legally available
funds of the Corporation, cash per share of Series B Preferred Stock in an
amount equal to the excess of $93.75 over the Dividend Value, compounded
quarterly, and (y) in the event that the Dividend Value exceeds $187.50, then
the number of shares of Common Stock to be so distributed shall be reduced by an
amount sufficient to cause the Dividend Value to equal $187.50 (subject in each
case to adjustment in the event of any dividend, stock split, stock distribution
or combination with respect to any such shares), and (ii) shall be entitled to
receive thereafter, beginning on the first to occur of the first day of
February, May, August or November after the fourth anniversary of the Initial
Issuance Date, when and as declared, out of legally available funds of the
Corporation, cash dividends (computed on the basis of a 360-day year of twelve
30-day months) at the rate of $150 per share (subject to adjustment in the event
of any dividend, stock split, stock distribution or combination with respect to
any such shares), compounded quarterly, payable quarterly on the first day of
February, May, August and November of each twelve-month period after the fourth
anniversary of the Initial Issuance Date, on a pari passu basis with the Series
A Preferred Stock of the Corporation (the "Series A Preferred Stock") (such
stock and any other class or series of the preferred stock of the Corporation
which shall rank with respect to the payment of dividends on a parity with the
Series B Preferred Stock being referred to hereinafter, collectively, as "Parity
Stock") and before any dividends shall be set apart for or paid upon the Common
Stock or any other stock ranking with respect to the payment of dividends junior
to the Series B Preferred Stock (such stock being referred to hereinafter
collectively as "Junior Stock") in any year. All dividends declared upon Series
B Preferred Stock shall be declared pro rata per share.
2
For purposes of this Section 2, the term "Market Price" shall
mean the average closing price of a share of Common Stock for the ten
consecutive trading days immediately preceding the Dividend Date or the
conversion date, as the case may be, as reported on the principal national
securities exchange on which the shares of Common Stock or securities are listed
or admitted to trading or, if not listed or admitted to trading on any national
securities exchange, the average of the closing bid and asked prices during such
ten trading day period in the over-the-counter market as reported by the Nasdaq
National Market or any comparable system, or, if no such firm is then engaged in
the business of reporting such prices, as reported by The Wall Street Journal,
or, if not so reported, as furnished by any member of the National Association
of Securities Dealers, Inc. selected by the Corporation or, if the shares of
Common Stock or securities are not publicly traded, the Market Price for such
date shall be the fair market value thereof determined jointly by the
Corporation and the holders of record of a majority of the Series B Preferred
Stock then outstanding; provided, however, that if such parties are unable to
reach agreement within a reasonable period of time, the Market Price shall be
determined in good faith by an independent investment banking firm selected
jointly by the Corporation and the holders of record of a majority of the Series
B Preferred Stock then outstanding or, if that selection cannot be made within
ten days, by an independent investment banking firm selected by the American
Arbitration Association in accordance with its rules, and provided further, that
the Corporation shall pay all of the fees and expenses of any third parties
incurred in connection with determining the Market Price.
(b) Dividends on the Series B Preferred Stock shall be
cumulative, whether or not in any fiscal year there shall be net profits or
surplus available for the payment of dividends in such fiscal year, so that if
in any fiscal year or years, dividends in whole or in part are not paid upon the
Series B Preferred Stock, (i) unpaid dividends shall accumulate and no sums in
any years shall be paid to the holders of the Junior Stock until all dividends
payable on the Series B Preferred Stock have been paid in full, and (ii) no full
dividends shall be declared or paid or set apart for payment on any Parity Stock
for any period unless full cumulative dividends have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for such payment on the Series B Preferred Stock for all dividend
payment periods terminating on or prior to the date of payment of such full
cumulative dividends. If at any time the Corporation shall have failed to pay
full dividends which have accrued (whether or not earned or declared) on the
shares of the Series B Preferred Stock and any other Parity Stock, all dividends
(other than Series B Preferred
3
Stock dividends paid in shares of Common Stock) declared upon shares of the
Series B Preferred Stock and any other Parity Stock shall be declared pro rata
so that the amount of dividends declared per share on the Series B Preferred
Stock and such other Parity Stock shall in all cases bear to each other the same
ratio that accrued dividends per share on the Series B Preferred Stock and other
such Parity Stock bear to each other.
3. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series B
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Corporation available for distribution to its stockholders, after and
subject to the payment in full of all amounts required to be distributed to the
holders of any other Preferred Stock of the Corporation ranking on liquidation
prior and in preference to the Series B Preferred Stock (such Preferred Stock
being referred to hereinafter as "Senior Preferred Stock") upon such
liquidation, dissolution or winding up, but before any payment shall be made to
the holders of Junior Stock, an amount equal to $5,000 per share plus any
dividends thereon cumulated or accrued but unpaid, whether or not declared
(subject to adjustment in the event of any stock dividend, stock split, stock
distribution or combination with respect to such shares). If upon any such
liquidation, dissolution or winding up of the Corporation the remaining assets
of the Corporation available for the distribution to its stockholders after
payment in full of amounts required to be paid or distributed to holders of
Senior Preferred Stock shall be insufficient to pay the holders of shares of
Series B Preferred Stock the full amount to which they shall be entitled, the
holders of shares of Series B Preferred Stock and shares of Parity Stock shall
share ratably in any distribution of the remaining assets and funds of the
Corporation in proportion to the respective amounts which would otherwise be
payable in respect to the shares held by them upon such distribution if all
amounts payable on or with respect to said shares were paid in full.
(b) After the payment of all preferential amounts required to
be paid to the holders of Senior Preferred Stock, Series B Preferred Stock and
Parity Stock and any other series of Preferred Stock upon the dissolution,
liquidation or winding up of the Corporation, the holders of shares of Common
Stock then outstanding shall be entitled to receive the remaining assets and
funds of the Corporation available for distribution to its stockholders.
4
(c) The merger or consolidation of the Corporation into or
with another corporation, the merger or consolidation of any other corporation
into or with the Corporation, or the sale, conveyance, mortgage, pledge or lease
of all or substantially all the assets of the Corporation shall not be deemed to
be a liquidation, dissolution or winding up of the Corporation for purposes of
this Section 3.
4. VOTING.
(a) Each issued and outstanding share of Series B Preferred
Stock shall be entitled to the number of votes equal to the number of shares of
Common Stock into which each such share of Series B Preferred Stock is
convertible (as adjusted from time to time pursuant to Section 5 thereof), at
each meeting of stockholders of the Corporation with respect to any and all
matters presented to the stockholders of the Corporation for their action or
consideration, including, without limitation, the election of all directors (the
"Non-Series B Directors") other than those as to which the Series B Preferred
Stock has rights voting separately as a class as set out in paragraphs (b) and
(c) below. Except as provided by law, by the provisions of paragraphs (b), (c)
and (d) below or by the provisions establishing any other series of Preferred
Stock, holders of Series B Preferred Stock, and of any other outstanding
Preferred Stock that is entitled to vote together with the holders of Common
Stock as a single class, shall vote together with the holders of Common Stock as
a single class.
(b) In addition to the right of the holders of Series B
Preferred Stock to vote together with the holders of Common Stock as a single
class with respect to the election of the Non-Series B Directors, for as long as
at least (i) 40% of the shares of Series B Preferred Stock issued on the Initial
Issuance Date (after taking into account any adjustments provided for
hereunder)(the "Initial Series B Shares") are owned by Golden Press Holding,
L.L.C. ("GP Holding"), any of its members, any Affiliates (as defined below) of
such members (other than of Warburg, ▇▇▇▇▇▇ Ventures, L.P. ("WPV")) and the
general partnership that acts as a general partner of WPV (GP Holding, its
members, such Affiliates, WPV and such general partnership being herein
collectively referred to as the "GP Holding Parties"), the holders of Series B
Preferred Stock shall have the exclusive right, voting separately
5
as a class, to elect one-third of the members of the Corporation's Board of
Directors (herein referred to as the "Series B Directors"), (ii) 30% of the
Initial Series B Shares are owned by GP Holding Parties, the holders of Series B
Preferred Stock shall have the exclusive right, voting separately as a class, to
elect two Series B Directors, and (iii) 20% of the Initial Series B Shares are
owned by GP Holding Parties, the holders of Series B Preferred Stock shall have
the exclusive right, voting separately as a class, to elect one Series B
Director. In case such number of members calculated pursuant to clause (i) of
the immediately preceding sentence is not an integer, the number of Series B
Directors shall be rounded up to the next integer. All such Series B Directors
shall be elected by the affirmative vote of the holders of record of a majority
of the outstanding shares of Series B Preferred Stock either at meetings of
stockholders at which directors are elected, a special meeting of holders of
Series B Preferred Stock or by written consent without a meeting in accordance
with the General Corporation Law of Delaware. Each Series B Director so elected
shall serve for a term of one year and until his successor is elected and
qualified, provided, however, that promptly upon any decrease in the number of
Series B Directors that the holders of the Series B Preferred Stock are entitled
to elect pursuant to the first sentence of this paragraph (b), the appropriate
number of Series B Directors shall resign from the Corporation's Board of
Directors. Any vacancy in the position of a Series B Director, other than
pursuant to the proviso in the immediately preceding sentence, may be filled
only by the holders of the Series B Preferred Stock. Each Series B Director may,
during his term of office, be removed at any time, with or without cause, by and
only by the affirmative vote, at a special meeting of holders of Series B
Preferred Stock called for such purpose, or the written consent, of the holders
of record of a majority of the outstanding shares of Series B Preferred Stock.
Any vacancy created by such removal may also be filled at such meeting or by
such consent. On the Initial Issuance Date, the Board of Directors of the
Corporation shall consist of nine members. For purposes hereof, "Affiliates"
shall include persons included under the definition thereof in Rule 405 under
the Securities Act of 1933, as amended, immediate family members and trusts, 25%
or more of the beneficial interests of which are owned by such persons or one or
more of their immediate family members.
(c) In addition to any other rights provided by law, for as
long as at least one-half (1/2) of the Initial Series B Shares are owned by GP
Holding Parties, the Corporation shall not (nor shall it, in the case of clauses
(ii), (iii), (iv) and (v), permit any of its subsidiaries to), without first
obtaining the affirmative vote or written consent of the holders of record of a
majority of the shares of the Series B Preferred Stock, voting as a separate
class:
(i) amend or repeal any provision of the Corporation's
Certificate of Incorporation or By-Laws, including without
6
limitation a change in the number of members of the Board of Directors
of the Corporation;
(ii) authorize or effect the incurrence or issuance of any
Indebtedness (as defined below) (other than pursuant to an agreement to
incur the same which has been approved in writing by holders of a
majority of outstanding shares of Series B Preferred Stock, and other
than pursuant to that certain Credit Agreement, dated September 29,
1995, between Western Publishing Company, Inc. and ▇▇▇▇▇▇ Financial,
Inc.) or shares of capital stock or rights to acquire capital stock
other than, in the case of shares of Common Stock, (x) options to
acquire up to 1,874,300 shares of Common Stock issued to employees of
the Corporation pursuant to the Amended and Restated 1986 Employee
Stock Option Plan of the Corporation (the "Stock Option Plan") or (y)
thereafter approved with the consent of the holders of record of a
majority of the then outstanding shares of Series B Preferred Stock;
provided, however, that the incurrence of Indebtedness among the
Corporation and its subsidiaries shall not require such consent;
(iii) authorize or effect (A) in one or in a series of two or
more related transactions, any sale, lease, license, transfer or other
disposition of assets for consideration in excess of $5,000,000 (other
than in the ordinary course of business or among the Corporation and
its subsidiaries); (B) any merger or consolidation or other
reorganization involving the Corporation or any of its subsidiaries
(other than with one another or in respect of which the aggregate
consideration paid to or received by the Corporation or its
subsidiaries is less than $5,000,000) or (C) a liquidation, winding up,
dissolution or adoption of any plan for the same other than the
liquidation, winding up, dissolution or adoption of any plan for the
same of a subsidiary into the Corporation or another subsidiary
thereof;
(iv) authorize or effect, in one or in a series of two or more
related transactions, (A) any acquisition or lease of assets or (B) any
license of patent, trademark or other rights relating to any
intellectual property, in each case, that involves by its terms a per
annum payment in excess of $5,000,000 as determined in good faith by
the Corporation's Board of Directors, other than among the Corporation
and its subsidiaries or in the ordinary course of business; or
(v) terminate the employment of the chief executive officer
of the Corporation.
7
For purposes of this Section 4(c), "Indebtedness" means liability for borrowed
money or the deferred purchase price of property or services (except payables
arising in the ordinary course of business) and including any guaranties
thereof.
Notwithstanding anything in paragraphs (b) or (c) to the
contrary, in the event that the shares of Series B Preferred Stock are held by
more than 10 holders, then (i) the right of the holders of Series B Preferred
Stock to vote separately as a class to elect the Series B Directors shall
terminate, and the holders of the Series B Preferred Stock shall have the right
to vote together with the holders of Common Stock with respect to the election
of all directors as set forth in paragraph (a) above and (ii) the restrictions
on the Corporation set forth in this paragraph (c) shall terminate, provided
that for purposes of this sentence, each member of GP Holding (other than WPV)
together with the Affiliates of such member shall be deemed to be one holder (if
such member or Affiliate directly owns shares of Series B Preferred Stock) and
WPV and the general partnership that acts as a general partner of WPV together
shall be deemed to be one holder (if any such entity directly owns shares of
Series B Preferred Stock).
(d) The Corporation shall not amend, alter or repeal the
preferences, special rights or other powers of the Series B Preferred Stock so
as to affect adversely the Series B Preferred Stock, without the written consent
or affirmative vote of the holders of record of at least a majority of the then
outstanding aggregate number of shares of such adversely affected Series B
Preferred Stock, given in writing or by vote at a meeting, consenting or voting
(as the case may be) separately as a class. For this purpose, without limiting
the generality of the foregoing, the authorization or issuance of any series of
Preferred Stock with preference or priority over, or being on a parity with, the
Series B Preferred Stock as to the right to receive either dividends or amounts
distributable upon liquidation, dissolution or winding up of the Corporation
shall be deemed so to affect adversely the Series B Preferred Stock.
5. OPTIONAL CONVERSION. Each share of Series B Preferred Stock
may be converted at any time from and after the Initial Issuance Date, at the
option of the holder thereof, in the manner hereinafter provided, into
fully-paid and nonassessable shares of Common Stock, provided, however, that on
any redemption of any Series B Preferred Stock or any liquidation of the
Corporation, the right of conversion shall terminate at the close of business on
the date fixed for such redemption or for the payment of any amounts
distributable on liquidation to the holders of Series B Preferred Stock, as the
case may be
8
(unless the Corporation defaults upon the payment due upon such redemption or
liquidation).
(a) The applicable conversion rate ("Conversion Rate") and
conversion price ("Conversion Price") of the Series B Preferred Stock from time
to time in effect is subject to adjustment as hereinafter provided. The initial
Conversion Rate shall be 500 shares of Common Stock for each one share of Series
B Preferred Stock surrendered for conversion representing an initial Conversion
Price (for purposes of Section 6) of $10.00 per share of Common Stock. Exercise
of the conversion right set forth herein by the exercising holder shall not
extinguish such holder's right to receive, and of the Corporation's obligation
to pay, any and all accrued but unpaid dividends, whether or not declared, up to
and including the time of conversion in respect of any shares of Series B
Preferred Stock then being converted. In the event any such accrued but unpaid
dividends are not paid at the time of such conversion, interest on the unpaid
amount of such dividends shall continue to accrue at the rate of 12% per annum,
compounded quarterly, until such amount is paid.
(b) The Corporation shall not issue fractions of shares of
Common Stock upon conversion of Series B Preferred Stock or scrip in lieu
thereof. If any fraction of a share of Common Stock would, except for the
provisions of this paragraph (b), be issuable upon conversion of any Series B
Preferred Stock, the Corporation shall in lieu thereof pay to the person
entitled thereto an amount in cash equal to such fraction multiplied by the
Market Price of one share of Common Stock, calculated to the nearest
one-hundredth (1/100) of a share.
(c) Whenever the Conversion Rate and Conversion Price shall be
adjusted as provided in Section 6 hereof, the Corporation shall forthwith file
at each office designated for the conversion of Series B Preferred Stock, a
statement, signed by the Chairman of the Board, the President, any Vice
President or Treasurer of the Corporation, showing in reasonable detail the
facts requiring such adjustment and the Conversion Rate that will be effective
after such adjustment. The Corporation shall also cause a notice setting forth
any such adjustments to be sent by mail, first class, postage prepaid, to each
holder of record of Series B Preferred Stock at his or its address appearing on
the stock register. If such notice relates to an adjustment resulting from an
event referred to in paragraph 6(g), such notice shall be included as part of
the notice required to be mailed and published under the provisions of paragraph
6(g) hereof.
9
(d) In order to exercise the conversion privilege, the holder
of record of any Series B Preferred Stock to be converted shall surrender his or
its certificate or certificates therefor to the principal office of the transfer
agent for the Series B Preferred Stock (or if no transfer agent is at the time
appointed, then the Corporation at its principal office), and shall give written
notice to the Corporation at such office that the holder elects to convert the
Series B Preferred Stock represented by such certificates, or any number
thereof. Such notice shall also state the name or names (with address) in which
the certificate or certificates for shares of Common Stock which shall be
issuable on such conversion shall be issued, subject to any restrictions on
transfer relating to shares of the Series B Preferred Stock or shares of Common
Stock upon conversion thereof. If so required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by written
instrument or instruments of transfer, in form satisfactory to the Corporation,
duly authorized in writing. The date of receipt by the transfer agent (or by the
Corporation if the Corporation serves as its own transfer agent) of the
certificates and notice shall be the conversion date. As soon as practicable
after receipt of such notice and the surrender of the certificate or
certificates for Series B Preferred Stock as aforesaid, the Corporation shall
cause to be issued and delivered at such office to such holder, or on his or its
written order, a certificate or certificates for the number of full shares of
Common Stock issuable on such conversion in accordance with the provisions
hereof and cash as provided in paragraph (b) of this Section 5 in respect of any
fraction of a share of Common Stock otherwise issuable upon such conversion.
(e) The Corporation shall at all times when the Series B
Preferred Stock shall be outstanding reserve and keep available out of its
authorized but unissued stock, for the purposes of effecting the conversion of
the Series B Preferred Stock, such number of its duly authorized shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding Series B Preferred Stock. Before taking any action which
would cause an adjustment reducing the Conversion Price below the then par value
of the shares of Common Stock issuable upon conversion of the Series B Preferred
Stock, the Corporation will take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Corporation may validly and
legally issue fully-paid and nonassessable shares of such Common Stock at such
adjusted Conversion Price.
(f) All shares of Series B Preferred Stock which shall have
been surrendered for conversion as herein provided shall no longer be deemed to
be outstanding and all rights with respect to such shares, including the rights,
if any, to receive notices and
10
to vote, shall forthwith cease and terminate except the right of the holder
thereof to receive payment of any accrued but unpaid dividends thereon and
shares of Common Stock in exchange therefor. Any shares of Series B Preferred
Stock so converted shall be retired and cancelled and shall not be reissued, and
the Corporation may from time to time take such appropriate action as may be
necessary to reduce the authorized Series B Preferred Stock accordingly.
6. ANTI-DILUTION PROVISIONS.
(a) In order to prevent dilution of the right granted
hereunder, the Conversion Price shall be subject to adjustment from time to time
in accordance with this paragraph 6(a). At any given time the Conversion Price,
whether as the initial price of $10.00 per share or as last adjusted, shall be
that dollar (or part of a dollar) amount the payment of which shall be
sufficient at the given time to acquire one share of Common Stock upon
conversion of shares of Series B Preferred Stock. Upon each adjustment of the
Conversion Price pursuant to Section 6, the Conversion Rate shall be adjusted
such that the registered holders of shares of Series B Preferred Stock shall
thereafter be entitled to acquire upon exercise, at the Conversion Price
resulting from such adjustment, the number of shares of Common Stock obtainable
by multiplying the Conversion Price in effect immediately prior to such
adjustment by the number of shares of Common Stock acquirable immediately prior
to such adjustment and dividing the product thereof by the Conversion Price
resulting from such adjustment. For purposes of this Section 6, the term "Number
of Common Shares Deemed Outstanding" at any given time shall mean the sum of (x)
the number of shares of Common Stock outstanding at such time, (y) the number of
shares of Common Stock issuable assuming conversion at such time of the
Corporation's Series A Preferred Stock and Series B Preferred Stock and (z) the
number of shares of Common Stock deemed to be outstanding under subparagraphs
6(b)(1) to (9), inclusive, at such time.
(b) Except as provided in paragraph 6(c) or 6(f) below, if and
whenever on or after the Initial Issuance Date, the Corporation shall issue or
sell, or shall in accordance with subparagraphs 6(b)(1) to (9), inclusive, be
deemed to have granted, issued or sold, any shares of its Common Stock for a
consideration per share less than the Conversion Price in effect immediately
prior to the time of such grant, issue or sale, then forthwith upon such grant,
issue or sale (the "Triggering Transaction"), the Conversion Price shall,
subject to subparagraphs (1) to (9) of this paragraph 6(b), be reduced to the
Conversion Price (calculated to the nearest tenth of a cent) determined by
dividing:
11
(i) an amount equal to the sum of (x) the product derived by
multiplying the Number of Common Shares Deemed Outstanding immediately
prior to such Triggering Transaction by the Conversion Price then in
effect, plus (y) the consideration, if any, received by the Corporation
upon consummation of such Triggering Transaction, by
(ii) an amount equal to the sum of (x) the Number of Common
Shares Deemed Outstanding immediately prior to such Triggering
Transaction, plus (y) the number of shares of Common Stock granted,
issued or sold (or deemed to be granted, issued or sold in accordance
with subparagraphs 6(b)(1) to (9) hereof) in connection with such
Triggering Transaction;
provided, however, that the Conversion Price shall not be so reduced if (A) for
so long as the holders of the Series B Preferred Stock have the right to elect
one or more Series B Directors pursuant to Section 4(b) hereof or to approve
certain transactions by the Corporation pursuant to Section 4(c) hereof, such
Triggering Transaction involves a grant, issuance or sale of Common Stock to any
GP Holding Party other than ratably to all holders of the Common Stock, and such
Triggering Transaction has not been approved by a majority of the Non-Series B
Directors (other than natural persons who are GP Holding Parties or officers,
directors or employees of entities that are GP Holding Parties) or (B) the
Triggering Transaction involves a grant, issuance or sale of Common Stock that
has not been registered pursuant to the Securities Act of 1933, as amended, and
an investment bank of national standing and reputation, engaged for a fee by the
Corporation pursuant to a written engagement letter, has not been consulted by
the Corporation with respect to the structure of such Triggering Transaction and
participated in the negotiation of such Triggering Transaction.
For purposes of determining the adjusted Conversion Price
under this paragraph 6(b), the following subsections (1) to (9), inclusive,
shall be applicable:
(1) In case the Corporation at any time shall in any
manner grant (whether directly or by assumption in a merger or
otherwise) any rights to subscribe for or to purchase, or any
options for the purchase of, (A) Common Stock or (B) any stock
or other securities convertible into or exchangeable for
Common Stock (such rights or options being herein called
"Options" and such convertible or exchangeable stock or
securities being herein called "Convertible Securities"),
whether or not such
12
Options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the
price per share for which the Common Stock is issuable upon
exercise, conversion or exchange (determined by dividing (x)
the total amount, if any, received or receivable by the
Corporation as consideration for the granting of such Options,
plus the minimum aggregate amount of additional consideration,
if any, payable to the Corporation upon the exercise of all
such Options, plus, in the case of such Options which relate
to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issue or
sale of such Convertible Securities and upon the conversion or
exchange thereof, by (y) the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities) shall
be less than the Conversion Price in effect immediately prior
to the granting of such Option, then the total maximum amount
of Common Stock issuable upon the exercise of such Options or
in the case of Options which relate to Convertible Securities,
upon the conversion or exchange of such Convertible
Securities, shall (as of the date of granting of such Options)
be deemed to be outstanding and to have been issued and sold
by the Corporation for such price per share. No adjustment of
the Conversion Price shall be made upon the actual issue of
such shares of Common Stock or such Convertible Securities
upon the exercise of such Options, except as otherwise
provided in subparagraph (3) below.
(2) In case the Corporation at any time shall in any
manner issue (whether directly or by assumption in a merger or
otherwise) or sell any Convertible Securities, whether or not
the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is
issuable upon such conversion or exchange (determined by
dividing (x) the total amount received or receivable by the
Corporation as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation
upon the conversion or exchange thereof, by (y) the total
maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities)
shall be less than the Conversion Price in respect of such
issue or sale, then the total maximum number of shares of
Common Stock
13
issuable upon conversion or exchange of all such Convertible
Securities shall (as of the date of the issue or sale of such
Convertible Securities) be deemed to be outstanding and to
have been issued and sold by the Corporation for such price
per share. No adjustment of the Conversion Price shall be made
upon the actual issue of such Common Stock upon exercise of
the rights to exchange or convert under such Convertible
Securities, except as otherwise provided in subparagraph (3)
below.
(3) If the purchase price provided for in any Options
referred to in subparagraph (1), the additional consideration,
if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subparagraphs (1) or
(2), or the rate at which any Convertible Securities referred
to in subparagraph (1) or (2) are convertible into or
exchangeable for Common Stock shall change at any time (other
than under or by reason of provisions designed to protect
against dilution of the type set forth in paragraphs 6(b) or
6(d)), the Conversion Price in effect at the time of such
change shall forthwith be readjusted to the Conversion Price
which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion
rate, as the case may be, at the time initially granted,
issued or sold. If the purchase price provided for in any
Option referred to in subparagraph (1) or the rate at which
any Convertible Securities referred to in subparagraphs (1) or
(2) are convertible into or exchangeable for Common Stock,
shall be reduced at any time under or by reason of provisions
with respect thereto designed to protect against dilution,
then in case of the delivery of Common Stock upon the exercise
of any such Option or upon conversion or exchange of any such
Convertible Security, the Conversion Price then in effect
hereunder shall forthwith be adjusted to such respective
amount as would have been obtained had such Option or
Convertible Security never been issued as to such Common Stock
and had adjustments been made upon the issuance of the shares
of Common Stock delivered as aforesaid, but only if as a
result of such adjustment the Conversion Price then in effect
hereunder is hereby reduced.
(4) On the expiration of any Option or the
termination of any right to convert or exchange any
Convertible Securities, the Conversion Price then in
14
effect hereunder shall forthwith be increased to the
Conversion Price which would have been in effect at the time
of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately
prior to such expiration or termination, never been issued.
(5) In case any Options shall be issued in connection
with the issue or sale of other securities of the Corporation,
together comprising one integral transaction in which no
specific consideration is allocated to such Options by the
parties thereto, such Options shall be deemed to have been
issued without consideration (but shall otherwise be deemed
issued for the specific consideration allocated thereto).
(6) In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold or deemed to
have been issued or sold for cash, the consideration received
therefor less any underwriting discounts, selling commissions
and other expenses paid or incurred in respect of such
issuance or sale, shall be deemed to be the amount received by
the Corporation therefor. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for
a consideration other than cash, the amount of the
consideration other than cash received by the Corporation
shall be the fair value of such consideration as determined in
good faith by the Board of Directors of the Corporation. In
case any shares of Common Stock, Options or Convertible
Securities shall be issued in connection with any merger in
which the Corporation is the surviving corporation, the amount
of consideration therefor shall be deemed to be the value
attributable to such shares in such merger, provided that, to
the extent such value is not readily ascertainable, such value
shall be the fair value of such consideration as determined in
good faith by the Board of Directors of the Corporation.
(7) The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by or
for the account of the Corporation, and the disposition of any
shares so owned or held shall be considered an issue or sale
of Common Stock for the purpose of this paragraph 6(b).
(8) In case the Corporation shall declare a dividend
or make any other distribution upon the stock of the
Corporation (other than dividends payable on the
15
Series B Preferred Stock pursuant to Section 2 hereof) payable
in Common Stock, Options, or Convertible Securities (other
than a dividend or distribution payable in Common Stock
covered by subparagraph 6(c) or 6(d)), then in such case any
Common Stock, Options or Convertible Securities, as the case
may be, issuable in payment of such dividend or distribution
shall be deemed to have been issued or sold without
consideration.
(9) For purposes of this paragraph 6(b), in case the
Corporation shall take a record of the holders of its Common
Stock for the purpose of entitling them (x) to receive a
dividend or other distribution payable in Common Stock,
Options or in Convertible Securities, or (y) to subscribe for
or purchase Common Stock, Options or Convertible Securities,
then such record date shall be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have
been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the
granting of such right or subscription or purchase, as the
case may be.
(c) In the event the Corporation shall declare a dividend upon
the Common Stock payable otherwise than out of earnings or earned surplus,
determined in accordance with generally accepted accounting principles,
including the making of appropriate deductions for minority interests, if any,
in subsidiaries but without increasing the same as a result of any write-up of
assets related to such dividend or any gain from the sale of any capital assets
related to such dividend (herein referred to as "Liquidating Dividends"), then,
the Corporation shall pay to the holders of the Series B Preferred Stock (in
respect of each share of Class B Preferred Stock), at the time such dividend is
paid to holders of the Common Stock and in addition to any other dividend
required to be paid to the holders of the Series B Preferred Stock, an amount
equal to the product of the Conversion Rate then in effect and the aggregate
value at such time of all Liquidating Dividends paid in respect of one share of
Common Stock. For the purposes of this paragraph 6(c), a dividend shall be
considered payable out of earnings or earned surplus only if paid in cash and to
the extent that such earnings or earned surplus are charged an amount equal to
the fair value of such dividend as determined in good faith by the Board of
Directors of the Corporation.
(d) In case the Corporation shall at any time subdivide its
outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such
16
subdivision shall be proportionately reduced, and, conversely, in case the
outstanding shares of Common Stock of the Corporation shall be combined into a
smaller number of shares, the Conversion Price in effect immediately prior to
such combination shall be proportionately increased.
(e) If any capital reorganization or reclassification of the
capital stock of the Corporation, or consolidation or merger of the Corporation
with another corporation, or the sale of all or substantially all of its assets
to another corporation (other than pursuant to a liquidation subject to Section
3 hereof) shall be effected in such a way that holders of Common Stock shall be
entitled to receive stock, securities, cash or other property with respect to or
in exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the holders of the Series B Preferred Stock shall have the
right to acquire and receive upon conversion of the Series B Preferred Stock,
which right shall be pari passu with the rights of holders of Parity Stock and
prior to the rights of the holders of Junior Stock (but after and subject to the
rights of holders of Senior Preferred Stock, if any), such shares of stock,
securities, cash or other property issuable or payable (as part of the
reorganization, reclassification, consolidation, merger or sale) with respect to
or in exchange for such number of outstanding shares of Common Stock as would
have been received upon conversion of the Series B Preferred Stock at the
Conversion Price then in effect. The Corporation will not effect any such
consolidation, merger or sale, unless prior to the consummation thereof the
successor corporation (if other than the Corporation) resulting from such
consolidation or merger or the corporation purchasing such assets shall assume
by written instrument (in form and substance reasonably satisfactory to the
holders of a majority of the outstanding Series B Preferred Stock) mailed or
delivered to the holders of the Series B Preferred Stock at the last address of
each such holder appearing on the books of the Corporation, the obligation to
deliver to each such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
purchase.
(f) The provisions of this Section 6 shall not apply to any
Common Stock issued or issuable to any person or entity, or deemed outstanding,
under subparagraphs 6(b)(1) to (9) inclusive: (i) on exercise of options
outstanding as of the Initial Issuance Date to acquire up to 1,874,300 shares of
Common Stock issued to employees of the Corporation pursuant to the Stock Option
Plan or any options approved by the holders of record of a majority of the
outstanding shares of Series B Preferred Stock pursuant to Section 4(c)(ii)(y)
hereof, (ii) pursuant to options granted to
17
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ under the Stock Option Plan, as amended by the Corporation's
Board of Directors on January 31, 1996, (iii) on conversion of the Series B
Preferred Stock or Series A Preferred Stock, (iv) as a dividend on the Series B
Preferred Stock, or (v) on exercise of the Warrant issued to GP Holding on the
Initial Issuance Date.
(g) In the event that:
(1) the Corporation shall declare any cash dividend upon its
Common Stock, or
(2) the Corporation shall declare any dividend upon its Common
Stock payable in stock or make any special dividend or other
distribution to the holders of its Common Stock, or
(3) the Corporation shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock of any
class or other rights, or
(4) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, including any
subdivision or combination of its outstanding shares of Common Stock,
or consolidation or merger of the Corporation with, or sale of all or
substantially all of its assets to, another individual or entity, or
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in connection with such event, the Corporation shall give to the holders
of the Series B Preferred Stock:
(i) at least ten (10) days' prior written notice of the
date on which the books of the Corporation shall
close or a record shall be taken for such dividend,
distribution or subscription rights or for
determining rights to vote in respect of any such
reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up;
and
(ii) in the case of any such reorganization,
reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date
when the same shall take place. Such notice in
accordance with the foregoing clause (i) shall also
specify, in the case of any such dividend,
distribution or subscription rights, the date on
18
which the holders of Common Stock shall be entitled
thereto, and such notice in accordance with the
foregoing clause (ii) shall also specify the date on
which the holders of Common Stock shall be entitled
to exchange their Common Stock for securities or
other property deliverable upon such reorganization,
reclassification consolidation, merger, sale,
dissolution, liquidation or winding up, as the case
may be. Each such written notice shall be given by
first class mail, postage prepaid, addressed to the
holders of the Series B Preferred Stock at the
address of each such holder as shown on the books of
the Corporation.
(h) If at any time or from time to time on or after the
Initial Issuance Date, the Corporation shall grant, issue or sell any Options,
Convertible Securities, rights to purchase property or evidences of indebtedness
(the "Purchase Rights") pro rata to the record holders of any class of Common
Stock and such grants, issuances or sales do not result in an adjustment of the
Conversion Price under paragraph 6(b) hereof, then each holder of record of
Series B Preferred Stock shall be entitled to acquire (within thirty (30) days
after the later to occur of the initial exercise date of such Purchase Rights or
receipt by such holder of the notice concerning Purchase Rights to which such
holder shall be entitled under paragraph 6(g)) and upon the terms applicable to
such Purchase Rights either:
(i) the aggregate Purchase Rights which such holder could
have acquired if it had held the number of shares of
Common Stock acquirable upon conversion of the Series
B Preferred Stock immediately before the grant,
issuance or sale of such Purchase Rights; provided
that if any Purchase Rights were distributed to
holders of Common Stock without the payment of
additional consideration by such holders,
corresponding Purchase Rights shall be distributed to
the exercising holders of the Series B Preferred
Stock as soon as possible after such exercise and it
shall not be necessary for the exercising holders of
the Series B Preferred Stock specifically to request
delivery of such rights; or
(ii) in the event that any such Purchase Rights shall have
expired or shall expire prior to the end of said
thirty (30) day period, the number of shares of
Common Stock or the amount of property which such
holder could have acquired upon such exercise
19
at the time or times at which the Corporation
granted, issued or sold such expired Purchase Rights.
(i) If any event occurs as to which, in the opinion of the
Board of Directors of the Corporation, the provisions of this Section 6 are not
strictly applicable or if strictly applicable would not fairly protect the
rights of the holders of the Series B Preferred Stock in accordance with the
essential intent and principles of such provisions, then the Board of Directors
shall make an adjustment in the application of such provisions, in accordance
with such essential intent and principles, so as to protect such rights as
aforesaid, but in no event shall any adjustment have the effect of increasing
the Conversion Price as otherwise determined pursuant to any of the provisions
of this Section 6 except in the case of a combination of shares of a type
contemplated in paragraph 6(d) and then in no event to an amount larger than the
Conversion Price as adjusted pursuant to paragraph 6(d).
7. REDEMPTION.
(a) The Corporation, at its option, may redeem (to the extent
that such redemption shall not violate any applicable provisions of the laws of
the State of Delaware) all or a portion of the shares of Series B Preferred
Stock at a price of $5,000 per share (subject to adjustment in the event of any
stock dividend, stock split, stock distribution or combination with respect to
such shares), plus an amount equal to any dividends thereon cumulated or accrued
but unpaid, whether or not declared (such amount is hereinafter referred to as
the "Redemption Price"), from time to time after the fourth anniversary of the
Initial Issuance Date (any such date of redemption is hereafter referred to as a
"Redemption Date"), if prior to such redemption all accrued but unpaid dividends
on all outstanding shares of Series B Preferred Stock have been paid, provided,
however, that, without the written consent of the holders of a majority of the
outstanding shares of Class A Preferred Stock, the Corporation shall not redeem
any shares of Class B Preferred Stock so long as any shares of Class A Preferred
Stock remain outstanding.
(b) In the event of any redemption of only a part of the then
outstanding Series B Preferred Stock, the Corporation shall effect such
redemption pro rata among the holders thereof (based on the number of shares of
Series B Preferred Stock held on the date of notice of redemption).
(c) At least thirty (30) days prior to any proposed Redemption
Date, written notice shall be mailed, postage prepaid,
20
to each holder of record of Series B Preferred Stock to be redeemed, at his or
its post office address last shown on the records of the Corporation, notifying
such holder of the number of shares so to be redeemed, specifying the Redemption
Date and the date on which such holder's conversion rights (pursuant to Section
5 hereof) as to such shares terminate and calling upon such holder to surrender
to the Corporation, in the manner and at the place designated, his or its
certificate or certificates representing the shares to be redeemed (such notice
is hereinafter referred to as the "Redemption Notice"). On or prior to each
Redemption Date, each holder of record of Series B Preferred Stock to be
redeemed shall surrender his or its certificate or certificates representing
such shares to the Corporation, in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Price of such shares shall be
payable to the order of the person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate shall be
cancelled. In the event less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares. From and after the Redemption Date, unless there shall have
been a default in payment of the Redemption Price, all rights of the holders of
the Series B Preferred Stock designated for redemption in the Redemption Notice
as holders of Series B Preferred Stock of the Corporation (except the right to
receive the Redemption Price upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever.
(d) Except as provided in paragraph (a) above, the Corporation
shall have no right to redeem the shares of Series B Preferred Stock. Any shares
of Series B Preferred Stock so redeemed shall be permanently retired, shall no
longer be deemed outstanding and shall not under any circumstances be reissued,
and the Corporation may from time to time take such appropriate corporate action
as may be necessary to reduce the amount of authorized Series B Preferred Stock
accordingly. Nothing herein contained shall prevent or restrict the purchase by
the Corporation, from time to time either at public or private sale, of the
whole or any part of the Series B Preferred Stock at such price or prices as the
Corporation and the selling holders of the Series B Preferred Stock may mutually
determine, subject to the provisions of applicable law.
IN WITNESS WHEREOF, [Western Publishing Group, Inc.] has
caused this Certificate of Designations, Number, Voting Powers, Preferences and
Rights of Series B Convertible Preferred
21
Stock to be duly executed by its ______________ this ____ day of ____________,
1996.
[WESTERN PUBLISHING GROUP, INC.]
By:
----------------------------------
Name:
Title:
22
Index of Defined Terms
Affiliates 6
Common Stock 1
Conversion Price 8
Conversion Rate 8
Convertible Securities 12
Corporation 1
Dividend Date 1
Dividend Value 2
GP Holding 5
GP Holding Parties 5
Indebtedness 7
Initial Issuance Date 1
Initial Series B Shares 5
Junior Stock 2
Liquidating Dividends 16
Market Price 2
Non-Series B Directors 5
Number of Common Shares Deemed Outstanding 11
Parity Stock 2
Redemption Date 20
Redemption Notice 21
Redemption Price 20
Senior Preferred Stock 4
Series A Preferred Stock 2
Series B Directors 5
Series B Preferred Stock 1
Stock Option Plan 7
Triggering Transaction 11
WPV 5
WF&G DRAFT
1/31/96
EXHIBIT B
FORM OF WARRANT
THIS WARRANT AND THE SECURITIES ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT OR IN
A TRANSACTION WHICH, IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO
[WESTERN PUBLISHING GROUP, INC.], QUALIFIES AS AN EXEMPT TRANSACTION UNDER THE
ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
[WESTERN PUBLISHING GROUP, INC.]
Common Stock Purchase Warrant
[Western Publishing Group, Inc.], a Delaware corporation (the
"Company"), hereby certifies that, for value received, Golden Press Holding,
L.L.C. (the "Holder"), or assigns, is entitled, subject to the terms set forth
below, to purchase from the Company, at any time and from time to time during
the period beginning on the earlier to occur of (i) the second anniversary of
the date of issuance hereof and (ii) the date on which a bona fide Business
Combination Proposal (as defined in the Securities Purchase Agreement, dated as
of January 31, 1996, between the Company and the Holder) is publicly announced
or a proxy solicitation for control of the Company's Board of Directors is
initiated by any person or entity other than a Holder Party (as defined in
Section 3.1 hereof)(the "Earliest Exercise Date"), and ending on , 2003, in
whole or in part, an aggregate of 3,250,000 fully paid and non-assessable shares
of the Common Stock of the Company at a purchase price, subject to the
provisions of Paragraph 3 hereof, of $10.00 per share (the "Purchase Price").
The Purchase Price and the number and character of such shares are subject to
adjustment as provided below, and the term "Common Stock" shall mean, unless the
context otherwise requires, the stock or other securities or property at the
time deliverable upon the exercise of this Warrant.
1. EXERCISE OF WARRANT. The purchase rights evidenced by this
Warrant shall be exercised by the holder surrendering this Warrant, with the
form of subscription at the end hereof duly executed by such holder, to the
Company at its office in New
York, New York, accompanied by payment of an amount (the "Exercise Amount")
equal to the Purchase Price multiplied by the number of shares being purchased
pursuant to such exercise, payable as follows: (i) by payment to the Company in
cash, by certified or official bank check, or by wire transfer of the Exercise
Amount, (ii) by surrender to the Company for cancellation of securities of the
Company having a Market Price (as hereinafter defined) in respect of such
exercise equal to the Exercise Amount, or (iii) by a combination of the methods
described in clauses (i) and (ii) above. In lieu of exercising this Warrant
pursuant to the immediately preceding sentence, the holder may elect to receive
a payment equal to the difference between (i) the Market Price multiplied by the
number of shares as to which this Warrant is then being exercised and (ii) the
Purchase Price with respect to such shares, payable by the Company to the Holder
only in shares of Common Stock valued at the Market Price in respect of such
exercise, by surrendering this Warrant, with the form of subscription at the end
hereof duly executed by such holder, to the Company at its office in New York,
New York. For purposes hereof, the term "Market Price" shall mean the average
closing price of a share of Common Stock for the ten consecutive trading days
immediately preceding the date of exercise of this Warrant as reported on the
principal national securities exchange on which the shares of Common Stock or
securities are listed or admitted to trading or, if not listed or admitted to
trading on any national securities exchange, the average of the closing bid and
asked prices during such ten trading day period in the over-the-counter market
as reported by the Nasdaq National Market or any comparable system, or, if no
such firm is then engaged in the business of reporting such prices, as reported
by The Wall Street Journal, or, if not so reported, as furnished by any member
of the National Association of Securities Dealers, Inc. selected by the Company
or, if the shares of Common Stock or securities are not publicly traded, the
Market Price for such day shall be the fair market value thereof determined
jointly by the Company and the holder of this Warrant; provided, however, that
if such parties are unable to reach agreement within a reasonable period of
time, the Market Price shall be determined in good faith by an independent
investment banking firm selected jointly by the Company and the holder of this
Warrant or, if that selection cannot be made within ten days, by an independent
investment banking firm selected by the American Arbitration Association in
accordance with its rules, and provided further, that the Company shall pay all
of the fees and expenses of any third parties incurred in connection with
determining the Market Price.
1.1 Partial Exercise. This Warrant may be exercised for less
than the full number of shares of Common Stock, in which
2
case the number of shares receivable upon the exercise of this Warrant as a
whole, and the sum payable upon the exercise of this Warrant as a whole, shall
be proportionately reduced. Upon any such partial exercise, the Company at its
expense will forthwith issue to the holder hereof a new Warrant or Warrants of
like tenor calling for the number of shares of Common Stock as to which rights
have not been exercised, such Warrant or Warrants to be issued in the name of
the holder hereof or its nominee (upon payment by such holder of any applicable
transfer taxes).
2. DELIVERY OF STOCK CERTIFICATES ON EXERCISE. As soon as
practicable after the exercise of this Warrant and payment of the Purchase
Price, and in any event within ten (10) days thereafter, the Company, at its
expense, will cause to be issued in the name of and delivered to the holder
hereof a certificate or certificates for the number of fully paid and
non-assessable shares or other securities or property to which such holder shall
be entitled upon such exercise, plus, in lieu of any fractional share to which
such holder would otherwise be entitled, cash in an amount determined in
accordance with Paragraph 3.9 hereof. The Company agrees that the shares so
purchased shall be deemed to be issued to the holder hereof as the record owner
of such shares as of the close of business on the date on which this Warrant
shall have been surrendered and payment made for such shares as aforesaid.
3. ANTI-DILUTION PROVISIONS AND OTHER ADJUSTMENTS. In order to
prevent dilution of the right granted hereunder, the Purchase Price shall be
subject to adjustment from time to time in accordance with this Paragraph 3.
Upon each adjustment of the Purchase Price pursuant to this Paragraph 3, the
registered Holder of this Warrant shall thereafter be entitled to acquire upon
exercise, at the Purchase Price resulting from such adjustment, the number of
shares of Common Stock obtainable by multiplying the Purchase Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
acquirable immediately prior to such adjustment and dividing the product thereof
by the Purchase Price resulting from such adjustment.
3.1. Adjustment for Issue or Sale of Common Stock at Less than
Purchase Price. Except as provided in Paragraph 3.2 or 3.5 below, if and
whenever on or after the date of issuance hereof the Company shall grant, issue
or sell, or shall in accordance with subparagraphs 3.1(1) to (9), inclusive, be
deemed to have granted, issued or sold, any shares of its Common Stock for a
consideration per share less than the Purchase Price in effect immediately prior
to the time of such grant, issue or sale, then forthwith upon such grant, issue
or sale (the
3
"Triggering Transaction"), the Purchase Price shall, subject to subparagraphs
(1) to (9) of this Paragraph 3.1, be reduced to the Purchase Price (calculated
to the nearest tenth of a cent) determined by dividing:
(i) an amount equal to the sum of (x) the product derived by multiplying the
Number of Common Shares Deemed Outstanding immediately prior to such Triggering
Transaction by the Purchase Price then in effect, plus (y) the consideration, if
any, received by the Company upon consummation of such Triggering Transaction,
by
(ii) an amount equal to the sum of (x) the Number of Common Shares Deemed
Outstanding immediately prior to such Triggering Transaction plus (y) the number
of shares of Common Stock granted, issued or sold (or deemed to be granted,
issued or sold in accordance with subparagraphs 3.1(1) to (9)) in connection
with the Triggering Transaction;
provided, however, that the Purchase Price shall not be so reduced if (i) so
long as the Holder has the right to elect as a class one or more directors of
the Company's Board of Directors or to approve certain transactions by the
Company pursuant to Section 4(b) or 4(c), respectively, of the Certificate of
Designations of the Company's Series B Convertible Preferred Stock (the "Series
B Preferred Stock"), such Triggering Transaction involves a grant, issuance or
sale of Common Stock to the Holder, any of its members, any affiliates of such
members (other than of Warburg, ▇▇▇▇▇▇ Ventures, L.P. ("WPV")) and the general
partnership that acts as a general partner of WPV (the Holder, its members, such
affiliates and such general partnership being herein collectively referred to as
the "Holder Parties"), other than ratably to all holders of the Common Stock,
and such Triggering Transaction has not been approved by a majority of the
Non-Series B Directors (as defined in said Certificate of Designations and
excluding natural persons who are Holder Parties or officers, directors or
employees of entities that are Holder Parties) or (ii) the Triggering
Transaction involves a grant, issuance or sale of Common Stock that has not been
registered pursuant to the Securities Act of 1933, as amended, and an investment
bank of national standing and reputation, engaged for fee by the Company
pursuant to a written engagement letter, has not been consulted by the Company
with respect to the structure of such Triggering Transaction and participated in
the negotiation of such Triggering Transaction.
For purposes of this Paragraph 3, the term "Number of Common
Shares Deemed Outstanding"
4
at any given time shall mean the sum of (x) the number of shares of Common Stock
outstanding at such time, (y) the number of shares of Common Stock issuable
assuming conversion at such time of the Company's Series A Preferred Stock and
Series B Convertible Preferred Stock and (z) the number of shares of the
Company's Common Stock deemed to be outstanding under subparagraphs 3.1(1) to
(9), inclusive, at such time.
For purposes of determining the adjusted Purchase Price under
this Paragraph 3.1, the following subsections (1) to (9), inclusive, shall be
applicable:
(1) In case the Company at any time shall in any
manner grant (whether directly or by assumption in a merger or otherwise) any
rights to subscribe for or to purchase, or any options for the purchase of,
Common Stock or any stock or other securities convertible into or exchangeable
for Common Stock (such rights or options being herein called "Options" and such
convertible or exchangeable stock or securities being herein called "Convertible
Securities"), whether or not such Options or the right to convert or exchange
any such Convertible Securities are immediately exercisable and the price per
share for which the Common Stock is issuable upon exercise, conversion or
exchange (determined by dividing (x) the total amount, if any, received or
receivable by the Company as consideration for the granting of such Options,
plus the minimum aggregate amount of additional consideration payable to the
Company upon the exercise of all such Options, plus, in the case of such Options
which relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issue or sale of such
Convertible Securities and upon the conversion or exchange thereof, by (y) the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or the conversion or exchange of such Convertible Securities) shall
be less than the Purchase Price in effect immediately prior to the time of the
granting of such Option, then the total maximum amount of Common Stock issuable
upon the exercise of such Options, or, in the case of Options which relate to
Convertible Securities, upon the conversion or exchange of such Convertible
Securities, shall (as of the date of granting of such Options) be deemed to be
outstanding and to have been issued and sold by the Company for such price per
share. No adjustment of the Purchase Price shall be made upon the actual issue
of such shares of Common Stock or such Convertible Securities upon the exercise
of such Options, except as otherwise provided in subparagraph (3) below.
(2) In case the Company at any time shall in any
manner issue (whether directly or by assumption in a merger or
5
otherwise) or sell any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the price per
share for which Common Stock is issuable upon such conversion or exchange
(determined by dividing (x) the total amount received or receivable by the
Company as consideration for the issue or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the conversion or exchange thereof, by (y) the total maximum
number of shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the Purchase Price in effect
immediately prior to the time of such issue or sale, then the total maximum
number of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall (as of the date of the issue or sale of such
Convertible Securities) be deemed to be outstanding and to have been issued and
sold by the Company for such price per share. No adjustment of the Purchase
Price shall be made upon the actual issue of such Common Stock upon exercise of
the rights to exchange or convert under such Convertible Securities, except as
otherwise provided in subparagraph (3) below.
(3) If the purchase price provided for in any
Options referred to in subparagraph (1), the additional consideration, if any,
payable upon the conversion or exchange of any Convertible Securities referred
to in subparagraphs (1) or (2), or the rate at which any Convertible Securities
referred to in subparagraph (1) or (2) are convertible into or exchangeable for
Common Stock shall change at any time (other than under or by reason of
provisions designed to protect against dilution of the type set forth in
Paragraph 3.1 or 3.3), the Purchase Price in effect at the time of such change
shall forthwith be readjusted to the Purchase Price which would have been in
effect at such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or conversion
rate, as the case may be, at the time initially granted, issued or sold. If the
purchase price provided for in any Option referred to in subparagraph (1) or the
rate at which any Convertible Securities referred to in subparagraphs (1) or (2)
are convertible into or exchangeable for Common Stock, shall be reduced at any
time under or by reason of provisions with respect thereto designed to protect
against dilution, then in case of the delivery of Common Stock upon the exercise
of any such Option or upon conversion or exchange of any such Convertible
Security, the Purchase Price then in effect hereunder shall forthwith be
adjusted to such respective amount as would have been obtained had such Option
or Convertible Security never been issued as to such Common Stock and had
adjustments been made upon the issuance of the shares of Common
6
Stock delivered as aforesaid, but only if as a result of such adjustment the
Purchase Price then in effect hereunder is hereby reduced.
(4) On the expiration of any Option or the
termination of any right to convert or exchange any Convertible Securities, the
Purchase Price then in effect hereunder shall forthwith be increased to the
Purchase Price which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination, never been issued.
(5) In case any Options shall be issued in
connection with the issue or sale of other securities of the Company, together
comprising one integral transaction in which no specific consideration is
allocated to such Options by the parties thereto, such Options shall be deemed
to have been issued without consideration (but shall otherwise be deemed issued
for the specific consideration allocated thereto).
(6) In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold or deemed to have been issued or
sold for cash, the consideration received therefor, less any underwriting
discounts, selling commissions and other expenses paid or incurred in respect of
such issuance or sale, shall be deemed to be the amount received by the Company
therefor. In case any shares of Common Stock, Options or Convertible Securities
shall be issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company shall be the fair value of
such consideration as determined in good faith by the Board of Directors of the
Company. In case any shares of Common Stock, Options or Convertible Securities
shall be issued in connection with any merger in which the Company is the
surviving corporation, the amount of consideration therefor shall be deemed to
be the value attributable to such shares in such merger, provided that, to the
extent such value is not ascertainable, such value shall be the fair value of
such consideration as determined in good faith by the Board of Directors of the
Company.
(7) The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by or for the account
of the Company, and the disposition of any shares so owned or held shall be
considered an issue or sale of Common Stock for the purpose of this Paragraph
3.1.
7
(8) In case the Company shall declare a dividend or
make any other distribution upon the stock of the Company payable in Common
Stock, Options, or Convertible Securities (other than a dividend or distribution
payable in Common Stock covered by Section 3.3 or 3.4), then in such case any
Common Stock, Options or Convertible Securities, as the case may be, issuable in
payment of such dividend or distribution shall be deemed to have been issued or
sold without consideration.
(9) For purposes of this Paragraph 3.1, in case the
Company shall take a record of the holders of its Common Stock for the purpose
of entitling them (x) to receive a dividend or other distribution payable in
Common Stock, Options or in Convertible Securities, or (y) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such record date
shall be deemed to be the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration of such dividend
or the making of such other distribution or the date of the granting of such
right or subscription or purchase, as the case may be.
3.2. Dividends Not Paid Out of Earnings or Earned Surplus. In
the event the Company shall declare a dividend upon the Common Stock payable
otherwise than out of earnings or earned surplus, determined in accordance with
generally accepted accounting principles, including the making of appropriate
deductions for minority interests, if any, in subsidiaries but without
increasing the same as a result of any write-up of assets related to such
dividend or any gain from the sale of any capital assets related to such
dividend (herein referred to as "Liquidating Dividends"), then, the Company
shall pay to the holder of this Warrant, at the time such dividend is paid to
the holders of the Common Stock, an amount equal to the product of (i) the
number of shares of Common Stock that the holder of this Warrant would be
entitled to acquire upon exercise of this Warrant at the Purchase Price then in
effect and (ii) the aggregate value at such time of all Liquidating Dividends
paid in respect of one share of Common Stock. For the purposes of this Paragraph
3.2, a dividend shall be considered payable out of earnings or earned surplus
only if paid in cash and to the extent that such earnings or earned surplus are
charged an amount equal to the fair value of such dividend as determined in good
faith by the Board of Directors of the Company.
3.3. Subdivisions and Combinations. In case the Company shall
at any time subdivide its outstanding shares of Common Stock into a greater
number of shares, the Purchase Price in effect immediately prior to such
subdivision shall be
8
proportionately reduced, and, conversely, in case the outstanding shares of
Common Stock shall be combined into a smaller number of shares, the Purchase
Price in effect immediately prior to such combination shall be proportionately
increased.
3.4. Reorganization, Reclassification, Consolidation, Merger
or Sale of Assets. If any capital reorganization or reclassification of the
capital stock of the Company, or consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its assets to
another corporation shall be effected in such a way that holders of Common Stock
shall be entitled to receive stock, securities, cash or other property with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provision shall be made whereby the holder of this Warrant shall have
the right to acquire and receive upon exercise of this Warrant such shares of
stock, securities, cash or other property issuable or payable (as part of the
reorganization, reclassification, consolidation, merger or sale) with respect to
or in exchange for such number of outstanding shares of the Company's Common
Stock as would have been received upon exercise of this Warrant at the Purchase
Price then in effect. The Company will not effect any such consolidation, merger
or sale, unless prior to the consummation thereof the successor corporation (if
other than the Company) resulting from such consolidation or merger or the
corporation purchasing such assets shall assume by written instrument (in form
and substance reasonably satisfactory to the holder of this Warrant) mailed or
delivered to the holder of this Warrant at the last address of such holder
appearing on the books of the Company, the obligation to deliver to such holder
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to purchase.
3.5. No Adjustment for Exercise of Certain Options, Warrants,
Etc. The provisions of this Section 3 shall not apply to any Common Stock issued
or issuable to any person or entity, or deemed outstanding, under subparagraphs
3.1(1) to (9) inclusive: (i) on exercise of options outstanding on the date of
issuance hereof to acquire up to 1,874,300 shares of Common Stock issued to
employees of the Company pursuant to the Amended and Restated 1986 Employee
Stock Option Plan of the Company (the "Stock Option Plan") or any options
approved with the consent of the holders of record of a majority of the
outstanding shares of Series B Preferred Stock; (ii) pursuant to options granted
to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ under the Stock Option Plan, as amended by the Company's
Board of Directors on January 31, 1996; (iii) on conversion of the Series B
Preferred
9
Stock or the Series A Preferred Stock of the Company; (iv) as a dividend on the
Series B Preferred Stock; or (v) on exercise of this Warrant.
3.6. Notices of Record Date, Etc. In the event that:
(1) the Company shall declare any cash dividend upon
its Common Stock, or
(2) the Company shall declare any dividend upon its
Common Stock payable in stock or make any special dividend or other distribution
to the holders of its Common Stock, or
(3) the Company shall offer for subscription pro
rata to the holders of its Common Stock any additional shares of stock of any
class or other rights, or
(4) there shall be any capital reorganization or
reclassification of the capital stock of the Company, including any subdivision
or combination of its outstanding shares of Common Stock, or consolidation or
merger of the Company with, or sale of all or substantially all of its assets
to, another corporation, or
(5) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in connection with such event, the Company shall give to the holder of
this Warrant:
(i) at least ten (10) days' prior written notice of the date on which the books
of the Company shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in respect
of any such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up; and
(ii) in the case of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, at least twenty (20) days'
prior written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause (i) shall also specify, in the case of any
such dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto, and such notice in accordance
with the foregoing clause (ii) shall also specify the date on which the holders
of Common Stock shall be entitled to exchange their Common Stock for securities
or other property deliverable upon such reorganization, reclassification
consolidation, merger, sale, dissolution,
10
liquidation or winding up, as the case may be. Each such written notice shall be
given by first class mail, postage prepaid, addressed to the holder of this
Warrant at the address of such holder as shown on the books of the Company.
3.7. Grant, Issue or Sale of Options, Convertible Securities,
or Rights. If at any time or from time to time on or after the date of issuance
hereof, the Company shall grant, issue or sell any Options, Convertible
Securities, rights to purchase property or evidences of indebtedness (the
"Purchase Rights") pro rata to the record holders of any class of Common Stock
and such grants, issuances or sales do not result in an adjustment of the
Purchase Price under Paragraph 3.1 hereof, then the holder of this Warrant shall
be entitled to acquire (within thirty (30) days after the later to occur of the
initial exercise date of such Purchase Rights or receipt by such holder of the
notice concerning Purchase Rights to which such holder shall be entitled under
Paragraph 3.6) and upon the terms applicable to such Purchase Rights either:
(i) the aggregate Purchase Rights which such holder could have acquired if it
had held the number of shares of Common Stock acquirable upon exercise of this
Warrant immediately before the grant, issuance or sale of such Purchase Rights;
provided that if any Purchase Rights were distributed to holders of Common Stock
without the payment of additional consideration by such holders, corresponding
Purchase Rights shall be distributed to the exercising holder of this Warrant as
soon as possible after such exercise and it shall not be necessary for the
exercising holder of this Warrant specifically to request delivery of such
rights; or
(ii) in the event that any such Purchase Rights shall have expired or shall
expire prior to the end of said thirty (30) day period, the number of shares of
Common Stock or the amount of property which such holder could have acquired
upon such exercise at the time or times at which the Company granted, issued or
sold such expired Purchase Rights.
3.8. Adjustment by Board of Directors. If any event occurs as
to which, in the opinion of the Board of Directors of the Company, the
provisions of this Section 3 are not strictly applicable or if strictly
applicable would not fairly protect the rights of the holder of this Warrant in
accordance with the essential intent and principles of such provisions, then the
Board of Directors shall make an adjustment in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such rights as aforesaid, but in no event shall any adjustment have the
effect of increasing the
11
Purchase Price as otherwise determined pursuant to any of the provisions of this
Section 3 except in the case of a combination of shares of a type contemplated
in Paragraph 3.3 and then in no event to an amount larger than the Purchase
Price as adjusted pursuant to Paragraph 3.3.
3.9. Fractional Shares. The Company shall not issue fractions
of shares of Common Stock upon exercise of this Warrant or scrip in lieu
thereof. If any fraction of a share of Common Stock would, except for the
provisions of this Paragraph 3.9, be issuable upon exercise of this Warrant, the
Company shall in lieu thereof pay to the person entitled thereto an amount in
cash equal to the current value of such fraction, calculated to the nearest
one-hundredth (1/100) of a share, to be computed (i) if the Common Stock is
listed on any national securities exchange on the basis of the last sales price
of the Common Stock on such exchange (or the quoted closing bid price if there
shall have been no sales) on the date of conversion, or (ii) if the Common Stock
shall not be listed, on the basis of the mean between the closing bid and asked
prices for the Common Stock on the date of conversion as reported by the Nasdaq
National Market, or its successor, and if there are not such closing bid and
asked prices, on the basis of the fair market value per share as determined by
the Board of Directors of the Company.
3.10. Officers' Statement as to Adjustments. Whenever the
Purchase Price shall be adjusted as provided in Section 3 hereof, the Company
shall forthwith file at each office designated for the exercise of this Warrant,
a statement, signed by the Chairman of the Board, the President, any Vice
President or Treasurer of the Company, showing in reasonable detail the facts
requiring such adjustment and the Purchase Price that will be effective after
such adjustment. The Company shall also cause a notice setting forth any such
adjustments to be sent by mail, first class, postage prepaid, to the record
holder of this Warrant at his or its address appearing on the stock register. If
such notice relates to an adjustment resulting from an event referred to in
Paragraph 3.6, such notice shall be included as part of the notice required to
be mailed and published under the provisions of Paragraph 3.6 hereof.
4. NO DILUTION OR IMPAIRMENT. The Company will not, by
amendment of its charter or through reorganization, consolidation, merger,
dissolution, sale of assets or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the holder hereof
12
against dilution or other impairment. Without limiting the generality of the
foregoing, the Company will not increase the par value of any shares of stock
receivable upon the exercise of this Warrant above the amount payable therefor
upon such exercise, and at all times will take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and non-assessable stock upon the exercise of this Warrant.
5. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF
WARRANTS. The Company shall at all times reserve and keep available out of its
authorized but unissued stock, solely for the issuance and delivery upon the
exercise of this Warrant and other similar Warrants, such number of its duly
authorized shares of Common Stock as from time to time shall be issuable upon
the exercise of this Warrant and all other similar Warrants at the time
outstanding.
6. REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to it, or (in the case of mutilation) upon surrender and
cancellation thereof, the Company will issue, in lieu thereof, a new Warrant of
like tenor.
7. REMEDIES. The Company stipulates that the remedies at law
of the holder of this Warrant in the event of any default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate, and that the same may be specifically enforced.
8. NEGOTIABILITY, ETC. This Warrant is issued upon the
following terms, to all of which each taker or owner hereof consents and agrees:
(a) Subject to the legend appearing on the first page hereof,
at any time beginning on the Earliest Exercise Date, title to this Warrant may
be transferred by endorsement (by the holder hereof executing the form of
assignment at the end hereof including guaranty of signature) and delivery in
the same manner as in the case of a negotiable instrument transferable by
endorsement and delivery.
(b) Subject to Section 8(a), any person in possession of this
Warrant properly endorsed is authorized to represent himself as absolute owner
hereof and is granted power to transfer absolute title hereto by endorsement and
delivery hereof to a
13
bona fide purchaser hereof for value; each prior taker or owner waives and
renounces all of his equities or rights in this Warrant in favor of every such
bona fide purchaser, and every such bona fide purchaser shall acquire title
hereto and to all rights represented hereby.
(c) Until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder of this Warrant as the
absolute owner hereof for all purposes without being affected by any notice to
the contrary.
(d) Prior to the exercise of this Warrant, the holder hereof
shall not be entitled to any rights of a shareholder of the Company with respect
to shares for which this Warrant shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to receive any notice
of any proceedings of the Company, except, in each case, as provided herein.
(e) The Company shall not be required to pay any Federal or
state transfer tax or charge that may be payable in respect of any transfer
involved in the transfer or delivery of this Warrant or the issuance or
conversion or delivery of certificates for Common Stock in a name other than
that of the registered holder of this Warrant or to issue or deliver any
certificates for Common Stock upon the exercise of this Warrant until any and
all such taxes and charges shall have been paid by the holder of this Warrant or
until it has been established to the Company's satisfaction that no such tax or
charge is due.
9. SUBDIVISION OF RIGHTS. This Warrant (as well as any new
warrants issued pursuant to the provisions of this paragraph) is exchangeable,
upon the surrender hereof by the holder hereof, at the principal office of the
Company for any number of new warrants of like tenor and date representing in
the aggregate the right to subscribe for and purchase the number of shares of
Common Stock which may be subscribed for and purchased hereunder.
10. MAILING OF NOTICES, ETC. All notices and other
communications from the Company to the holder of this Warrant shall be mailed by
first-class certified mail, postage prepaid, to the address furnished to the
Company in writing by the last holder of this Warrant who shall have furnished
an address to the Company in writing.
14
11. HEADINGS, ETC. The headings in this Warrant are for
purposes of reference only, and shall not limit or otherwise affect the meaning
hereof.
12. CHANGE, WAIVER, ETC. Neither this Warrant nor any term
hereof may be changed, waived, discharged or terminated orally but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
13. SUCCESSORS AND ASSIGNS. This Warrant and the rights
evidenced hereby shall inure to the benefit of and be binding upon the
successors and assigns of the Company, the holder hereof and (to the extent
provided herein) the holders of shares Common Stock issued upon exercise of this
Warrant, and shall be enforceable by any such holder.
14. MODIFICATION AND SEVERABILITY. If, in any action before
any court or agency legally empowered to enforce any provision contained herein,
any provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court of
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceablilty of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
15. GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
[WESTERN PUBLISHING GROUP, INC.]
By
-------------------------------
Name:
Title:
Dated: _____________
Attest:
____________________
15
[To be signed only upon exercise of Warrant]
To [Western Publishing Group, Inc.]
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ______ shares of Common Stock of [Western Publishing Group,
Inc.] and herewith makes payment of $ ___________________________[specify
amount of cash and/or number, market value and type of securities being paid
or whether a cashless exercise is elected], and requests that the certificates
for such shares be issued in the name of, and be delivered to ________________,
whose address is _______________________________________________.
Dated: ___________________
_______________________________
(Signature must conform in all respects to name of Holder as
specified on the face of the Warrant)
_______________________________
Address
16
[To be signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________________________________ the right represented by the
within Warrant to purchase the _____________ shares of the Common Stock of
[Western Publishing Group, Inc.] to which the within Warrant relates, and
appoints ___________________ attorney to transfer said right on the books of
[Western Publishing Group, Inc.] with full power of substitution in the
premises.
Dated:
__________________________
_____________________________
(Signature must conform in all respects to name of holder as
specified on the face of the Warrant)
_____________________________
Address
In the presence of
_____________________________
17
Index of Defined Terms
ACT 1
Common Stock 1
Company 1
Convertible Securities 5
Earliest Exercise Date 1
Exercise Amount 2
Holder 1
Holder Parties 4
Liquidating Dividends 8
Market Price 2
Number of Common Shares Deemed Outstanding 4
Purchase Price 1
Purchase Rights 11
Series B Preferred Stock 4
Stock Option Plan 9
Triggering Transaction 4
WPV 4
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of __________ __,
1996, is entered into by and among [Western Publishing Group, Inc.], a Delaware
corporation (the "Company"), and Golden Press Holding, L.L.C., a Delaware
limited liability company ("GP Holding").
WHEREAS, the Company has agreed to issue to GP Holding, shares
of its Series B Convertible Preferred Stock ("Preferred Stock") and a Warrant
(the "Warrant") to purchase shares of its Common Stock ("Common Stock") and to
grant to GP Holding and any subsequent holders of such Preferred Stock and such
Warrant certain rights to have such Preferred Stock, such Warrant and certain
shares of Common Stock registered under the Securities Act of 1933, as amended
(the "Act").
NOW, THEREFORE, in consideration of the foregoing and the
mutual promises and covenants herein contained, the parties hereto hereby agree
as follows:
SECTION 1. Definitions.
As used in this Agreement:
(a) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Act;
(b) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(c) the term "Holder" shall mean any holder of Registrable
Securities;
(d) the term "Initiating Holder" shall mean any Holder or
Holders who in the aggregate are Holders of more than 50% of the then
outstanding Registrable Securities;
(e) the terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Act (and any post-effective amendments filed or
required to be filed) and the declaration or ordering of effectiveness of such
registration statement;
(f) ( the term "Registrable Securities" means (i) any shares
of Preferred Stock, (ii) any shares of Common Stock issued upon conversion of
shares of Preferred Stock, (iii) the Warrant or any portion thereof, (iv) ny
shares of Common Stock issued upon exercise of the Warrant or any portion
thereof and (v) any capital stock of the Company issued as a dividend or other
distribution with respect to, or in exchange for or in replacement of, any
securities referred to in clauses (i) through (iv) above. For purposes of this
Agreement, a person will be deemed to be a Holder whenever such person has the
right to acquire directly or indirectly Registrable Securities (upon conversion
or exercise in connection with a transfer of securities or otherwise, but
disregarding any restrictions or limitations upon the exercise of such right),
whether or not such acquisition has actually been effected;
(g) "Registration Expenses" shall mean all expenses incurred
by the Company in compliance with Sections 2, 3 and 4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company, which shall
be paid in any event by the Company); and
(h) "Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for each of the Holders.
SECTION 2. Demand Registration.
(a) Request for Registration. If the Company shall receive
from an Initiating Holder, at any time, a written request that the Company
effect any registration with respect to all or a part of the Registrable
Securities, the Company will:
(i) within five (5) days of receipt of such
request, give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its diligent best
efforts to effect such registration (including, without
limitation, the execution of an undertaking to file
post-effective amendments, appropriate qualification under
applicable blue sky or other state securities
2
laws and appropriate compliance with applicable regulations
issued under the Act) as may be so requested and as would
permit or facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in
such request, together with all or such portion of the
Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request received by
the Company within ten (10) days after written notice from the
Company is given under Section 2(a)(i) above; provided that
the Company shall not be obligated to effect, or take any
action to effect, any such registration pursuant to this
Section 2:
(x) In any particular jurisdiction in
which the Company would be required to execute a
general consent to service of process in effecting
such registration, qualification or compliance,
unless the Company is already subject to service in
such jurisdiction and except as may be required by
the Act or applicable rules or regulations
thereunder; or
(y) After the Company has effected three
(3) such registrations pursuant to this Section 2 and
such registrations have been declared or ordered
effective and the sales of such Registrable
Securities shall have closed.
The registration statement filed pursuant to the request of
the Initiating Holders may, subject to the provisions of Section 2(b) below,
include other securities of the Company which are held by officers or directors
of the Company, or which are held by persons who, by virtue of agreements with
the Company, are entitled to include their securities in any such registration,
but the Company shall have no absolute right to include any of its securities in
any such registration.
The registration rights set forth in this Section 2 shall be
assignable, in whole or in part, to any transferee of Registrable Securities who
is a transferee of at least 5% of the then outstanding Registrable Securities, a
member of GP Holding, an affiliate of ▇.▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., Inc.
("Warburg") or a limited or general partner of an investment fund affiliated
with Warburg, and such transferee shall be bound by all obligations of this
Section 2.
(b) Underwriting. If the Initiating Holders intend to
distribute the Registrable Securities covered by their request by
3
means of an underwriting, they shall so advise the Company as a part of their
request made pursuant to Section 2(a).
If officers or directors of the Company holding other
securities of the Company shall request inclusion in any registration pursuant
to Section 2, or if holders of securities of the Company other than Registrable
Securities who are entitled, by contract with the Company or otherwise, to have
securities included in such a registration (the "Other Stockholders") request
such inclusion, the Holders shall offer to include the securities of such
officers, directors and Other Stockholders in the underwriting and may condition
such offer on their acceptance of the further applicable provisions of this
Section 2. The Holders whose shares are to be included in such registration and
the Company shall (together with all officers, directors and Other Stockholders
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for such underwriting by the Initiating
Holders. Notwithstanding any other provision of this Section 2, if the
representative advises the Holders in writing that marketing factors require a
limitation on the number of shares to be underwritten, the securities of the
Company held by officers or directors (other than Registrable Securities) of the
Company and the securities held by Other Stockholders shall be excluded from
such registration to the extent so required by such limitation. If, after the
exclusion of such shares, further reductions are still required, the number of
shares included in the registration by each Holder shall be reduced on a pro
rata basis (based on the number of shares originally proposed to be registered
by such Holder), by such minimum number of shares as is necessary to comply with
such request. No Registrable Securities or any other securities excluded from
the underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. If any of the Holders or any officer, director or
Other Stockholder who has requested inclusion in such registration as provided
above disapproves of the terms of the underwriting, such person may elect to
withdraw therefrom by written notice to the Company, the underwriter and the
Initiating Holders. The securities so withdrawn shall also be withdrawn from
registration. If the underwriter has not limited the number of Registrable
Securities or other securities to be underwritten, the Company may include its
securities for its own account in such registration if the representative so
agrees and if the number of Registrable Securities and other securities which
would otherwise have been included in such registration and underwriting will
not thereby be limited.
4
SECTION 3. Company Registration.
(i) Request For Registration. If the Company shall determine
to register any of its equity securities either for its own account or for the
account of a security holder or holders exercising their respective demand
registration rights, other than a registration relating solely to employee
benefit plans, or a registration relating solely to a Commission Rule 145
transaction, or a registration on any registration form which does not permit
secondary sales or does not include substantially the same information as would
be required to be included in a registration statement covering the sale of
Registrable Securities, the Company will:
(i) promptly give to each of the Holders a written
notice thereof which shall describe in reasonable detail the
proposed registration and distribution (including those
jurisdictions in which the Company intends to attempt to
qualify such securities under the applicable blue sky or other
state securities laws); and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in
any underwriting involved therein, all the Registrable
Securities specified in a written request or requests, made by
the Holders within fifteen (15) days after receipt of the
written notice from the Company described in clause (i) above,
except as set forth in Section 3(b) below. Such written
request may specify all or a part of the Holders' Registrable
Securities.
(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise each of the Holders as a part of the written notice
given pursuant to Section 3(a)(i). In such event, the right of each of the
Holders to registration pursuant to this Section 3 shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein; provided, however, that GP Holding shall not be required to participate
in such underwriting if GP Holding, or an affiliate of GP Holding who is a
Holder, notifies the Company that it is seeking registration of its shares to
enable it to distribute such shares to its members or to affiliates of Warburg
or limited or general partners of investment funds affiliated with Warburg. The
Holders whose shares are to be included in such registration (other than GP
5
Holding if GP Holding, or an affiliate of GP Holding who is a Holder, elects not
to participate in such underwriting) shall (together with the Company and the
Other Stockholders distributing their securities through such underwriting)
enter into an underwriting agreement in customary form with the representative
of the underwriter or underwriters selected for underwriting by the Company.
Notwithstanding any other provision of this Section 3, if the representative
determines that marketing factors require a limitation on the number of shares
to be underwritten, the representative may (subject to the allocation priority
set forth below) limit the number of Registrable Securities to be included in
the registration and underwriting as the representative deems necessary and
appropriate. The Company shall so advise all holders of securities requesting
registration, and the number of shares of securities that are entitled to be
included in the registration and underwriting shall be allocated in the
following manner: The securities of the Company held by officers, directors and
Other Stockholders of the Company (other than Registrable Securities, securities
held by holders who by contractual right demanded such registration ("Demanding
Holders") and securities held by "Holders" under the Registration Rights
Agreement, dated as of January __, 1996, between the Company, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, and certain of his affiliates (the "▇▇▇▇▇▇▇▇▇ Holders")) shall be
excluded from such registration and underwriting to the extent required by such
limitation, and, if a limitation on the number of shares is still required, the
number of shares that may be included in the registration and underwriting by
each of the Holders and the ▇▇▇▇▇▇▇▇▇ Holders (if the ▇▇▇▇▇▇▇▇▇ Holders are not
Demanding Holders) shall be reduced, on a pro rata basis (based on the number of
shares originally proposed to be registered by each such person), by such
minimum number of shares as is necessary to comply with such limitation. If any
of the Holders or any officer, director or Other Stockholder disapproves of the
terms of any such underwriting, such person may elect to withdraw therefrom by
written notice to the Company and the underwriter. Any Registrable Securities or
other securities excluded or withdrawn from such underwriting shall be withdrawn
from such registration.
(c) Number and Transferability. Each of the Holders shall be
entitled to have its shares included in an unlimited number of registrations
pursuant to this Section 3. The registration rights granted pursuant to this
Section 3 shall be assignable, in whole or in part, to any transferee of
Registrable Securities who is a transferee of at least 5% of the then
outstanding Registrable Securities, a member of GP Holding, an affiliate of
Warburg or a limited or general partner of an
6
investment fund affiliated with Warburg, and such transferee shall be bound by
all obligations of this Section 3.
SECTION 4. Form S-3 and Shelf Registration.
(a) Form S-3. The Company shall use its best efforts to
qualify for registration on Form S-3 for secondary sales. So long as the Company
is so qualified, Holders shall have the right to request unlimited registrations
on Form S-3 (such requests shall be in writing and shall state the number of
shares of Registrable Securities to be disposed of and the intended method of
disposition of shares by such holders), subject only to the following:
(i) The Company shall not be required to effect a
registration pursuant to this Section 4(a) within 120 days of
the effective date of the most recent registration pursuant to
this Section 4(a) in which securities held by the requesting
Holder could have been included for sale or distribution.
(ii) The Company shall not be required to effect a
registration pursuant to this Section 4(a) if the Company
shall furnish to the Holders a certificate signed by the
President or Chief Executive Officer of the Company stating
that in the good faith judgment of the Board of Directors of
the Company, it would be materially detrimental to the Company
and its stockholders for such registration statement to be
filed and it is therefore essential to defer the filing of
such registration statement. In such event, the Company shall
have the right to defer the filing of the registration
statement no more than once during any twelve (12) month
period for a period of not more than 90 days after receipt of
the request of the Holder or Holders under this Section 4(a).
(iii) The Company shall not be obligated to effect
any registration pursuant to this Section 4(a) in any
particular jurisdiction in which the Company would be required
to execute a general consent to service of process in
effecting such registration, qualification or compliance,
unless the Company is already subject to service in such
jurisdiction and except as may be required by the Act or
applicable rules or regulations thereunder.
The Company shall, within five (5) days of receipt of request
for registration pursuant to this Section 4(a), give
7
written notice to all Holders of the receipt of such request and shall provide a
reasonable opportunity for other Holders to participate in the registration,
provided that if the registration is for an underwritten offering, the terms of
Section 2(b) shall apply to all participants in such offering. Subject to the
foregoing, the Company will use its diligent best efforts to effect promptly the
registration of all shares of Registrable Securities on Form S-3 to the extent
requested by the Holder or Holders thereof for purposes of disposition.
(b) Shelf Registration. If the Company shall receive from an
Initiating Holder, at any time, a written request that the Company effect a
registration pursuant to Rule 415, or any successor rule under the Act, that
would permit the sale of all or a part of the Registrable Securities from time
to time:
(i) The Company shall use its best efforts to file
with the Commission and thereafter to cause to be declared
effective as promptly as practicable a registration statement
on an appropriate form under the Act as reasonably determined
by the Company relating to the offer and sale of the
Registrable Securities by the Holders from time to time
pursuant to Rule 415, or any successor rule under the Act, in
accordance with the methods of distribution set forth in such
registration statement (a "Shelf Registration Statement").
(ii) The Company shall use its best efforts to keep
the Shelf Registration Statement continuously effective in
order to permit the prospectus forming part thereof to be
usable by Holders for a period of 18 months from the effective
date thereof or such shorter period that will terminate when
all the Registrable Securities covered by the Shelf
Registration Statement have been sold. Notwithstanding any
other provision hereof, the Company may postpone or suspend
the filing or the effectiveness of the Shelf Registration
Statement (or any amendments or supplements thereto) if (i)
such action is required by applicable law, or (ii) such action
is taken by the Company in good faith and for valid business
reasons (not including avoidance of the Company's obligations
hereunder), including the acquisition or divestiture of
assets, other pending corporate developments, public filings
with the Commission or other similar events, so long as the
Company promptly thereafter complies with the requirements of
Section 6(a)(v) hereof, if applicable. The Company shall be
deemed not to have used its best
8
efforts to keep the Shelf Registration Statement effective
during the requisite period if it intentionally takes any
action not contemplated by clause (i) or (ii) above that would
result in holders of Registrable Securities covered thereby
not being able to offer and sell such Registrable Securities
during the period.
SECTION 5. Expenses of Registration. All Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to this Agreement shall be borne by the Company, and all Selling
Expenses shall be borne by the Holders of the securities so registered pro rata
on the basis of the number of their shares so registered.
SECTION 6. Registration Procedures.
(a) In the case of each registration effected by the
Company pursuant to this Agreement, the Company will:
(i) provide the Holders of Registrable Securities
to be registered under the registration statement, their
underwriters, if any, and their respective counsel and
accountants, a reasonable opportunity to participate in the
preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each
amendment thereof or supplement thereto (reflecting in each
such document such comments as such persons may reasonably
propose), and provide each of them such access to its books
and records and such opportunities to discuss the business of
the Company with its officers and the independent public
accountants who have certified its financial statements as
shall be necessary, in the opinion of such Holders' and such
underwriters' respective counsel, to conduct a reasonable
investigation within the meaning of the Act;
(ii) notify each Holder as to the filing of the
registration statement and of all amendments or supplements
thereto filed prior to the effective date of such registration
statement;
(iii) notify each Holder, promptly after it shall
receive notice thereof, of the time when such registration
statement becomes effective or when any amendment or
supplement to any prospectus forming a part of such
registration statement has been filed;
9
(iv) notify each Holder promptly of any request by
the Commission for the amending or supplementing of such
registration statement or prospectus or for additional
information;
(v) prepare and promptly file with the Commission,
and promptly notify each Holder of the filing of, any
amendments or supplements to such registration statement or
prospectus as may be necessary to correct any statements or
omissions if, at any time when a prospectus relating to the
Registrable Securities is required to be delivered under the
Act, any event with respect to the Company shall have occurred
as a result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement
of a material fact or omit to state any material fact
necessary in order to make the statements made, in the light
of the circumstances under which they were made, not
misleading, and, in addition, prepare and file with the
Commission, promptly upon the written request of any Holder,
any amendments or supplements to such registration statement
or prospectus which may be reasonably necessary or advisable
in connection with the distribution of the Registrable
Securities;
(vi) prepare promptly upon request of the Holders or
any underwriters for the Holders such amendment or amendments
to such registration statement and such prospectus or
prospectuses as may be reasonably necessary to permit
compliance with the requirements of Section 10(a)(3) of the
Act;
(vii) advise each Holder promptly after the Company
shall receive notice or obtain knowledge of the issuance of
any stop order by the Commission suspending the effectiveness
of any such registration statement or amendment thereto or of
the initiation or threatening of any proceeding for that
purpose, and promptly use its best efforts to prevent the
issuance of any stop order or obtain its withdrawal promptly
if such stop order should be issued;
(viii) use its best efforts to qualify as soon as
reasonably practicable the Registrable Securities included in
the registration statement for sale under the blue sky or
other state securities laws of such states and jurisdictions
within the United States as shall be reasonably requested by
any Holder, provided
10
that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business, to become
subject to taxation or to file a consent to service of process
generally in any of the aforesaid states or jurisdictions;
(ix) furnish each Holder, as soon as available,
copies of any registration statement and each preliminary or
final prospectus, or supplement or amendment required to be
prepared pursuant hereto, all in such quantities as any Holder
may from time to time reasonably request;
(x) furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to
this Agreement, on the date that such Registrable Securities
are delivered to the underwriters for sale in connection with
a registration pursuant to this Agreement, if such securities
are being sold through underwriters or, if such securities are
not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes
effective, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such
registration, in form and substance as is customarily given by
company counsel to the underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the
holders requesting registration of Registrable Securities, and
(ii) a letter, dated such date, from the independent certified
public accountant of the Company, in form and substance as is
customarily given by independent certified public accountants
to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and, if customarily given to
holders of securities to be sold in a registration, to the
Holders requesting registration of Registrable Securities;
(xi) otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and
make available to its security holders as soon as reasonably
practicable, but not later than 16 months after the effective
date of the registration statement, an earnings statement
covering a period of at least twelve (12) months beginning
after the effective date of the registration statement, which
earnings statement shall satisfy the provision of Section
11(a) of the Act; and
11
(xii) enter into and perform an underwriting
agreement with the managing underwriter, if any, selected as
provided in Section 2(b) or 3(b), containing customary (y)
terms of offer and sale of the securities, payment provisions,
underwriting discounts and commissions, and (z)
representations, warranties, covenants, indemnities, terms and
conditions, provided that the Holders may, at their option,
require that any or all of the representations and warranties
by, and the other agreements on the part of, the Company to
and for the benefit of such underwriters shall also be made to
and for the benefit of such Holders and that any or all of the
conditions precedent to the obligations of the Company shall
also be conditions precedent to the obligations of such
Holders, and provided further that such Holders shall not be
required to make any representations or warranties to or
agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such
Holders and such Holders' intended method of distribution and
any other representation required by law.
(b) At its expense, the Company will: keep each registration
effected by the Company pursuant to this Agreement effective for a period of
nine (9) months or until the Holders have completed the distribution described
in the registration statement relating thereto, whichever first occurs;
provided, however, that in the case of any registration of Registrable
Securities on Form S-3 which are intended to be offered on a continuous or
delayed basis, such nine-month period shall be extended until all such
Registrable Securities are sold, provided that Rule 415, or any successor rule
under the Act, permits an offering on a continuous or delayed basis, and
provided further that applicable rules under the Act governing the obligation to
file a post-effective amendment permit, in lieu of filing a post-effective
amendment which (y) includes any prospectus required by Section 10(a) of the Act
or (z) reflects facts or events representing a material or fundamental change in
the information set forth in the registration statement, the incorporation by
reference in the registration statement of information required to be included
in (y) and (z) above to be contained in periodic reports filed pursuant to
Section 12 or 15(d) of the Exchange Act.
12
SECTION 7. Indemnification.
(a) To the extent permitted by law, the Company will
indemnify each of the Holders, each of its officers, directors, partners,
members, managers, agents, representatives and affiliates of the foregoing, each
underwriter (as defined in the Act), if any, and each person controlling each of
the Holders or such underwriter within the meaning of the Act and the rules and
regulations thereunder, with respect to each registration which has been
effected pursuant to this Agreement, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Act or any rule or regulation thereunder applicable to the
Company and relating to action or inaction required of the Company in connection
with any such registration, qualification or compliance, and will reimburse each
of the Holders, each of its officers, directors, partners, members, managers,
agents, representatives and their affiliates, each such underwriter and each
person controlling any such Holder or underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating and defending any
such claim, loss, damage, liability or action, provided that the Company will
not be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by the Holders
or underwriter and stated to be specifically for use therein.
(b) To the extent permitted by law, each of the Holders will,
if Registrable Securities held by it are included in the securities as to which
such registration, qualification or compliance is being effected, indemnify the
Company, each of its directors, officers, agents and representatives and each
underwriter, if any, and each person controlling the Company or such
underwriter, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document made by such Holder,
or any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements by such Holder therein
not misleading, and will
13
reimburse the Company and such directors, officers, agents, representatives,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder and stated to be specifically for use
therein; provided, however, that the indemnity agreement contained in this
Section 7(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holders, and provided further that the obligations of each of the
Holders hereunder shall be limited to an amount equal to the proceeds to such
Holder of securities sold as contemplated herein.
(c) Each party entitled to indemnification under this Section
7 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld) and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnified Party shall have
reasonably concluded that there may be a conflict of interest between the
Indemnifying Party and the Indemnified Party in such action, in which case the
fees and expenses of counsel shall be at the expense of the Indemnifying Party),
and provided further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 7 unless the Indemnifying Party is materially prejudiced
thereby. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall
14
be reasonably required in connection with the defense of such claim and
litigation resulting therefrom.
(d) If the indemnification provided for in this Section 7 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage or expense referred to
herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense, as well as any other relevant equitable
considerations, provided, however, that the obligations of each Holder shall be
limited to an amount equal to the proceeds to such Holder from the sale of
Registrable Securities as contemplated herein. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act), shall be entitled to contribution from any person who is not guilty of
such fraudulent misrepresentation.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with any underwritten public offering
contemplated by this Agreement are in conflict with the foregoing provisions,
the provisions in such underwriting agreement shall be controlling.
(f) The foregoing indemnity agreements are subject to the
condition that, insofar as they relate to any loss, claim, liability or damage
made in a preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the Commission at the time the registration statement in
question becomes effective or the amended prospectus filed with the Commission
pursuant to Commission Rule 424(b) (the "Final Prospectus"), such indemnity
agreement shall not inure to the benefit of any underwriter if a copy of the
Final Prospectus was furnished to the underwriter and was not furnished to the
person asserting the loss, liability, claim or
15
damage at or prior to the time such action is required by the Act.
(g) The obligations of the Company and the Holders under this
Section 7 shall survive the completion of any offering of Registrable Securities
in a registration statement under this Agreement and otherwise.
(h) The foregoing indemnity agreements shall include
reasonable fees and expenses of counsel incurred by the Indemnified Party in any
action or proceeding between the Indemnifying Party and the Indemnified Party or
between the Indemnified Party and any third party or otherwise.
SECTION 8. Information by the Holders. Each of the Holders
shall furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Agreement.
SECTION 9. Rule 144 Reporting. With a view to making
available the benefits of certain rules and regulations of the Commission which
may permit the sale of restricted securities to the public without registration,
the Company agrees to use its reasonable best efforts:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Act;
(b) file with the Commission in a timely manner all reports
and other documents required of the Company under the Act and the Exchange Act;
and
(c) furnish to any Holder upon request, (i) a written
statement by the Company as to its compliance with the reporting requirements of
Rule 144, the Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company filed with the Commission and such other reports
and documents so filed by the Company and (iii) such other information as a
Holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing such Holder to sell any such securities without
registration.
SECTION 10. Assignability. The rights to cause the Company
to register Registrable Securities pursuant to this
16
Agreement may be assigned by a Holder to any transferee or assignee of
Registrable Securities who is a transferee or assignee of at least 5% of the
then outstanding Registrable Securities, a member of GP Holding, an affiliate of
Warburg or a limited or general partner of an investment fund affiliated with
Warburg. The Company may not assign or transfer its rights or obligations
hereunder without the prior written consent of all the Holders.
SECTION 11. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York.
SECTION 12. Amendment. Any modification, amendment or waiver
of this Agreement or any provision hereof shall be in writing and executed by
the Company and the Holders of not less than 50% of the Registrable Securities
then outstanding, provided, however, that no such modification, amendment or
waiver shall reduce the aforesaid percentage of Registrable Securities without
the consent of all of the Holders of the Registrable Securities.
SECTION 13. Notices. All notices, requests, consents and
demands shall be in writing and shall be personally delivered, mailed, postage
prepaid, telecopied or telegraphed or delivered by any nationally recognized
overnight delivery service to the Company at:
to the Company:
[Western Publishing Group, Inc.]
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Senior Vice President - Legal Affairs
[Western Publishing Group, Inc.]
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
17
and a copy to:
Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
and to each Holder at such address set forth on the signature page hereof or as
shall be furnished in writing to the Company. All such notices, requests,
demands and other communication shall, when mailed (registered or certified
mail, return receipt requested, postage prepared), personally delivered, or
telegraphed, be effective four (4) days after deposit in the mails, when
personally delivered, or when delivered to the telegraph company, respectively,
addressed as aforesaid, unless otherwise provided herein and, when telecopied or
delivered by any nationally recognized overnight delivery service, shall be
effective upon actual receipt.
SECTION 14. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof 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.
SECTION 15. Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
SECTION 16. Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 17. Headings. The various headings of this Agreement
are inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement or any provisions hereof or thereof.
18
SECTION 18. Entire Agreement. This Agreement constitutes the
entire understanding among the parties hereto with respect to the subject matter
hereof and supersedes any prior agreements, written or oral, with respect
thereto.
19
IN WITNESS WHEREOF, the Company and each of the undersigned
parties has executed this Agreement effective for all purposes as of the date
first above written.
[WESTERN PUBLISHING GROUP, INC.]
By:
-------------------------------
Name:
Title:
GOLDEN PRESS HOLDING, L.L.C.
By: WARBURG, ▇▇▇▇▇▇ VENTURES, L.P
Member
By:
---------------------------
Name:
Title:
Address for notices:
Golden Press Holding, L.L.C.
c/o Warburg, ▇▇▇▇▇▇ Ventures, L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
20
Index of Defined Terms
Act 1
▇▇▇▇▇▇▇▇▇ Holders 6
Commission 1
Common Stock 1
Company 1
Demanding Holders 6
Exchange Act 1
Final Prospectus 15
GP Holding 1
Holder 1
Indemnified Party 14
Indemnifying Party 14
Initiating Holder 1
Other Stockholders 4
Preferred Stock 1
Registrable Securities 2
Registration Expenses 2
Selling Expenses 2
Shelf Registration Statement 8
Warburg 3
Warrant 1
WF&G DRAFT
1/23/95
EXHIBIT D
[FORM OF OPINION OF ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇]
_________ __, 1996
Western Publishing Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
We have acted as counsel to Golden Press Holding, L.L.C., a
Delaware limited liability company ("GP Holding"), in connection with the
Securities Purchase Agreement (the "Securities Purchase Agreement"), dated as of
January __, 1996, between GP Holding and Western Publishing Group, Inc., a
Delaware corporation (the "Company"), and the transactions contemplated thereby.
This opinion is being delivered to you pursuant to Section 6.2(c) of the
Securities Purchase Agreement. Capitalized terms not otherwise defined herein
are used as defined in the Securities Purchase Agreement.
In connection with this opinion, we have examined original
copies of the following:
(a) the Securities Purchase Agreement;
(b) the Irrevocable Proxies;
(c) the Series B Certificate of Designations;
(d) the Warrant;
(e) the Registration Rights Agreement; and
(f) the Registration Rights Agreement by and among the
Company, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇"), the Trust,
fbo ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ u/a March 16, 1978, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇, as trustees (the "▇▇▇▇▇▇▇▇▇
Trust"), The ▇▇▇▇▇▇▇ ▇. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Foundation,
Inc. a not-for-profit corporation (the "▇▇▇▇▇▇▇▇▇
Foundation"), and the Trust fbo ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ u/a
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ dated April 5, 1986, Shawmut Bank
Connecticut, N.A., as trustee (the "Shawmut Trust");
The agreements, documents and instruments referred to in clauses (a) through (f)
above are hereinafter collectively referred to as the "Transaction Documents".
The Company, all of its subsidiaries, ▇▇▇▇▇▇▇▇▇, the ▇▇▇▇▇▇▇▇▇ Trust, the
▇▇▇▇▇▇▇▇▇ Foundation and the Shawmut Trust are hereinafter collectively referred
to as the "Company Parties".
In connection with this opinion, we have also examined such
documents and records of GP Holding and such agreements, certificates of public
officials or officers or other representatives of GP Holding as we have deemed
necessary or appropriate for the purposes of this opinion.
In our examination, we have assumed (i) the genuineness of all
signatures of all parties other than the signatures of GP Holding on the
Transaction Documents; (ii) the authenticity of all records, agreements,
documents, instruments and certificates submitted to us as originals, the
conformity to original documents and agreements of all documents and agreements
submitted to us as conformed, certified or photostatic copies thereof and the
authenticity of the originals of such conformed, certified or photostatic
copies; (iii) the due authorization, execution and delivery of all documents and
agreements by all parties other than the authorization, execution and delivery
of the Transaction Documents by GP Holding; and (iv) the legal right and power
of all parties under all applicable laws and regulations to enter into, execute
and deliver such agreements and documents other than the legal right and power
of GP Holding to enter into, execute and deliver the Transaction Documents. As
to questions of fact material to such opinions, we have, when relevant facts
were not independently established by us, relied upon representations of GP
Holding and of their respective officers and of public officials. We have
further assumed (a) the absence of any requirement of consent, approval or
authorization by any person or entity or by any Governmental Entity with respect
to the Company Parties and (b) that the Transaction Documents are legal, valid
and binding obligations of the Company Parties enforceable against in accordance
with their respective terms.
Based upon the foregoing and subject to the assumptions,
qualifications and exceptions set forth below, we are of the opinion that:
1. GP Holding is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware.
2. GP Holding has the requisite power and authority to execute
and deliver each Transaction Document to which it is party and to perform its
obligations thereunder.
3. Each Transaction Document to which GP Holding is party has
been duly executed and delivered on behalf of GP
Holding, and the consummation of the transactions contemplated thereby have been
duly authorized by all requisite actions on the part of GP Holding. Each
Transaction Document to which GP Holding is party constitutes a legal, valid and
binding obligation of GP Holding, enforceable against GP Holding in accordance
with its terms.
4. The execution, delivery and performance by GP Holding of
the Transaction Documents to which GP Holding is party do not and will not (i)
conflict with the constituent documents of GP Holding, (ii) contravene (x) any
state or federal law, rule or regulation or (y) any judgment, writ, injunction,
decree or order of any Governmental Entity applicable to GP Holding of which we
have knowledge or (iii) contravene, conflict with, result in a breach of or
cause a default under any material contractual obligation known to us to which
GP Holding is party.
5. The execution, delivery and performance by GP Holding of
the Transaction Documents to which GP Holding is party do not and will not
require any registration by GP Holding with, consent or approval of, or notice
to, or other action by, any Governmental Entity, except routine filings required
to be made after the date hereof to maintain good standing and to maintain or
renew licenses and permits required for GP Holding to operate its business in
the ordinary course of business.
The foregoing opinions are subject to the following
assumptions, qualifications and exceptions:
A. The opinions expressed above are qualified (i) by the
effects of applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting the enforcement of creditors' rights
generally, (ii) insofar as the remedies of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and the
discretion of the court before which any enforcement thereof may be brought and
(iii) insofar as proceedings therefor may be limited by general principles of
equity (regardless of whether such enforceability is considered in a proceeding
at law or in equity), including, without limitation, principles of commercial
reasonableness and an implied covenant of good faith and fair dealing. In
addition, the enforcement of certain provisions, including those providing for
indemnification, may be limited by public policy considerations. Such opinions
are further subject to the qualification that certain remedial provisions of the
Transaction Documents are or may be unenforceable in whole or in part under the
laws of the State of New York, but the inclusion of such provisions does not
affect the validity of any such Transaction Document in which any such provision
is included, and such Transaction Documents contain adequate provisions for
enforcing payment of the obligations thereunder and for the practical
realization of the rights and benefits afforded thereby.
B. We express no opinion as to any provisions of the
Transaction Documents insofar as they relate to (i) the subject matter
jurisdiction of the federal courts to adjudicate any controversy relating to the
Transaction Documents or (ii) the waiver of inconvenient forum.
We are members of the bar of the State of New York and do not
herein intend to express any opinion as to any matters governed by any laws
other than the laws of the State of New York, the United States of America or
the DGCL.
No person other than you may rely or claim reliance upon this
opinion letter. This opinion letter is limited to the matters stated herein and
no opinion is implied or may be inferred beyond the matters expressly stated.
This opinion letter may not be quoted, distributed or disclosed, except to your
counsel or, to the extent necessary, to an applicable regulatory authority or
pursuant to legal process, without our prior written consent.
This letter speaks only as of the date hereof and is limited
to present statutes, regulations and administrative and judicial
interpretations. We undertake no responsibility to update or supplement this
letter after the date hereof.
Very truly yours,
EXHIBIT E
[FORM OF OPINION OF MILBANK, TWEED, ▇▇▇▇▇▇ & ▇▇▇▇▇▇]
__________ __, 1996
Golden Press Holding, L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re: Western Publishing Group, Inc.
Ladies and Gentlemen:
We have acted as special counsel to Western Publishing Group,
Inc., a Delaware corporation (the "Company"), and certain of its affiliates in
connection with the Securities Purchase Agreement, dated as of January __, 1996
(the "Securities Purchase Agreement"), between the Company and Golden Press
Holding, L.L.C., a Delaware limited liability company ("GP Holding"), and the
transactions contemplated thereby. This opinion is being delivered to you
pursuant to Section 6.3(e) of the Securities Purchase Agreement. Capitalized
terms not otherwise defined herein are used as defined in the Securities
Purchase Agreement.
In connection with this opinion, we have examined original
copies of the following:
(a) the Securities Purchase Agreement;
(b) the Irrevocable Proxies;
(c) the Series B Certificate of Designations;
(d) the Warrant;
(e) the Registration Rights Agreement;
(f) the Registration Rights Agreement by and among the
Company, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇"), the
Trust, fbo ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ u/a March 16,
1978, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇, as
trustees (the "▇▇▇▇▇▇▇▇▇ Trust"), The ▇▇▇▇▇▇▇ ▇.
and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Foundation, Inc., a not-for-
profit corporation (the "▇▇▇▇▇▇▇▇▇ Foundation"),
and the Trust fbo ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ u/a ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇ dated April 5, 1986, Shawmut Bank
Connecticut, N.A., as trustee (the "Shawmut
Trust"); and
(g) the Employment Agreement, dated the date hereof,
between the Company and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(including any related stock option agreements).
The agreements, documents and instruments referred to in clauses (a) through (g)
above are hereinafter collectively referred to as the "Transaction Documents".
The Company, all of its subsidiaries, ▇▇▇▇▇▇▇▇▇, the ▇▇▇▇▇▇▇▇▇ Trust, the
▇▇▇▇▇▇▇▇▇ Foundation and the Shawmut Trust are hereinafter collectively referred
to as the "Company Parties".
In connection with this opinion, we have also examined such
documents and records of the Company and each of the other Company Parties and
such agreements, certificates of public officials or officers or other
representatives of the Company and each of the other Company Parties as we have
deemed necessary or appropriate for the purposes of this opinion.
In our examination, we have assumed (i) the genuineness of all
signatures of all parties other than the signatures of the Company on the
Transaction Documents; (ii) the authenticity of all records, agreements,
documents, instruments and certificates submitted to us as originals, the
conformity to original documents and agreements of all documents and agreements
submitted to us as conformed, certified or photostatic copies thereof and the
authenticity of the originals of such conformed, certified or photostatic
copies; (iii) the due authorization, execution and delivery of all documents and
agreements by all parties other than the authorization, execution and delivery
of the Transaction Documents by the Company; and (iv) the legal right and power
of all parties under all applicable laws and regulations to enter into, execute
and deliver all agreements and documents other than the legal right and power of
the Company to enter into, execute and deliver the Transaction Documents. As to
questions of fact material to such opinions, we have, when relevant facts were
not independently established by us, relied upon representations of the Company
Parties and of their respective officers and of public officials. We have
further assumed (a) the absence of any requirement of consent, approval or
authorization by any person or entity or by any Governmental Entity with respect
to all parties other than the Company and (b) that the Transaction Documents are
legal, valid and binding obligations of all parties other than the Company
Parties enforceable against such parties in accordance with their respective
terms.
Based upon and subject to the foregoing and subject also to
the assumptions, qualifications and exceptions set forth below, and having
considered such questions of law as we deemed
2
necessary as a basis for the opinions expressed below, we are of
the opinion that:
1. Each of the Company, Penn Corporation and Western
Publishing Company, Inc. is a corporation duly incorporated,
validly existing and in good standing under the laws of its state
of incorporation.
2. The Company has the requisite corporate power and authority
to execute and deliver each Transaction Document to which it is party and to
perform its obligations thereunder.
3. Each Transaction Document to which the Company is party has
been duly executed and delivered on behalf of the Company, and the consummation
of the transactions contemplated thereby have been duly authorized by all
requisite corporate actions on the part of the Company. Each Transaction
Document to which any of the Company Parties is party constitutes a legal, valid
and binding obligation of such party, enforceable against such party in
accordance with its terms.
4. The Series B Certificate of Designations is effective in
accordance with the DGCL, and all the New Preferred Shares and all the shares of
Company Common Stock issuable upon conversion of the New Preferred Shares and in
payment of stock dividends in respect thereof and upon exercise of the Warrant
will be, when so issued in accordance with the terms of the applicable
Transaction Documents, duly authorized, validly issued, fully paid and
nonassessable. The Company has duly reserved 8,880,000 shares of Company Common
Stock for issuance upon conversion of the New Preferred Stock and in payment of
stock dividends in respect thereof and 3,000,000 shares of Company Common Stock
for issuance upon exercise of the Warrant.
5. All the outstanding shares of capital stock of each of Penn
Corporation and Western Publishing Company, Inc. have been duly authorized,
validly issued, fully paid and nonassessable and (except as specified in Section
3.3 of the Company Disclosure Schedule) are owned of record, and, to our
knowledge, beneficially, directly or indirectly, by the Company, and, to our
knowledge, are free and clear of any claims, liens, charges, security interests
or the legal or equitable encumbrances, limitations or restrictions. [To be
given by ▇▇▇ ▇▇▇▇▇ in his capacity as Senior Vice President of Legal Affairs of
the Company.]
6. The execution, delivery and performance by the Company of
the Transaction Documents to which it is party (including the proposed
redemption of the Company Preferred Stock by the Company) do not and will not
(i) conflict with the constituent documents of such party, (ii) contravene any
New York State or federal law, rule or regulation or (iii) contravene, conflict
with, result in a breach of or cause a default under any
3
material contractual obligation known to us to which Company is
party.
7. The execution, delivery and performance by each Company
Party of the Transaction Documents to which it is party do not and will not
require any registration with, consent or approval of, or notice to, or other
action by, any Governmental Entity, except (i) filing of the Company Proxy
Statement with the Commission, (ii) routine corporate filings required to be
made after the date hereof to maintain good standing and to maintain or renew
licenses and permits required for the Company and its subsidiaries to operate
their business in the ordinary course of business and (iii) in compliance with
the HSR Act.
8. Based upon the representations and warranties of the
Company and GP Holding contained in the Securities Purchase Agreement, the
issuance and sale by the Company of the New Preferred Stock and the Warrant, in
the manner and under the circumstances contemplated by the Securities Purchase
Agreement, is exempt from the registration requirements of Section 5 of the
Securities Act. For the purposes of this paragraph 8, we have assumed that (a)
the issuance and sale by the Company of the New Preferred Stock and the Warrant
on the date hereof will be conducted solely in the manner contemplated and
intended in the Securities Purchase Agreement and (b) GP Holding will not offer,
transfer, sell or otherwise dispose of any of the New Preferred Stock or the
Warrant except in accordance with the terms of the Securities Purchase
Agreement.
In addition, we have reviewed that certain letter from the
Company to ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ dated December 20, 1993 that has been furnished
to us by the Company (the "First ▇▇▇▇▇▇▇▇▇ Letter") and that certain letter from
the Company to ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ dated July 8, 1994 (the "Second ▇▇▇▇▇▇▇▇▇
Letter"). We have been advised by the Company, and assume for purposes of the
opinion set forth in this paragraph, that letters substantially similar to the
First ▇▇▇▇▇▇▇▇▇ Letter were delivered by the Company to a number of employees
(such letters, together with the First ▇▇▇▇▇▇▇▇▇ Letter, being referred to
herein as the "Change of Control Benefits Agreements"). We have also been
advised by the Company, and assume for purposes of the opinion set forth in this
paragraph, that each recipient of a Change of Control Benefits Agreement also
received a letter from the Company substantially similar to the Second ▇▇▇▇▇▇▇▇▇
Letter. Subject to (i) the foregoing assumptions, (ii) equitable considerations
arising out of the individual circumstances of which we are not aware and (iii)
the fact that the applicable laws of other jurisdictions may be different from
those of the State of New York with respect to the matters to which this
paragraph relates, and having considered such questions of law as we deemed
necessary as a basis for the opinion set forth in this paragraph, we are of the
opinion that the Change of Control Benefits Agreements have been effectively
rescinded by the Company such
4
that no person has or will in the future become eligible for the benefits
described in the Change of Control Benefits Agreements.
The foregoing opinions are subject to the following
assumptions, qualifications and exceptions:
A. The opinions expressed above are qualified (i) by the
effects of applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting the enforcement of creditors' rights
generally, (ii) insofar as the remedies of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and the
discretion of the court before which any enforcement thereof may be brought and
(iii) insofar as proceedings therefor may be limited by general principles of
equity (regardless of whether such enforceability is considered in a proceeding
at law or in equity), including, without limitation, principles of commercial
reasonableness and an implied covenant of good faith and fair dealing. In
addition, the enforcement of certain provisions, including those providing for
indemnification, may be limited by public policy considerations. Such opinions
are further subject to the qualification that certain remedial provisions of the
Transaction Documents are or may be unenforceable in whole or in part under the
laws of the State of New York, but the inclusion of such provisions does not
affect the validity of any such Transaction Document in which any such provision
is included, and such Transaction Documents contain adequate provisions for
enforcing payment of the obligations thereunder and for the practical
realization of the rights and benefits afforded thereby.
B. We express no opinion as to any provisions of the
Transaction Documents insofar as they relate to (i) the subject matter
jurisdiction of the federal courts to adjudicate any controversy relating to the
Transaction Documents or (ii) the waiver of inconvenient forum.
We are members of the bar of the State of New York and do not
herein intend to express any opinion as to any matters governed by any laws
other than the laws of the State of New York, the United States of America or
the DGCL.
No person, other than you, any holder from time to time of the
New Preferred Stock, the Warrant or the Company Common Stock issued upon
conversion or exercise thereof or payment of stock dividends in respect thereof
and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ in respect of the Employment Agreement, may rely or claim
reliance upon this opinion letter. This opinion letter is limited to the matters
stated herein and no opinion is implied or may be inferred beyond the matters
expressly stated. This opinion letter may not be quoted, distributed or
disclosed, except to your counsel, to transferees of the New Preferred Stock,
the Warrant or the Company Common Stock issuable upon exchange of the New
Preferred Stock or as a stock dividend thereon or upon
5
conversion of the Warrant, to the extent necessary, to an applicable regulatory
authority or pursuant to legal process, without our prior written consent.
This letter speaks only as of the date hereof and is limited
to present statutes, regulations and administrative and judicial
interpretations. We undertake no responsibility to update or supplement this
letter after the date hereof.
Very truly yours,
6
