Exhibit (d)(1)
Execution Copy
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AGREEMENT AND PLAN OF MERGER
Among
KAGT HOLDINGS, INC.,
KAGT ACQUISITION CORP.
and
APPLIED GRAPHICS TECHNOLOGIES, INC.
Dated as of June 12, 2003
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TABLE OF CONTENTS
ARTICLE I The Offer and the Merger....................................................................2
SECTION 1.01. The Offer..........................................................................2
SECTION 1.02. Company Actions....................................................................5
SECTION 1.03. The Merger.........................................................................5
SECTION 1.04. Closing............................................................................6
SECTION 1.05. Effective Time.....................................................................6
SECTION 1.06. Effects............................................................................6
SECTION 1.07. Certificate of Incorporation and By-laws...........................................6
SECTION 1.08. Directors..........................................................................6
SECTION 1.09. Officers...........................................................................6
ARTICLE II Effect on the Capital Stock of the Constituent Corporations; Exchange of Certificates......7
SECTION 2.01. Effect on Capital Stock............................................................7
SECTION 2.02. Exchange of Certificates...........................................................8
ARTICLE III Representations and Warranties of the Company............................................10
SECTION 3.01. Organization, Standing and Power..................................................10
SECTION 3.02. Company Subsidiaries; Equity Interests............................................10
SECTION 3.03. Capital Structure.................................................................11
SECTION 3.04. Authority; Execution and Delivery; Enforceability.................................12
SECTION 3.05. No Conflicts; Consents............................................................13
SECTION 3.06. SEC Documents; Undisclosed Liabilities............................................14
SECTION 3.07. Information Supplied..............................................................14
SECTION 3.08. Absence of Certain Changes or Events..............................................15
SECTION 3.09. Taxes.............................................................................16
SECTION 3.10. Absence of Changes in Benefit Plans...............................................17
SECTION 3.11. ERISA Compliance; Excess Parachute Payments.......................................18
SECTION 3.12. Litigation........................................................................20
SECTION 3.13. Compliance with Applicable Laws...................................................20
SECTION 3.14. Contracts.........................................................................21
SECTION 3.15. Intellectual Property.............................................................22
SECTION 3.16. Certain Notes Receivable..........................................................23
SECTION 3.17. Environmental Matters.............................................................23
SECTION 3.18. Insurance.........................................................................24
SECTION 3.19. Title to Properties; Absence of Liens and Encumbrances............................24
SECTION 3.20. Transactions with Affiliates......................................................25
SECTION 3.21. Customers.........................................................................25
SECTION 3.22. State Takeover Statutes; Company Rights Agreement.................................25
SECTION 3.23. Brokers; Schedule of Fees and Expenses............................................25
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ARTICLE IV Representations and Warranties of Parent and Sub..........................................26
SECTION 4.01. Organization, Standing and Power..................................................26
SECTION 4.02. Sub...............................................................................26
SECTION 4.03. Authority; Execution and Delivery; Enforceability.................................26
SECTION 4.04. No Conflicts; Consents............................................................26
SECTION 4.05. Information Supplied..............................................................27
SECTION 4.06. Brokers...........................................................................27
SECTION 4.07. Financing.........................................................................28
ARTICLE V Covenants Relating to Conduct of Business..................................................28
SECTION 5.01. Conduct of Business...............................................................28
SECTION 5.02. No Solicitation...................................................................31
SECTION 5.03. Recapitalization Transactions.....................................................33
ARTICLE VI Additional Agreements.....................................................................34
SECTION 6.01. Preparation of Proxy Statement; Stockholders Meeting..............................34
SECTION 6.02. Access to Information; Confidentiality............................................34
SECTION 6.03. Reasonable Efforts; Notification..................................................35
SECTION 6.04. Stock Options.....................................................................36
SECTION 6.05. Indemnification...................................................................37
SECTION 6.06. Fees and Expenses.................................................................38
SECTION 6.07. Public Announcements..............................................................40
SECTION 6.08. Transfer Taxes....................................................................40
SECTION 6.09. Directors.........................................................................40
SECTION 6.10. Stockholder Litigation............................................................41
SECTION 6.11. Benefit Plans.....................................................................41
ARTICLE VII Conditions Precedent.....................................................................41
SECTION 7.01. Conditions to Each Party's Obligation To Effect The Merger........................41
ARTICLE VIII Termination, Amendment and Waiver.......................................................42
SECTION 8.01. Termination.......................................................................42
SECTION 8.02. Effect of Termination.............................................................44
SECTION 8.03. Amendment.........................................................................45
SECTION 8.04. Extension; Waiver.................................................................45
SECTION 8.05. Procedure for Termination, Amendment, Extension or Waiver.........................45
ARTICLE IX General Provisions........................................................................45
SECTION 9.01. Nonsurvival of Representations and Warranties.....................................45
SECTION 9.02. Notices...........................................................................45
SECTION 9.03. Definitions.......................................................................46
SECTION 9.04. Interpretation; Disclosure Letters................................................47
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SECTION 9.05. Severability......................................................................47
SECTION 9.06. Counterparts......................................................................47
SECTION 9.07. Entire Agreement; Third-Party Beneficiaries.......................................47
SECTION 9.08. Governing Law.....................................................................48
SECTION 9.09. Assignment........................................................................48
SECTION 9.10. Enforcement.......................................................................48
SECTION 9.11. Consents..........................................................................48
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GLOSSARY OF DEFINED TERMS
Location of
Defined Term Definition
------------ ----------
2002 Form 10-K...................................... Section 3.06
2003 SEC Documents.................................. Section 3.06
affiliate........................................... Section 9.03
Agent............................................... Recitals
Appraisal Provisions................................ Section 2.01(d)
Appraisal Shares.................................... Section 2.01(d)
Certificate of Merger............................... Section 1.05
Certificates........................................ Section 2.02(b)
Closing............................................. Section 1.04
Closing Date........................................ Section 1.04
Code................................................ Section 3.11(c)
Commitment Letters.................................. Section 4.07
Company............................................. Preamble
Company Benefit Plans............................... Section 3.10
Company Board....................................... Section 3.04(b)
Company By-laws..................................... Section 3.01
Company Capital Stock............................... Section 3.03
Company Charter..................................... Section 3.01
Company Common Stock................................ Recitals
Company Credit Agreement............................ Recitals
Company Credit Agreement Refinancing................ Section 5.02(e)
Company Disclosure Letter........................... Section 3.02
Company Material Adverse Effect..................... Section 3.01
Company Material Contracts.......................... Section 3.14
Company Multi-employer Plan......................... Section 3.11(d)
Company Pension Plans............................... Section 3.11(a)
Company Permits..................................... Section 3.13(b)
Company SEC Documents............................... Section 3.06
Company Stock Option................................ Section 6.04(e)
Company Stock Plans................................. Section 6.04(e)
Company Stockholders Approval....................... Section 3.04(c)
Company Stockholders Meeting........................ Section 6.01(b)
Company Subsidiaries................................ Section 3.01
Company Takeover Proposal........................... Section 5.02(e)
Company Warrants.................................... Section 3.03
Company Welfare Benefit Plans....................... Section 3.11(a)
Confidentiality Agreement........................... Section 6.02
Consent............................................. Section 3.05(b)
Contract............................................ Section 3.05(a)
Control Date........................................ Section 5.01(a)
Covered Person...................................... Section 3.10
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Debt Commitment Letter.............................. Section 4.07
DGCL................................................ Section 1.03
Effective Time...................................... Section 1.05
Environmental Laws.................................. Section 3.17(b)
Environmental Permits............................... Section 3.17(a)
ERISA............................................... Section 3.11(a)
Exchange Act........................................ Section 1.01(a)
Exchange Fund....................................... Section 2.02(a)
Exercisable Options................................. Section 6.04(a)
Filed Company SEC Documents......................... Section 3.08
Financing........................................... Section 4.07
First Quarter 2003 10-Q............................. Section 3.06
Fully Diluted Shares................................ Exhibit A
Funding Failure..................................... Section 6.06(b)
GAAP................................................ Section 3.06
Governmental Entity................................. Section 3.05(b)
Hazardous Substances................................ Section 3.17(b)
HSR Act............................................. Section 3.05(b)
Independent Directors............................... Section 6.10
Information Statement............................... Section 3.05(b)
Intellectual Property Rights........................ Section 3.15(a)
In-the-Money Company Stock Options.................. Section 3.03
Judgment............................................ Section 3.05(a)
key employee........................................ Section 9.03
Law................................................. Section 3.05(a)
Lenders............................................. Recitals
Licensed Intellectual Property Rights............... Section 3.15(d)
Liens............................................... Section 3.02
Lock-Up Agreement................................... Recitals
MAC Termination..................................... Section 6.06(b)
material adverse effect............................. Section 9.03
Maximum Premium..................................... Section 6.05(b)
Merger.............................................. Recitals
Merger Consideration................................ Section 2.01(c)(ii)
Minimum Tender Condition............................ Exhibit A
Offer............................................... Recitals
Offer Documents..................................... Section 1.01(e)
Outside Date........................................ Section 8.01(b)(i)
Owned Intellectual Property Rights.................. Section 3.15(b)
Parent.............................................. Preamble
Parent Breach....................................... Section 6.06(b)
Parent Material Adverse Effect...................... Section 4.01
Paying Agent........................................ Section 2.02(a)
person.............................................. Section 9.03
Preference Shares................................... Preamble
Primary Company Executives.......................... Section 3.11(e)
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Principal Shareholders.............................. Recitals
Proxy Statement..................................... Section 3.05(b)
Recapitalization Transactions....................... Recitals
Representatives..................................... Section 5.02(a)
Schedule 14D-9...................................... Section 1.02(b)
SEC................................................. Section 1.01(a)
Securities Act...................................... Section 3.06
Sub................................................. Preamble
Subordinated Notes.................................. Preamble
subsidiary.......................................... Section 9.03
Superior Company Proposal........................... Section 5.02(e)
Surviving Corporation............................... Section 1.03
Surviving Corporation Common Stock.................. Section 2.01(a)
Tax Return.......................................... Section 3.09(h)
Taxes............................................... Section 3.09(h)
Tender Agreements................................... Recitals
to the knowledge.................................... Section 9.03
Transfer Taxes...................................... Section 6.08
Voting Company Debt................................. Section 3.03
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June 12, 2003, among KAGT
HOLDINGS, INC., a Delaware corporation ("Parent"), KAGT ACQUISITION CORP., a
Delaware corporation ("Sub") and a wholly owned subsidiary of Parent, and
APPLIED GRAPHICS TECHNOLOGIES, INC., a Delaware corporation (the "Company").
WHEREAS the respective Boards of Directors of Parent, Sub and the Company
have approved the acquisition of the Company by Parent on the terms and subject
to the conditions set forth in this Agreement;
WHEREAS, in furtherance of such acquisition, Parent proposes to cause Sub
to make a tender offer (as it may be amended from time to time as permitted
under this Agreement, the "Offer") to purchase all the outstanding shares of
common stock, par value $0.01 per share, of the Company (the "Company Common
Stock"), at a price per share of Company Common Stock of $0.85, net to the
seller in cash, on the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, concurrently with the execution and delivery of this Agreement,
and as a condition and inducement to Parent entering into this Agreement, each
of Applied Printing Technologies, L.P., Fleet National Bank, Xxxx Xxxxxxx,
Xxxxxx Xxxxx, Xxxxxx Xxxxxxxxxx, Xxxxx Xxxxxx and Xxxxx Xxxxxxxxx, Xx.
(collectively, the "Principal Shareholders") has entered into a tender and
voting agreement, dated as of the date hereof (collectively, the "Tender
Agreements"), pursuant to which, among other things, each of the Principal
Shareholders has agreed to tender its shares of Company Common Stock to Sub in
the Offer.
WHEREAS the respective Boards of Directors of Parent, Sub and the Company
have approved the merger (the "Merger") of Sub into the Company on the terms and
subject to the conditions set forth in this Agreement, whereby each issued share
of Company Common Stock not owned directly by Parent or the Company, other than
Appraisal Shares (as defined in Section 2.01(d)), shall be converted into the
right to receive the highest per share cash consideration paid pursuant to the
Offer;
WHEREAS, in addition to the Offer and the Merger, contemporaneously with
the closing of the Offer (or, in the case of the transactions described in (ii)
and (iii) below, in the period as soon as possible following the closing of the
Offer), the Company and certain Company Subsidiaries shall close transactions
which will result in a recapitalization of the Company (the transactions in (i),
(ii) and (iii) collectively with the Offer and the Merger, the "Recapitalization
Transactions"), including:
(i) Sub and the lenders under the Debt Commitment Letter (as defined in
Section 4.07) purchasing, or lending the Company the money for the
Company to repay, at an agreed upon amount, all of the outstanding
debt under the Company's Second Amended and Restated Credit
Agreement dated as of April 15, 2003 (the "Company Credit
Agreement") by and among the Company, as borrower, Fleet National
Bank, as Administrative Agent (the "Agent") and the
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lenders named therein (the "Lenders"), at a price and otherwise in
accordance with the terms of a Lock-Up Agreement entered into
between certain affiliates of Sub, the Agent and the Lenders (the
"Lock-Up Agreement"),
(ii) the Company with funds provided from Sub or Parent repurchasing
through a tender offer and/or redemption all outstanding 10%
Subordinated Notes due 2005 of the Company (the "Subordinated
Notes") effective in the period as soon as possible following the
closing of the Offer (provided that the vote of the holders of
Subordinated Notes required to effect such redemption shall be
effective upon the closing of the Offer), at a price and otherwise
on the terms set forth in the Notice of Noteholders' Meeting in the
form previously approved by Parent to be sent to the holders of such
notes, and
(iii) the Company causing its Wace Group Limited subsidiary, with funds
provided from Sub or Parent, to repurchase and/or redeem all
outstanding 8% Cumulative Convertible Redeemable Preference Shares
(the "Preference Shares") issued by the Company's Wace Group Limited
subsidiary (other than those Preference Shares held by Applied
Graphics Technologies (UK) Limited) effective in the period as soon
as possible following the closing of the Offer (provided that the
vote of the holders of Preference Shares required to effect such
redemption and/or repurchase shall be effective upon the closing of
the Offer), at a price and otherwise on the terms set forth in the
Notice of Meeting in the form previously approved by Parent to be
sent to the holders of such shares; and
WHEREAS Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
The Offer and the Merger
SECTION 1.01. The Offer.
(a) Commencement and Expiration of the Offer. Subject to the
conditions of this Agreement, as promptly as practicable after the date of
this Agreement, but in no event later than 10 business days after the
initial public announcement of the execution of this Agreement (which
initial public announcement shall occur no later than the second business
day following the execution and delivery of this Agreement), Sub shall,
and Parent shall cause Sub to, commence the Offer within the meaning of
the applicable rules and regulations of the Securities and Exchange
Commission (the "SEC"). The obligation of Sub to, and of Parent to cause
Sub to, commence the Offer and accept for payment, and pay for, any shares
of Company Common Stock tendered pursuant to the Offer shall be subject to
the conditions set forth in Exhibit A. The initial expiration date of the
Offer shall be the 20th business day following the commencement of the
Offer (determined
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using Rules 14d-1(g)(3) and 14d-2 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")). Sub expressly
reserves the right to waive any condition to the Offer or modify the terms
of the Offer, except that, without the consent of the Company, Sub shall
not and Parent shall not permit Sub to (i) reduce the number of shares of
Company Common Stock subject to the Offer, (ii) reduce the price per share
of Company Common Stock to be paid pursuant to the Offer, (iii) waive or
change the Minimum Tender Condition (as defined in Exhibit A), (iv) modify
in any manner adverse to the holders of Company Common Stock or add to the
conditions set forth in Exhibit A, (v) except as provided in Section
1.01(b), extend the Offer or (vi) change the form of consideration payable
in the Offer.
(b) Sub's Ability to Extend the Offer. Notwithstanding the
provisions of Section 1.01(a), Sub may, without the consent of the
Company, (A) if at the scheduled or any extended expiration date of the
Offer (whether extended pursuant to this clause (A) or otherwise) any of
the conditions to Sub's obligation to purchase shares of Company Common
Stock are not satisfied or waived, extend the Offer for a period of up to
five business days or such longer period as Parent, Sub and the Company
shall agree, (B) extend the Offer for any period required by any rule,
regulation, interpretation or position of the SEC or the staff thereof
applicable to the Offer and (C) if at the scheduled or any extended
expiration date of the Offer all of the conditions set forth in Exhibit A
have been satisfied or waived, Sub may extend the Offer pursuant to an
amendment to the Offer providing for a "subsequent offering period" not to
exceed twenty (20) business days to the extent permitted under, and in
compliance with, Rule 14d-11 under the Exchange Act in which event, in
accordance with Rule 14d-11, Sub will immediately accept for payment and
promptly pay for all shares of Company Common Stock tendered and not
withdrawn.
(c) Company's Ability to Extend the Offer. In the event that the
Minimum Tender Condition has not been satisfied or waived at the scheduled
expiration date of the Offer, at the request of the Company, Sub shall,
and Parent shall cause Sub to, extend the expiration date of the Offer in
such increments as Sub may determine until the earliest to occur of (x)
the satisfaction or waiver of such condition, and (y) the Outside Date (as
defined in Section 8.01(b)(i)).
(d) Payment Acceptance. On the terms and subject to the conditions
of the Offer and this Agreement, Parent shall cause Sub to accept for
payment and pay for all shares of Company Common Stock validly tendered
and not withdrawn pursuant to the Offer that Sub becomes obligated to
purchase pursuant to the Offer as soon as practicable after the expiration
of the Offer.
(e) SEC Filings. On the date of commencement of the Offer, Parent
and Sub shall file with the SEC a Tender Offer Statement on Schedule TO
with respect to the Offer, which shall contain an offer to purchase and a
related letter of transmittal and summary advertisement (such Schedule TO
and the documents included therein pursuant to which the Offer will be
made, together with any supplements or amendments thereto, the "Offer
Documents"). Each of Parent, Sub and the Company shall promptly correct
any information provided by it for use in the Offer Documents if and to
the extent that
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such information shall have become false or misleading in any material
respect, and each of Parent and Sub shall take all steps necessary to
amend or supplement the Offer Documents and to cause the Offer Documents
as so amended or supplemented to be filed with the SEC and to be
disseminated to the Company's stockholders, in each case as and to the
extent required by applicable Federal securities laws. Parent and Sub
shall give the Company and its counsel a reasonable opportunity to review
and comment on the Offer Documents prior to their being filed with the SEC
or disseminated to the stockholders of the Company. Parent and Sub shall
provide the Company and its counsel in writing with any comments Parent,
Sub or their counsel may receive from the SEC or its staff with respect to
the Offer Documents promptly after the receipt of such comments and shall
provide the Company and its counsel with a reasonable opportunity to
participate in the response of Parent or Sub to such comments and provide
copies of all such responses to the Company.
(f) Funding Obligations.
(1) Prior to the expiration of the Offer, Parent shall provide
or cause to be provided to Sub on a timely basis the funds necessary
to purchase any shares of Company Common Stock that Sub becomes
obligated to purchase pursuant to the Offer.
(2) If all conditions to the Offer have been satisfied and/or
waived and no event or circumstance exists such that the Offer shall
not close, simultaneously with the closing of the Offer, (A) Parent
shall or shall cause Sub to loan to the Company the funds necessary
to (i) repurchase or redeem all outstanding Subordinated Notes, (ii)
repurchase or redeem all outstanding Preference Shares, and (iii)
pay for options cancelled in accordance with Section 6.04(a), and
(B) unless there has otherwise been a breach by the Lenders of their
obligations under the Lock-Up Agreement, Parent shall either arrange
for the lenders under the Debt Commitment Letter and Sub to purchase
all outstanding indebtedness under the Company Credit Agreement on
the terms and subject to the conditions set forth in the Lock-Up
Agreement or make funds available to the Company to repay the
outstanding indebtedness under the Company Credit Agreement on the
terms and subject to the conditions set forth in the Lock-Up
Agreement. The loan referenced in clause (A) shall be made on terms
mutually acceptable to Parent and the Company, provided that subject
to the last sentence of this clause (2), such loan shall be in the
form of a demand note which shall not be callable prior to the
earlier of the Effective Time or August 31, 2003). If, following the
time the loans are made in accordance with this clause (2) the Offer
is not consummated for any reason, the loan referenced in clause (A)
shall be callable upon demand.
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SECTION 1.02. Company Actions.
(a) Subject to Section 5.02(b), the Company hereby approves of and
consents to the Offer, the Merger and the other Recapitalization
Transactions.
(b) On the date the Offer Documents are filed with the SEC, the
Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Offer, including an Information
Statement (such Schedule 14D-9, as amended and supplemented from time to
time, the "Schedule 14D-9"), describing the recommendations referred to in
Section 3.04(b), or any permitted withdrawal or modification in accordance
with Section 5.02(b), and shall mail the Schedule 14D-9 to the holders of
Company Common Stock. Each of the Company, Parent and Sub shall promptly
correct any information provided by it for use in the Schedule 14D-9 if
and to the extent that such information shall have become false or
misleading in any material respect, and the Company shall take all steps
necessary to amend or supplement the Schedule 14D-9 and to cause the
Schedule 14D-9 as so amended or supplemented to be filed with the SEC and
disseminated to the Company's stockholders, in each case as and to the
extent required by applicable Federal securities laws. The Company shall
provide Parent and its counsel in writing with any comments the Company or
its counsel may receive from the SEC or its staff with respect to the
Schedule 14D-9 promptly after the receipt of such comments.
(c) In connection with the Offer, the Company shall cause its
transfer agent to promptly furnish Sub with mailing labels containing the
names and addresses of the record holders of Company Common Stock as of a
recent date and of those persons becoming record holders subsequent to
such date, together with copies of all lists of stockholders, security
position listings and computer files and all other information as Sub may
reasonably request in the Company's possession or control regarding the
beneficial owners of Company Common Stock, and shall furnish to Sub such
information (including updated lists of stockholders, security position
listings and computer files) as Parent may reasonably request in
communicating the Offer to the Company's stockholders. Subject to the
requirements of applicable Law (as defined in Section 3.05), and except
for such steps as are necessary to disseminate the Offer Documents and any
other documents necessary to consummate the Recapitalization Transactions,
Parent and Sub shall hold in confidence pursuant to the Confidentiality
Agreement (as defined in Section 6.02) the information contained in any
such labels, listings and files, shall use such information only for the
purpose of communicating the Offer and disseminating any other documents
necessary to consummate the Offer, the Merger and the other
Recapitalization Transactions and, if this Agreement shall be terminated,
shall, upon request, deliver to the Company all copies of such information
then in their control.
SECTION 1.03. The Merger. On the terms and subject to the satisfaction or
waiver of the conditions set forth in this Agreement, and in accordance with the
Delaware General Corporation Law (the "DGCL"), Sub shall be merged with and into
the Company at the Effective Time (as defined in Section 1.05). At the Effective
Time, the separate corporate existence of Sub shall cease and the Company shall
continue as the surviving corporation (the "Surviving Corporation"). The
Surviving Corporation shall possess all the rights, privileges, immunities,
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powers and franchises of the Company and Sub, and the Surviving Corporation
shall by operation of law become liable for all of the debts, liabilities and
duties of the Company and Sub. The name of the Surviving Corporation shall be
Applied Graphics Technologies, Inc. and the purpose thereof shall be as set
forth in Section 2 of the Certificate of Incorporation of the Surviving
Corporation. At the election of Parent, any direct or indirect wholly owned
subsidiary of Parent may be substituted for Sub as a constituent corporation in
the Merger. In such event, the parties shall execute an appropriate amendment to
this Agreement in order to reflect the foregoing.
SECTION 1.04. Closing. The closing (the "Closing") of the Merger shall
take place at the offices of Ropes & Xxxx, 00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx, XX
00000 at 10:00 a.m. on the second business day following the satisfaction (or,
to the extent permitted by Law, requisite waiver) of the conditions set forth in
Article VII hereof, or at such other place, time and date as shall be agreed in
writing between Parent and the Company. The date on which the Closing occurs is
referred to in this Agreement as the "Closing Date".
SECTION 1.05. Effective Time. Prior to the Closing, Parent shall prepare
and give the Company and its counsel the opportunity to review, and on the
Closing Date or as soon as practicable thereafter Parent shall file with the
Secretary of State of the State of Delaware, a certificate of merger or other
appropriate documents (in any such case, the "Certificate of Merger") executed
in accordance with the relevant provisions of the DGCL and shall make all other
filings or recordings required under the DGCL. The Merger shall become effective
at such time as the Certificate of Merger is duly filed with such Secretary of
State, or at such other time as Parent and the Company shall agree and specify
in the Certificate of Merger (the time the Merger becomes effective being the
"Effective Time").
SECTION 1.06. Effects. The Merger shall have the effects set forth in
Section 259(a) of the DGCL.
SECTION 1.07. Certificate of Incorporation and By-laws.
(a) The Certificate of Incorporation of Sub as in effect immediately
prior to the Effective Time shall be the Certificate of Incorporation of
the Surviving Corporation until thereafter changed or amended as provided
therein or by applicable Law.
(b) The By-laws of Sub as in effect immediately prior to the
Effective Time shall be the By-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable Law.
SECTION 1.08. Directors. At the Closing, Parent shall designate the
directors of the Surviving Corporation and such directors shall hold office
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
SECTION 1.09. Officers. At the Closing, Parent shall designate the
officers of the Surviving Corporation and such officers shall hold office until
the earlier of their resignation or removal or until their respective successors
are duly elected or appointed and qualified, as the case may be.
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ARTICLE II
Effect on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
Company Common Stock or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
capital stock of Sub shall be converted into and become one validly
issued, fully paid and non-assessable share of common stock, par value
$0.01 per share, of the Surviving Corporation ("Surviving Corporation
Common Stock") and all such shares together will constitute the only
outstanding shares of capital stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each
share of Company Common Stock that is owned by the Company, Parent or Sub
shall no longer be outstanding and shall automatically be cancelled and
retired and shall cease to exist, and no consideration shall be delivered
or deliverable in exchange therefor.
(c) Conversion of Company Common Stock.
(i) Subject to Sections 2.01(b) and 2.01(d), each issued share
of Company Common Stock shall be converted into the right to receive
in cash the highest price per share of Company Common Stock paid
pursuant to the Offer.
(ii) The cash payable upon the conversion of shares of Company
Common Stock pursuant to this Section 2.01(c) is referred to
collectively as the "Merger Consideration". As of the Effective
Time, all such shares of Company Common Stock shall no longer be
outstanding and shall automatically be cancelled and retired and
shall cease to exist, and each holder of a certificate representing
any such shares of Company Common Stock shall cease to have any
rights with respect thereto, except the right to receive Merger
Consideration upon surrender of such certificate in accordance with
Section 2.02, without interest.
(d) Appraisal Rights. Notwithstanding anything in this Agreement to
the contrary, shares (the "Appraisal Shares") of Company Common Stock that
are outstanding immediately prior to the Effective Time and that are held
by any person who is entitled to demand and properly demands appraisal of
such Appraisal Shares pursuant to, and who complies in all respects with,
Section 262 of the DGCL (the "Appraisal Provisions") shall not be
converted into Merger Consideration as provided in Section 2.01(c), but
rather the holders of Appraisal Shares shall be entitled to payment of the
fair value of such Appraisal Shares in accordance with the Appraisal
Provisions; provided, however, that if any such holder shall fail to
perfect or otherwise shall waive, withdraw or lose the right to appraisal
under the Appraisal Provisions, then the right of such holder to be paid
the fair value of such holder's Appraisal Shares shall cease and
7
such Appraisal Shares shall be deemed to have been converted as of the
Effective Time into, and to have become exchangeable solely for the right
to receive, Merger Consideration as provided in Section 2.01(c). The
Company shall serve prompt notice to Parent of any demands received by the
Company for appraisal of any shares of Company Common Stock, and Parent
shall have the right to participate in and direct all negotiations and
proceedings with respect to such demands. Prior to the Effective Time, the
Company shall not, without the prior written consent of Parent, make any
payment with respect to, or settle or offer to settle, any such demands,
or agree to do any of the foregoing.
SECTION 2.02. Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, Parent shall select a
bank or trust company in the United States, reasonably acceptable to the
Company, to act, upon terms reasonably acceptable to the Company, as
paying agent (the "Paying Agent") for the payment of the Merger
Consideration upon surrender of certificates representing Company Common
Stock. Parent shall take all steps necessary to enable and cause the
Surviving Corporation to provide to the Paying Agent on a timely basis, as
and when needed after the Effective Time, cash necessary to pay for the
shares of Company Common Stock converted into the right to receive cash
pursuant to Section 2.01(c) (such cash being hereinafter referred to as
the "Exchange Fund"). If for any reason (including losses) the Exchange
Fund is inadequate to pay the amounts to which holders of shares of
Company Common Stock shall be entitled under this Section 2.02(a), Parent
shall take all steps necessary to enable or cause the Surviving
Corporation promptly to deposit in trust additional cash with the Paying
Agent sufficient to make all payments required under this Agreement, and
Parent and the Surviving Corporation shall in any event be liable for
payment thereof. The Exchange Fund shall not be used for any purpose
except as expressly provided in this Agreement.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, but in no event later than five business days thereafter,
the Surviving Corporation shall cause the Paying Agent to mail to each
holder of record of a certificate or certificates (the "Certificates")
that immediately prior to the Effective Time represented outstanding
shares of Company Common Stock whose shares were converted into the right
to receive Merger Consideration pursuant to Section 2.01, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon delivery of
the Certificates to the Paying Agent and shall be in such form and have
such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Paying Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor the amount of cash into which the
shares of Company Common Stock theretofore represented by such Certificate
shall have been converted pursuant to Section 2.01, and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Company Common Stock that is not registered in the transfer
records of the Company, payment may be made to a person
8
other than the person in whose name the Certificate so surrendered is
registered, if such Certificate shall be properly endorsed or otherwise be
in proper form for transfer and the person requesting such payment shall
pay any transfer or other taxes required by reason of the payment to a
person other than the registered holder of such Certificate or establish
to the satisfaction of Parent that such tax has been paid or is not
applicable. Until surrendered as contemplated by this Section 2.02, each
Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the amount of
cash, without interest, into which the shares of Company Common Stock
theretofore represented by such Certificate have been converted pursuant
to Section 2.01. If any holder of shares of Company Common Stock shall be
unable to surrender such holder's Certificates because such Certificates
have been lost, mutilated or destroyed, such holder may deliver in lieu
thereof an affidavit and indemnity bond in form and substance and with
surety reasonably satisfactory to the Surviving Corporation. No interest
shall be paid or accrue on the cash payable upon surrender of any
Certificate.
(c) No Further Ownership Rights in Company Common Stock. The Merger
Consideration paid in accordance with the terms of this Article II upon
conversion of any shares of Company Common Stock shall be deemed to have
been paid in full satisfaction of all rights pertaining to such shares of
Company Common Stock, and after the Effective Time there shall be no
further registration of transfers on the stock transfer books of the
Surviving Corporation of shares of Company Common Stock that were
outstanding immediately prior to the Effective Time. If, after the
Effective Time, any certificates formerly representing shares of Company
Common Stock are presented to the Surviving Corporation or the Paying
Agent for any reason, they shall be cancelled and exchanged as provided in
this Article II.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund
that remains undistributed to the holders of Company Common Stock for six
months after the Effective Time shall be delivered to Parent, upon demand,
and any holder of Company Common Stock who has not theretofore complied
with this Article II shall thereafter look only to Parent for payment of
its claim for Merger Consideration.
(e) No Liability. None of Parent, Sub, the Company or the Paying
Agent shall be liable to any person in respect of any cash from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar Law. If any Certificate has not
been surrendered prior to five years after the Effective Time (or
immediately prior to such earlier date on which Merger Consideration in
respect of such Certificate would otherwise escheat to or become the
property of any Governmental Entity (as defined in Section 3.05)), any
such shares, cash, dividends or distributions in respect of such
Certificate shall, to the extent permitted by applicable Law, become the
property of the Surviving Corporation, free and clear of all claims or
interest of any person previously entitled thereto.
(f) Investment of Exchange Fund. The Paying Agent shall invest any
cash included in the Exchange Fund, as directed by Parent, on a daily
basis. Any interest and other income resulting from such investments shall
be paid to Parent.
9
(g) Withholding Rights. Parent shall be entitled to deduct and
withhold from the consideration otherwise payable to any holder of Company
Common Stock pursuant to this Agreement such amounts as may be required to
be deducted and withheld with respect to the making of such payment under
the Code (as defined in Section 3.11(b)), or under any provision of state,
local or foreign tax Law.
(h) Charges and Expenses. The Surviving Corporation shall pay all
charges and expenses, including those of the Paying Agent, in connection
with the exchange of cash for shares of Company Common Stock.
ARTICLE III
Representations and Warranties of the Company
The Company represents and warrants to Parent and Sub as follows:
SECTION 3.01. Organization, Standing and Power. Each of the Company and
each of its subsidiaries (the "Company Subsidiaries") is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized and has all requisite corporate power and authority and possesses all
governmental franchises, licenses, permits, authorizations and approvals, and
has made all filings, registrations and declarations, in each case whether
domestic or foreign, necessary to enable it to own, lease or otherwise hold its
properties and assets and to conduct its businesses as presently conducted, in
each case other than such franchises, licenses, permits, authorizations,
approvals, filings, registrations and declarations the lack of which,
individually or in the aggregate, has not had and would not reasonably be
expected to have a material adverse effect on the Company and the Company
Subsidiaries, taken as a whole, a material adverse effect on the ability of the
Company to perform its obligations under this Agreement or a material adverse
effect on the ability of the Company to consummate the Offer, the Merger and the
other Recapitalization Transactions (a "Company Material Adverse Effect"). The
Company and each Company Subsidiary is duly qualified to do business in each
jurisdiction where the nature of its business or their ownership or leasing of
its properties makes such qualification necessary, except where the failure to
so qualify has not had and would not reasonably be expected to have a Company
Material Adverse Effect. The Company has made available to Parent true and
complete copies of the certificate of incorporation of the Company, as amended
to the date of this Agreement (as so amended, the "Company Charter"), and the
by-laws of the Company, as amended to the date of this Agreement (as so amended,
the "Company By-laws"), and the comparable charter and organizational documents
of each Company Subsidiary, in each case as amended through the date of this
Agreement.
SECTION 3.02. Company Subsidiaries; Equity Interests.
(a) The letter, dated as of the date of this Agreement, from the
Company to Parent and Sub (the "Company Disclosure Letter") lists each
Company Subsidiary and its jurisdiction of organization. All the
outstanding shares of capital stock of each Company Subsidiary have been
validly issued and are fully paid and nonassessable and, except as set
forth in the Company Disclosure Letter, are wholly owned by the Company,
by another Company Subsidiary or by the Company and another Company
Subsidiary, free and clear of all pledges, liens, charges, mortgages,
encumbrances and security interests of
10
any kind or nature whatsoever (collectively, "Liens") other than Liens in
favor of the Agent and the Lenders pursuant to the Company Credit
Agreement.
(b) Except for its interests in the Company Subsidiaries and except
for the ownership interests set forth in the Company Disclosure Letter,
the Company does not own, directly or indirectly, any capital stock,
membership interest, partnership interest, joint venture interest or other
equity interest in any person.
SECTION 3.03. Capital Structure. The authorized capital stock of the
Company consists of 150,000,000 shares of Company Common Stock, par value $0.01
per share, and 10,000,000 shares of preferred stock, no par value per share
(together with the Company Common Stock, the "Company Capital Stock"). At the
close of business on May 31, 2003, (i) 9,147,565 shares of Company Common Stock
were issued and outstanding, (ii) no shares of Company Common Stock were held by
the Company in its treasury, (iii) 2,974,433 shares of Company Common Stock were
subject to outstanding Company Stock Options (as defined in Section 6.04) and
164,967 additional shares of Company Common Stock were reserved for issuance
pursuant to the Company Stock Plans (as defined in Section 6.04), and (iv)
1,360,131 shares of Company Common Stock were subject to outstanding warrants to
purchase shares of Company Common Stock (the "Company Warrants"). Except as set
forth above, at the close of business on May 31, 2003, no shares of capital
stock or other voting securities of the Company were issued, reserved for
issuance or outstanding. Assuming completion of the Offer and the Merger prior
to July 15, 2003, Company Stock Options to purchase not more than 923,000 shares
of Company Common Stock will be exercisable, at an exercise price less than
$0.85 per share of Company Common Stock, in connection with the Offer and the
Merger (the "In-the-Money Company Stock Options"). There are no outstanding
stock appreciation rights linked to the price of Company Common Stock and
granted under any Company Stock Plan. All outstanding shares of Company Capital
Stock are, and all such shares that may be issued prior to the Effective Time
will be when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to or issued in violation of any purchase option,
call option, right of first refusal, preemptive right, subscription right or any
similar right under any provision of the DGCL, the Company Charter, the Company
By-laws or any Contract (as defined in Section 3.05) to which the Company is a
party or otherwise bound. There are not any bonds, debentures, notes or other
indebtedness of the Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
holders of Company Common Stock may vote ("Voting Company Debt"). Except for the
Preference Shares, as set forth in Section 3.03 of the Company Disclosure Letter
or as set forth above, as of the date of this Agreement, there are not any
options, warrants, rights (including, without limitation, rights associated with
any "stockholder rights" plan or any similar anti-takeover plan or device),
convertible or exchangeable securities, "phantom" stock rights, stock
appreciation rights, stock-based performance units, commitments, Contracts,
arrangements or undertakings of any kind to which the Company or any Company
Subsidiary is a party or by which any of them is bound (i) obligating the
Company or any Company Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other equity
interests in, or any security convertible or exercisable for or exchangeable
into any capital stock of or other equity interest in, the Company or of any
Company Subsidiary or any Voting Company Debt, (ii) obligating the Company or
any Company Subsidiary to issue, grant, extend or enter into any such option,
warrant, call, right, security, commitment, Contract, arrangement or undertaking
or
11
(iii) that give any person the right to receive any economic benefit or right
similar to or derived from the economic benefits and rights occurring to holders
of Company Capital Stock. Except as contemplated by the consummation of the
Recapitalization Transactions, as of the date of this Agreement, there are not
any outstanding contractual obligations of the Company or any Company Subsidiary
to repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or any Company Subsidiary. The Company has provided Parent with a
complete and correct copy of all agreements, instruments and other documents
relating to the Company Warrants. The Company Disclosure Letter sets forth a
true and complete list of the outstanding Company Stock Options, the
In-the-Money Company Stock Options and Company Warrants, together with the
number of shares of Company Common Stock subject thereto and the exercise price
thereof.
SECTION 3.04. Authority; Execution and Delivery; Enforceability.
(a) The Company has all requisite corporate power and authority to
execute and deliver this Agreement and, subject to the Company Stockholder
Approval (as defined in Section 3.04(c)) with respect to the Merger if
required by Law, to consummate the Recapitalization Transactions. The
execution and delivery by the Company of this Agreement and the
consummation by the Company of the Recapitalization Transactions have been
duly authorized by all necessary corporate action on the part of the
Company, subject, in the case of the Merger, to receipt of the Company
Stockholder Approval (if required by Law). The Company has duly executed
and delivered this Agreement, and this Agreement constitutes its legal,
valid and binding obligation (subject to the Company Stockholder Approval
with respect to the Merger if required by Law), enforceable against it in
accordance with its terms, except to the extent that enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws of general applicability relating to or
affecting the enforcement of creditors' rights and by the effect of the
principles of equity (regardless of whether enforceability is considered
in a proceeding in equity or at law).
(b) The Board of Directors of the Company (the "Company Board"), at
a meeting duly called and held, duly and unanimously adopted resolutions
(i) approving this Agreement, the Offer, the Merger and the other
Recapitalization Transactions, (ii) determining that the terms of the
Offer and the Merger are fair, from a financial point of view, to the
Company and its stockholders and that the Merger is advisable, (iii)
recommending that the holders of Company Common Stock accept the Offer and
tender their shares of Company Common Stock pursuant to the Offer and (iv)
recommending that the Company's stockholders approve this Agreement. Such
resolutions are sufficient to render inapplicable to Parent and Sub and
this Agreement, the Offer, the Merger and the other Recapitalization
Transactions the provisions of Section 203 of the DGCL. No state takeover
statute or similar statute or regulation applies or purports to apply to
the Company with respect to this Agreement, the Tender Agreements, the
Offer, the Merger or any other Transaction. The Company has been advised
by each of its directors and executive officers that, as of the date of
this Agreement, each such person intends to tender all shares of Company
Common Stock owned by such person pursuant to the Offer, except to the
extent of any restrictions created by Section 16(b) of the Exchange Act.
12
(c) The only vote of holders of any class or series of Company
Capital Stock necessary to approve and adopt this Agreement and the Merger
is the approval of this Agreement by the holders of a majority of the
outstanding Company Common Stock (the "Company Stockholder Approval"). The
affirmative vote of the holders of Company Capital Stock, or any of them,
is not necessary to consummate the Offer or any Transaction other than the
Merger.
SECTION 3.05. No Conflicts; Consents.
(a) Except as set forth in the Company Disclosure Letter and, in the
case of clause (ii) below, except for the Company Credit Agreement, the
execution and delivery by the Company of this Agreement do not, and the
consummation of the Offer, the Merger and the other Recapitalization
Transactions and compliance with the terms hereof will not, result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or
to increased, additional, accelerated or guaranteed rights or entitlements
of any person under, or result in the creation of any Lien upon any of the
properties or assets of the Company or any Company Subsidiary under, any
provision of (i) the Company Charter, the Company By-laws or the
comparable charter or organizational documents of any Company Subsidiary,
(ii) any contract, lease, license, indenture, note, bond, agreement,
permit, concession, franchise or other instrument (a "Contract") to which
the Company or any Company Subsidiary is a party or by which any of their
respective properties or assets is bound or (iii) subject to the filings
and other matters referred to in Section 3.05(b), any judgment, order,
injunction or decree, domestic or foreign ("Judgment"), or statute, law
(including common law), legislation, interpretation, ordinance, rule or
regulation, domestic or foreign ("Law"), applicable to the Company or any
Company Subsidiary or their respective properties or assets.
(b) No consent, approval, license, permit, order or authorization
("Consent") of, or registration, declaration or filing with, any Federal,
state, local or foreign government or any court of competent jurisdiction,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity") is required
to be obtained or made by or with respect to the Company or any Company
Subsidiary in connection with the execution, delivery and performance of
this Agreement or the consummation of the Recapitalization Transactions,
other than (i) if required by Law, compliance with and filings under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) the filing with the SEC of (A) the Schedule 14D-9, (B) if
required by Law, a proxy or information statement relating to the approval
of this Agreement by the Company's stockholders (the "Proxy Statement"),
(C) any information statement (the "Information Statement") required under
Rule 14f-1 in connection with the Offer and (D) such reports under Section
13 of the Exchange Act as may be required in connection with this
Agreement, the Offer, the Merger and the other Recapitalization
Transactions, (iii) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and appropriate documents with
the relevant authorities of the other jurisdictions in which the Company
is qualified to do business, (iv) such filings as may be required in
connection with the taxes described in
13
Section 6.08, (v) filings required under, and compliance with other
applicable requirements of, non-U.S. laws, as set forth in Section 3.05(b)
of the Company Disclosure Letter, and (vi) such other items that,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect.
SECTION 3.06. SEC Documents; Undisclosed Liabilities. The Company has
filed all reports, schedules, forms, statements and other documents required to
be filed by the Company with the SEC since January 1, 2001 (the "Company SEC
Documents"). As of its respective date, each Company SEC Document complied in
all material respects with the requirements of the Exchange Act or the
Securities Act of 1933, as amended (the "Securities Act"), as the case may be,
and the rules and regulations of the SEC promulgated thereunder applicable to
such Company SEC Document, and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Except to the extent that
information contained in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2002 (filed on April 15, 2003) (the "2002 Form 10-K"),
its definitive Proxy Statement with respect to its 2003 Annual Meeting (filed on
April 29, 2003), its Quarterly Reports on Form 10-Q for the quarters ended March
31, 2003 (filed on May 15, 2003) (the "First Quarter 2003 10-Q"), and its
Current Report on Form 8-K (filed on May 16, 2003) (collectively, the "2003 SEC
Documents") has been revised or superseded by a later Filed Company SEC Document
(as defined in Section 3.08), none of the 2003 SEC Documents contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The consolidated
financial statements of the Company included in the Company SEC Documents
complied as of their respective filing dates as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles ("GAAP") (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and present fairly in all material respects the consolidated financial position
of the Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth in the Filed Company SEC Documents (as defined
in Section 3.08), neither the Company nor any Company Subsidiary has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) required by GAAP to be set forth on a consolidated balance sheet
of the Company and its consolidated subsidiaries or in the notes thereto except
those incurred in the ordinary course of business after such filings, under this
Agreement or otherwise in connection with the Recapitalization Transactions.
Except as set forth in the Company Disclosure Letter, neither the Company nor
any Company Subsidiary is a party to any contract, arrangement or understanding
with an affiliate of such party that is not disclosed in the Filed Company SEC
Documents.
SECTION 3.07. Information Supplied. None of the information supplied or to
be supplied by the Company for inclusion or incorporation by reference in (i)
the Offer Documents, the Schedule 14D-9 or the Information Statement will, at
the time such document is filed with
14
the SEC, at any time it is amended or supplemented or at the time it is first
published, sent or given to the Company's stockholders, contain, or will
contain, any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, or
(ii) the Proxy Statement (if required by Law) will, at the date it is first
mailed to the Company's stockholders or at the time of the Company Stockholders
Meeting (as defined in Section 6.01), 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. The Schedule 14D-9, the Information
Statement and the Proxy Statement (if required by Law) will comply as to form in
all material respects with the requirements of the Exchange Act and the rules
and regulations thereunder, except that no representation is made by the Company
with respect to statements made or incorporated by reference therein based on
information supplied by Parent or Sub for inclusion or incorporation by
reference therein.
SECTION 3.08. Absence of Certain Changes or Events. Except as disclosed in
the Company SEC Documents filed and publicly available prior to the date of this
Agreement (the "Filed Company SEC Documents") or in the Company Disclosure
Letter, from the date of the most recent audited financial statements included
in the Filed Company SEC Documents to the date of this Agreement, the Company
has conducted its business only in the ordinary course, and during such period
there has not been:
(1) any event, change, effect or development that,
individually or in the aggregate, has had or would reasonably be
expected to have a Company Material Adverse Effect;
(2) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with
respect to any Company Capital Stock or any repurchase for value by
the Company of any Company Capital Stock;
(3) any split, combination or reclassification of any Company
Capital Stock or any issuance or the authorization of any issuance
of any other securities in respect of, in lieu of or in substitution
for shares of Company Capital Stock;
(4) (A) any granting by the Company or any Company Subsidiary
to any current or former director, officer or key employee of the
Company or any Company Subsidiary of any increase in compensation,
except to the extent required under employment agreements in effect
as of the date of the most recent audited financial statements
included in the Filed Company SEC Documents, (B) any granting by the
Company or any Company Subsidiary to any such director, officer or
key employee of any increase in severance or termination pay, except
as was required under any employment, severance or termination
policy, practice or agreements in effect as of the date of the most
recent audited financial statements included in the Filed Company
SEC Documents or (C) any entry by the Company or any Company
Subsidiary into, or any amendment of, any employment, severance or
termination agreement with any such director, officer
15
or employee, except for such agreements with employees (other than
directors, officers or key employees) that are entered into in the
ordinary course of business consistent with prior practice;
(5) any termination of employment or departure of any officer
or other key employee of the Company or any Company Subsidiary;
(6) any change in accounting methods, principles or practices
by the Company or any Company Subsidiary materially affecting the
consolidated assets, liabilities or results of operations of the
Company, except insofar as may have been required by a change in
GAAP, the Code or the treasury regulations under the Code; or
(7) any material elections with respect to Taxes (as defined
in Section 3.09) by the Company or any Company Subsidiary or
settlement or compromise by the Company or any Company Subsidiary of
any material Tax liability or refund.
SECTION 3.09. Taxes. Except as set forth in Section 3.09 of the Company
Disclosure Letter:
(a) Each of the Company and each Company Subsidiary has timely
filed, or has caused to be timely filed on its behalf, all Tax Returns
required to be filed by it, and all such Tax Returns are true, complete
and accurate, except (i) as stated in clause (f) of this Section 3.09 and
(ii) to the extent any failure to file or any inaccuracies in any filed
Tax Returns, individually or in the aggregate, has not had and would not
reasonably be expected to have a Company Material Adverse Effect.
Notwithstanding the foregoing, except to the extent of any adjustment(s)
to such basis by reason of an item of income, gain, loss or deduction
reflected on such Tax Return, no representation is made with respect to
the amount of the basis of the Company or any Company Subsidiary in its
assets. All Taxes shown to be due on such Tax Returns, or otherwise owed
(except Taxes being contested in good faith and which have been disclosed
in Section 3.09 of the Disclosure Letter), have been timely paid, except
to the extent that any failure to pay, individually or in the aggregate,
has not had and would not reasonably be expected to have a Company
Material Adverse Effect.
(b) The reserve for Taxes in the most recent financial statements
contained in the Filed Company SEC Documents is adequate in accordance
with GAAP for any unpaid liabilities of the Company and the Company
Subsidiaries (without regard to timing differences) through the date of
such financial statements. No deficiency with respect to any Taxes has
been proposed, asserted or assessed against the Company or any Company
Subsidiary, and no requests for waivers of the time to assess any such
Taxes are pending, except to the extent any such deficiency or request for
waiver, individually or in the aggregate, has not had and would not
reasonably be expected to have a Company Material Adverse Effect.
(c) The income Tax Returns of the Company or any Company Subsidiary
have never been examined by, or settled with, any Governmental Entity
(including the United
16
States Internal Revenue Service). All material assessments for Taxes due
with respect to any completed and settled examinations or any concluded
litigation have been fully paid.
(d) There are no material Liens for Taxes (other than for current
Taxes not yet due and payable) on the assets of the Company or any Company
Subsidiary.
(e) No claim has been made in writing in the past five years by any
authority in a jurisdiction within which the Company or any Company
Subsidiary does not file Tax Returns that it is, or may be, subject to
taxation by that jurisdiction.
(f) The Company Disclosure letter (as qualified therein) sets forth
the following information with respect to, each of the Company and the
Company "affiliated group" (within the meaning of Section 1504(a) of the
Code), as of the end of the most recent taxable year of the Company and of
the Company "affiliated group": (A) the amount of any net operating loss;
(B) the amount of any minimum tax credits; and (C) the amount of any
capital loss carryovers.
(g) Neither the Company nor any Company Subsidiary (i) has been a
member of an "affiliated group," as defined in Section 1504(a) of the
Code, filing a consolidated federal income Tax Return (other than a group
the common parent of which is the Company), (ii) has any liability for the
Taxes of any Person (other than any member of the group the common parent
of which is the Company) (A) under Treasury Regulation Section 1.1502-6
(or any similar provision of state, local, or foreign law), or (B) that
would be reasonably expected to have a Company Material Adverse Effect as
a transferee or successor, by contract or otherwise or (iii) has entered
into any agreement with respect to Taxes that would be reasonably expected
to have a Company Material Adverse Effect.
(h) Neither the Company nor any Company Subsidiary is a United
States Real Property Holding Corporation within the meaning of Section
897(c)(1)(A)(ii).
(i) For purposes of this Agreement:
"Taxes" includes all forms of taxation imposed by any Federal,
state, local, foreign or other Governmental Entity, including income,
franchise, property, sales, use, excise, employment, unemployment,
payroll, social security, estimated, value added, ad valorem, transfer,
recapture, withholding and other Taxes of any kind, including all
interest, penalties and additions thereto.
"Tax Return" means all Federal, state, local, provincial and foreign
Tax returns, declarations, statements, reports, schedules, forms and
information returns and any amended Tax return relating to Taxes
(including, without limitation, consolidated, combined and unitary Tax
returns).
SECTION 3.10. Absence of Changes in Benefit Plans. Except as disclosed in
the Filed Company SEC Documents or in the Company Disclosure Letter, from the
date of the most recent audited financial statements included in the Filed
Company SEC Documents to the date of this Agreement, there has not been any
adoption or amendment in any material respect by the
17
Company or any Company Subsidiary of any collective bargaining agreement or any
bonus, pension, profit sharing, deferred compensation, incentive compensation,
stock ownership, stock purchase, stock option, phantom stock, retirement,
vacation, severance, disability, death benefit, hospitalization, medical, fringe
benefit or other similar plan, program or arrangement, whether written or
unwritten, with respect to any current or former employee, independent
contractor, officer or director (each a "Covered Person") of the Company or any
Company Subsidiary or any beneficiary or dependent of any Covered Person, and as
to which the Company or any Company Subsidiary has any obligation or liability
(whether or not contingent) including any plan, policy, program or arrangement
within or outside of the United States (collectively, "Company Benefit Plans").
Except as disclosed in the Filed Company SEC Documents or in the Company
Disclosure Letter, as of the date of this Agreement there are not any
employment, consulting, indemnification, severance or termination agreements or
arrangements in effect between the Company or any Company Subsidiary and any
current or former employee, officer or director of the Company or any Company
Subsidiary, nor does the Company or any Company Subsidiary have any general
severance plan or policy. To the knowledge of the Company, no executive, or key
employee, has any plans to terminate employment with the Company or the Company
Subsidiaries.
SECTION 3.11. ERISA Compliance; Excess Parachute Payments.
(a) The Company Disclosure Letter contains a complete and accurate
list of all material "employee pension benefit plans" (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) (sometimes referred to herein as "Company Pension
Plans"), "employee welfare benefit plans" (as defined in Section 3(1) of
ERISA) (sometimes referred to herein as "Company Welfare Benefit Plans"),
all other Company Benefit Plans and employment agreements, which list is
broken down internally by each specific country with respect to which each
such Company Benefit Plan is established or maintained.
(b) With respect to each Company Benefit Plan (excluding any Company
Multi-employer Plan), the Company has made available to Parent true,
complete and correct copies of (i) each operative plan, trust document (in
the case of any unwritten Company Benefit Plan, a description thereof) and
employment agreement, (ii) the most recent periodic report, if any,
required to be filed with any governmental entity, (iii) the most recent
summary plan description for which such summary plan description is
required or other summary material provided to any Covered Person which
describes the benefits, (iv) the most recent actuarial valuation, if any,
(v) the most recent financial statements; (vi) the most recent IRS
determination letter, if applicable, and (vii) each trust agreement,
custodial agreement, annuity contract or other funding vehicle, if any.
(c) All Company Benefit Plans (excluding any Company Multi-employer
Plan) are in compliance in all material respects with applicable Law
(including, without limitation, the Code and ERISA and, with respect to
any Company Benefit Plan maintained outside of the United States, any
applicable non-U.S. law). All Company Pension Plans (excluding any Company
Multi-employer Plan) which are intended to be tax-qualified under Section
401(a) of the Code are so qualified and their related trusts are exempt
from Federal income taxes under Sections 401(a) and 501(a), respectively,
of the
18
Internal Revenue Code of 1986, as amended (the "Code"), except for
failures to be so qualified which in the aggregate would not reasonably be
expected to have a Company Material Adverse Effect. Except as set forth in
Section 3.10 of the Company Disclosure Letter, each Company Benefit Plan
(excluding any Company Multi-employer Plan) has received a determination
letter on the Plan as currently in effect as to its qualified status and
no such determination letter has been revoked nor, to the knowledge of the
Company, has revocation been threatened. Except as set forth in the
Company Disclosure Letter, no Plan amendments since January 1, 2003 have
the effect of materially increasing costs.
(d) The Company does not participate in or make contributions to any
"multi-employer plan" (as such term is defined in Section 3(37) of ERISA),
except as specifically set forth in the Company Disclosure Letter (each, a
"Company Multi-employer Plan"). To the knowledge of the Company, (i) no
withdrawal liability (within the meaning of Section 4201 et seq. of ERISA)
would be imposed on the Company or any Company Subsidiary in the event
that a "complete withdrawal" or "partial withdrawal", as such terms are
respectively defined in sections 4203 and 4205 of ERISA, from a Company
Multi-Employer Plan were to occur at Closing, and (ii) neither the
execution of this Agreement nor any of the transactions contemplated
hereunder could cause a complete withdrawal or partial withdrawal from any
Company Multi-employer Plan.
(e) Except with respect to the Company Multi-Employer Plans that are
Company Pension Plans, neither the Company nor any Company Subsidiary has
any liability, contingent or otherwise, under Title IV of ERISA for any
"defined benefit plan" within the meaning of Section 3(35) of ERISA.
(f) None of the Company, any Company Subsidiary, any officer of the
Company or any Company Subsidiary or any of the Company Benefit Plans
which are subject to ERISA, including the Company Pension Plans (excluding
any Company Multi-employer Plan), any trusts created thereunder or any
trustee or administrator thereof, has engaged in a "prohibited
transaction" (as such term is defined in Section 406 of ERISA or Section
4975 of the Code) that could subject the Company, any Company Subsidiary
or any officer of the Company or any Company Subsidiary to any material
tax or penalty on prohibited transactions imposed by Section 4975 or to
any material liability under Section 502(i) or 502(l) of ERISA. There are
no existing or, to the knowledge of the Company or any Company Subsidiary,
threatened, lawsuits, claims or other controversies relating to a Company
Benefit Plan (excluding any Company Multi-employer Plan), other than
routine claims for benefits in the normal course. To the knowledge of the
Company and any Company Subsidiary as of the date hereof, no Company
Benefit Plan is under any government investigation or audit.
(g) With respect to any Company Welfare Benefit Plan (excluding any
Company Multi-employer Plan), (i) each such Company Welfare Benefit Plan
that is a "group health plan" (as such term is defined in Section
5000(b)(1) of the Code), complies in all material respects with the
applicable requirements of Section 4980B(f) of the Code, and (ii) other
than as required under Section 601 et seq. of ERISA or as set forth in
Section 3.11(g)(ii) of the Company Disclosure Letter, no such Company
Welfare Benefit Plan
19
provides health or life insurance coverage following retirement or the
last day of the calendar month in which any other termination of
employment occurs.
(h) Full payment has been made or will be made prior to Closing of
all amounts which the Company or any Company Subsidiary is required to pay
on or before the Closing Date under the terms of each of the Company
Benefit Plans and all amounts not payable prior to the Closing Date will
be properly accrued and recorded on the balance sheet of the Company and
the Company Subsidiaries in accordance with GAAP. Except as set forth in
Section 3.11(h) of the Company Disclosure Letter, none of the medical or
dental insurance policies provide for a retroactive rate adjustment or
loss sharing arrangement. Except as set forth in Section 3.11(h) of the
Company Disclosure Letter, there is no Company Benefit Plan that is a
non-qualified deferred compensation arrangement.
(i) Except as set forth in the Company Disclosure Letter, the
consummation of the transactions contemplated by this Agreement will not
result in (1) the payment of any severance, change in control, retention
bonus, or other payment to any Covered Person under any Company Benefit
Plan or any consulting or other agreement or arrangement, or (2) the
acceleration of the accrual or vesting of any payment or benefit under any
Company Benefit Plan.
SECTION 3.12. Litigation. Except as disclosed in the Filed Company SEC
Documents or in the Company Disclosure Letter, there is no suit, action or
proceeding pending or, to the knowledge of the Company, threatened against or
affecting the Company or any Company Subsidiary that, individually or in the
aggregate, has had or would reasonably be expected to have a Company Material
Adverse Effect, nor is there any Judgment outstanding against the Company or any
Company Subsidiary that, individually or in the aggregate, has had or would
reasonably be expected to have a Company Material Adverse Effect.
SECTION 3.13. Compliance with Applicable Laws.
(a) Except as disclosed in the Filed Company SEC Documents or in the
Company Disclosure Letter, the Company and the Company Subsidiaries are in
compliance in all material respects with all applicable Laws, including
those relating to occupational health and safety and the environment.
Except as set forth in the Filed Company SEC Documents or in the Company
Disclosure Letter, neither the Company nor any Company Subsidiary has
received any written communication since January 1, 2002 from a
Governmental Entity that alleges that the Company or a Company Subsidiary
is not in compliance in any material respect with any applicable Law.
(b) Except as set forth in Section 3.13(b) of the Company Disclosure
Letter, the Company and the Company Subsidiaries hold all franchises,
grants, authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals and orders of any
Governmental Entity necessary for the Company or any Company Subsidiary to
own, lease and operate its properties or to carry on its business as it is
now being conducted (the "Company Permits"), other than such Company
Permits as, individually and in the aggregate, are not material to the
business of either the Company
20
or any Company Subsidiary and the failure of which to have such Company
Permits would not reasonably be expected to, individually or in the
aggregate, result in a Company Material Adverse Effect. Each of the
Company and the Company Subsidiaries is in possession of all Company
Permits, and no suspension or cancellation of any of the Company Permits
is pending or, to the knowledge of the Company, threatened. Neither the
Company nor any Company Subsidiary has received any written notices of
violations with respect to any Company Permit that remains uncured.
SECTION 3.14. Contracts. Section 3.14(a) of the Company Disclosure Letter
contains a list (organized by subsections corresponding to the subsections
identified below) of the following contracts, agreements and arrangements
(including all amendments thereto) to which the Company or a Company Subsidiary
is a party, other than those contracts, agreements and arrangements listed as
exhibits in the Company's 2002 Form 10-K or First Quarter 2003 10-Q (such
contracts, agreements and arrangements required to be set forth in Section
3.14(a) of the Company Disclosure Letter or listed as exhibits in the Company's
2002 Form 10-K or First Quarter 2003 10-Q "Company Material Contracts"):
(a) each contract and agreement or groups of related agreements
which (A) is likely to involve consideration of more than $2,000,000 in
the aggregate, during the year ending December 31, 2003 or December 31,
2004, or (B) is likely to involve consideration of more than $5,000,000 in
the aggregate over the remaining term of such contract;
(b) all employment, consulting, severance, termination or
indemnification agreements between the Company or any Company Subsidiary
and any director, officer or employee of the Company or any Company
Subsidiary whose total annual compensation (including incentive
compensation), after giving effect to any increase after the date of this
Agreement, exceeds $100,000;
(c) all (A) management contracts (excluding contracts for
employment) and (B) contracts with consultants which involve consideration
of more than $250,000 per annum;
(d) all contracts, credit agreements, indentures and other
agreements evidencing indebtedness for borrowed money (including
capitalized leases) involving an amount greater than $250,000 over the
term thereof;
(e) all agreements under which the Company or any Company Subsidiary
has advanced or loaned funds in excess of $100,000;
(f) all guarantees of any obligations in excess of $1,000,000;
(g) all joint venture or other similar agreements;
(h) all lease agreements with annual lease payments in excess of
$500,000;
21
(i) agreements under which the Company has granted any person
registration rights (including demand and piggy-back registration rights)
or any other agreements with respect to the capital stock of the Company
or any Company Subsidiary;
(j) all contracts and agreements that limit the ability of the
Company or any Company Subsidiary to compete in any line of business or
with any person or entity or in any geographic area or during any period
of time with respect to any business currently conducted by the Company or
any Company Subsidiary;
(k) all contracts and other agreements with affiliates; and
(l) any other contracts or agreements that are material to the
business, assets, condition (financial or otherwise) or results of
operations of the Company and the Company Subsidiaries taken as a whole.
Except, in each case, as would not reasonably be expected, individually or
in the aggregate, to have a Company Material Adverse Effect, each Company
Material Contract is a legal, valid and binding agreement of the Company or a
Company Subsidiary, as applicable in full force and effect in accordance with
its terms and neither the Company nor any Company Subsidiary is in violation or
default, or has received written notice that it is in violation or default,
under any Company Material Contract and to the Company's knowledge no other
party is in default under any Company Material Contract. The Company has
provided or made available to Parent all Company Material Contracts.
SECTION 3.15. Intellectual Property.
(a) The Company and the Company Subsidiaries own, or are validly
licensed or otherwise have the right to use, all inventions, processes,
methods, know-how, technology, trade secrets, domain names, works,
copyrights, data, databases, customer information, pricing and cost
information, computer programs, other proprietary intellectual property
rights, and, to the Company's knowledge, all patents, patent rights
(including patent licenses), trademarks, trademark rights, trade names,
trade name rights, service marks and service xxxx rights that are material
to the Company or the Company Subsidiaries taken as a whole (collectively,
"Intellectual Property Rights") which are used in the conduct of the
business of the Company or the Company Subsidiaries as currently conducted
and the consummation of the Recapitalization Transactions will not
conflict with, breach, adversely alter or impair in any material respect
any such Intellectual Property Rights.
(b) Except as set forth in the Company Disclosure Letter, no
actions, suits or proceedings to which the Company or any Company
Subsidiary is a party are pending or, to the knowledge of the Company,
threatened that (i) the Company or any of the Company Subsidiaries is
misappropriating, interfering with, infringing or otherwise adversely
affecting the rights of any person with regard to any Intellectual
Property Right or (ii) assert that any Intellectual Property Rights owned
by the Company or any Company Subsidiary (the "Owned Intellectual Property
Rights") are invalid or unenforceable. To the knowledge of the Company,
except as set forth in the Company
22
Disclosure Letter, no person is misappropriating, infringing or otherwise
violating any Owned Intellectual Property Right.
(c) To the knowledge of the Company, all Owned Intellectual Property
Rights are valid and in full force and effect. With respect to
Intellectual Property Rights other than Owned Intellectual Property Rights
("Licensed Intellectual Property Rights") that are material to the Company
or the Company Subsidiaries, the Company is in compliance in all material
respects with any applicable license or similar agreement and each such
license or similar agreement is a legal, valid and binding obligation of
the Company or Company Subsidiary, as applicable, and to the knowledge of
the Company, in full force and effect.
(d) All Owned Intellectual Property Rights are free and clear of any
Liens (other than Liens in favor of the Agent and the Lenders under the
Company Credit Agreement) and may be freely transferred, assigned,
licensed or sublicensed except as set forth in the Company Disclosure
Letter. The Company's licenses with respect to all Licensed Intellectual
Property Rights are free and clear of any Liens (other than Liens in favor
of the Agent and the Lenders under the Company Credit Agreement) except as
set forth in the Company Disclosure Letter.
SECTION 3.16. Certain Notes Receivable. There are no notes receivable of
the Company or any Company Subsidiary owing by any director, officer or key
employee of the Company or any Company Subsidiary.
SECTION 3.17. Environmental Matters.
(a) Except as described in Section 3.17 of the Company Disclosure
Letter, as disclosed in the Phase I reports previously delivered or made
available to Sub or obtained by Parent prior to Closing, or as has not had
or would not reasonably be expected to have a Company Material Adverse
Effect: (i) the Company and the Company Subsidiaries have not been and are
not in violation of any applicable Environmental Law; (ii) none of the
properties currently or formerly owned, leased or operated by the Company
or the Company Subsidiaries are contaminated with any Hazardous Substance;
(iii) neither the Company nor any of the Company Subsidiaries are liable
for any contamination by Hazardous Substances at properties not owned or
operated by the Company or a Company Subsidiary; (iv) the Company and the
Company Subsidiaries have all material permits, licenses and other
authorizations required under any applicable Environmental Law
("Environmental Permits"); (v) the Company and the Company Subsidiaries
are in compliance in all material respects with their Environmental
Permits; and (vi) neither the execution of this Agreement nor the
consummation of the Recapitalization Transactions will require any
investigation, remediation or other action with respect to Hazardous
Substances, or any notice to or consent of Governmental Entities or third
parties, pursuant to any applicable Environmental Law or Environmental
Permit. Except as described in Section 3.17 of the Company Disclosure
Letter, none of the Company or the Company Subsidiaries has received
written notice of a violation of, or any Liability under, any
Environmental Law (whether with respect to properties presently or
previously owned or used). The Company and the Company Subsidiaries have
made
23
available to Parent all environmental audits, reports and other material
environmental documents relating to their properties, facilities or
operations which are in their possession or control. Neither the Company
nor any Company Subsidiary has arranged for the disposal or treatment of
any substance at any off-site location that has been included in any
published U.S. federal, state or local "superfund" site list or any
similar list of hazardous or toxic waste sites published by any
Governmental Entity.
(b) For purposes of this Section 3.17:
(1) "Environmental Laws" means any federal, state, local or
foreign Laws relating to (A) releases or threatened releases of
Hazardous Substances or materials containing Hazardous Substances;
(B) the manufacture, handling, transport, use, treatment, storage or
disposal of Hazardous Substances or materials containing Hazardous
Substances; or (C) otherwise relating to pollution or protection of
the environment; and
(2) "Hazardous Substances" means (i) those substances defined
in or regulated as hazardous under the following federal statutes
and their state counterparts and all applicable regulations
thereunder: the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Clean Water Act, the
Safe Drinking Water Act, the Federal Insecticide, Fungicide, and
Rodenticide Act and the Clean Air Act; (ii) petroleum and petroleum
products, including crude oil and any fractions thereof; (iii)
natural gas, synthetic gas, and any mixtures thereof; (iv)
polychlorinated biphenyls, asbestos and radon; (v) any other
contaminant; and (vi) any substance, material or waste regulated as
hazardous by any federal, state, local or foreign Governmental
Entity pursuant to any Environmental Law.
SECTION 3.18. Insurance. Except as set forth in Section 3.18 of the
Company Disclosure Letter, neither the Company nor any Company Subsidiary has
received notice of any pending or threatened cancellation or material premium
increase (retroactive or otherwise) with respect to any insurance policies in
force naming the Company, any Company Subsidiary or employees thereof as a loss
payee or for which the Company or any Company Subsidiary has paid or is
obligated to pay all or part of the premiums, and each of the Company and the
Company Subsidiaries is in compliance with all material conditions contained
therein.
SECTION 3.19. Title to Properties; Absence of Liens and Encumbrances. Each
of the Company and the Company Subsidiaries has good and valid title to, or, in
the case of leased properties and assets, valid leasehold interests in, all of
its tangible personal properties and assets owned, used or held for use in its
business, free and clear of any Liens except (i) for Liens imposed by Law for
Taxes not yet due and payable or which otherwise are owed to materialmen,
workmen, carriers, warehousepersons or laborers not in excess of $100,000 in the
aggregate, (ii) as reflected in the financial statements contained in the Filed
Company SEC Documents, (iii) Liens in favor of the Agent and the Lenders under
the Company Credit Agreement and (iv) such other imperfections or irregularities
of title or other Liens as individually or in the aggregate, have not had and
would not reasonably be expected to have a Company Material Adverse Effect.
24
SECTION 3.20. Transactions with Affiliates. Except as set forth in the
Filed Company SEC Documents or in the Company Disclosure Letter, since the date
of the Company's last proxy statement filed with the SEC, no event has occurred
that would be required to be reported by the Company pursuant to Item 404 of
Regulation S-K promulgated by the SEC. Section 3.20 of the Company Disclosure
Letter identifies each person who is (or who may be deemed to be) an affiliate
of the Company or any Company Subsidiary. Without limiting the generality of the
foregoing, there are no amounts due or payable by the Company or any Company
Subsidiary to any of the Principal Shareholders or any of their affiliates or
associates in connection with the Recapitalization Transactions or the Tender
Agreements or otherwise, other than payment of consideration for their
securities of the Company pursuant to the terms of this Agreement.
SECTION 3.21. Customers. Section 3.21 of the Company Disclosure Letter
sets forth a complete and accurate list of the twenty-five largest customers of
the Company and the Company Subsidiaries (measured by aggregate xxxxxxxx) during
the fiscal year ended on December 31, 2002, indicating the existing Contracts
with each such customer by product or service provided. Except as set forth in
Section 3.21 of the Company Disclosure Letter, the relationships of the Company
and the Company Subsidiaries with the customers required to be listed on Section
3.21 of the Company Disclosure Letter are good commercial working relationships
and none of such customers has cancelled, terminated or otherwise materially
altered (including any material reduction in the rate or amount of purchases) or
notified the Company or the Company Subsidiaries of any intention to do any of
the foregoing or otherwise threatened in writing to cancel, terminate or
materially alter its relationship with the Company or the Company Subsidiaries.
SECTION 3.22. State Takeover Statutes; Company Rights Agreement.
(a) The Company has taken such actions, if any, as it reasonably
determined necessary for the consummation of the Recapitalization
Transactions under Section 203 of the DGCL and to permit Parent, Sub, and
if requested by Parent, certain stockholders of the Company and their
respective spouses, associates, affiliates and subsidiaries, or any
combination thereof, to become "interested stockholders" (within the
meaning of Section 203 of the DGCL), in connection with developing
agreements, arrangements or understandings among themselves relating to
the participation of all or any of them in the Recapitalization
Transactions and by taking any and all actions relating to the
consummation of, and by consummating, the Recapitalization Transactions.
(b) Neither the Company nor any of the Company Subsidiaries is a
party to any "stockholder rights" plan or any similar anti-takeover plan
or device.
SECTION 3.23. Brokers; Schedule of Fees and Expenses. No broker,
investment banker, financial advisor or other person, other than Deutsche Bank,
pursuant to the agreement dated July 2, 2002 previously delivered to Parent, the
fees and expenses of which will be paid by the Company, is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the Offer, the Merger and the other Recapitalization
Transactions based upon arrangements made by or on behalf of the Company. The
estimated fees and expenses incurred and to be incurred by the Company in
connection with the Offer, the Merger
25
and the other Recapitalization Transactions (including the fees of Deutsche
Bank and the fees of the Company's legal counsel) are set forth in the Company
Disclosure Letter.
ARTICLE IV
Representations and Warranties of Parent and Sub
Parent and Sub, jointly and severally, represent and warrant to the
Company as follows:
SECTION 4.01. Organization, Standing and Power. Each of Parent and Sub is
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has all requisite corporate power and
authority and possesses all governmental franchises, licenses, permits,
authorizations and approvals in each case whether domestic or foreign necessary
to enable it to own, lease or otherwise hold its properties and assets and to
conduct its businesses as presently conducted, other than such franchises,
licenses, permits, authorizations and approvals the lack of which, individually
and in the aggregate, has not had and would not reasonably be expected to have a
material adverse effect on the ability of Parent or Sub to perform its
obligations under this Agreement or a material adverse effect on the ability of
Parent or Sub to consummate the Offer, the Merger and the other Recapitalization
Transactions (a "Parent Material Adverse Effect").
SECTION 4.02. Sub.
(a) Since the date of its incorporation, Sub has not carried on any
business or conducted any operations other than the execution of this
Agreement, the performance of its obligations hereunder and matters
ancillary thereto. Sub was incorporated solely for the purpose of
consummating the Recapitalization Transactions.
(b) The authorized capital stock of Sub consists of 1,000 shares of
common stock, par value $0.01 per share, all of which have been validly
issued, are fully paid and nonassessable and are owned by Parent free and
clear of any Lien.
SECTION 4.03. Authority; Execution and Delivery; Enforceability. Each of
Parent and Sub has all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the Recapitalization Transactions. The
execution and delivery by each of Parent and Sub of this Agreement and the
consummation by it of the Recapitalization Transactions have been duly
authorized by all necessary corporate action on the part of Parent and Sub.
Parent, as sole stockholder of Sub, has approved this Agreement. Each of Parent
and Sub has duly executed and delivered this Agreement, and this Agreement
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms, except to the extent that enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws of general applicability relating to or affecting
the enforcement of creditors' rights and by the effect of the principles of
equity (regardless of whether enforceability is considered in a proceeding in
equity or at law).
SECTION 4.04. No Conflicts; Consents.
(a) The execution and delivery by each of Parent and Sub of this
Agreement, do not, and the consummation of the Offer, the Merger and the
other Recapitalization
26
Transactions and compliance with the terms hereof will not, result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or
to increased, additional, accelerated or guaranteed rights or entitlements
of any person under, or result in the creation of any Lien upon any of the
properties or assets of Parent or any of its subsidiaries under, any
provision of (i) the charter, by-laws or other organizational documents of
Parent or any of its subsidiaries, (ii) any Contract to which Parent or
any of its subsidiaries is a party or by which any of their respective
properties or assets is bound or (iii) subject to the filings and other
matters referred to in Section 4.04(b), any Judgment or Law applicable to
Parent or any of its subsidiaries or their respective properties or
assets, other than, in the case of clauses (ii) and (iii) above, any such
items that, individually and in the aggregate, have not had and would not
reasonably be expected to have a Parent Material Adverse Effect.
(b) No Consent of, or registration, declaration or filing with, any
Governmental Entity is required to be obtained or made by or with respect
to Parent or any of its subsidiaries in connection with the execution,
delivery and performance of this Agreement or the consummation of the
Recapitalization Transactions, other than (i) if required by Law,
compliance with and filings under the HSR Act, (ii) the filing with the
SEC of (A) the Offer Documents and (B) such reports under the Exchange Act
as may be required in connection with this Agreement, the Offer, the
Merger and the other Recapitalization Transactions, (iii) the filing of
the Certificate of Merger with the Secretary of State of the State of
Delaware, (iv) such filings as may be required in connection with the
taxes described in Section 6.08, (v) filings required under, and
compliance with other applicable requirements of, non-U.S. laws, as set
forth in Section 3.05(b) of the Company Disclosure Letter, and (vi) such
other items that, individually and in the aggregate, have not had and
would not reasonably be expected to have a Parent Material Adverse Effect.
SECTION 4.05. Information Supplied. None of the information supplied or to
be supplied by Parent or Sub for inclusion or incorporation by reference in (i)
the Offer Documents, the Schedule 14D-9 or the Information Statement will, at
the time such document is filed with the SEC, at any time it is amended or
supplemented or at the time it is first published, sent or given to the
Company's stockholders, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, or (ii) the Proxy Statement (if required
by Law) will, at the date it is first mailed to the Company's stockholders or at
the time of the Company Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Offer Documents
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder, except that no
representation is made by Parent or Sub with respect to statements made or
incorporated by reference therein based on information supplied by the Company
for inclusion or incorporation by reference therein.
SECTION 4.06. Brokers. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission
27
in connection with the Offer, the Merger and the other Recapitalization
Transactions based upon arrangements made by or on behalf of Parent.
SECTION 4.07. Financing. Parent has provided the Company with a commitment
letter from Foothill Capital Corporation and Silver Point Capital, L.P., dated
as of May 20, 2003, (the "Debt Commitment Letter") and from Kohlberg Management
IV, LLC, dated as of May 8, 2003, (collectively with the Debt Commitment Letter,
the "Commitment Letters" and the financing to be provided thereunder, the
"Financing"). To the knowledge of Parent, the Commitment Letters have been duly
executed by all parties thereto and are in full force and effect as of the date
hereof. All commitment and other fees required to be paid under the Commitment
Letters on or prior to the date hereof have been paid.
ARTICLE V
Covenants Relating to Conduct of Business
SECTION 5.01. Conduct of Business.
(a) Conduct of Business by the Company. Except for matters set forth
in the Company Disclosure Letter, expressly agreed to in writing by Parent
or otherwise expressly permitted by this Agreement, from the date of this
Agreement to the earliest to occur of the date of the termination of this
Agreement, the date directors designated by Parent or Sub have been
elected to and shall constitute a majority of the Company Board (the
"Control Date") or the Effective Time, the Company shall, and shall cause
each Company Subsidiary to, conduct the business of the Company and the
Company Subsidiaries taken as a whole in the usual, regular and ordinary
course in substantially the same manner as previously conducted and use
all commercially reasonable efforts to preserve intact its current
business organization, keep available the services of its current officers
and employees and keep its relationships with customers, suppliers,
licensors, licensees, distributors and others having business dealings
with them to the end that its goodwill and ongoing business shall be
unimpaired in all material respects at the Effective Time. In addition,
and without limiting the generality of the foregoing, except for matters
set forth in the Company Disclosure Letter, expressly agreed to in writing
by Parent or otherwise expressly permitted by this Agreement, from the
date of this Agreement to the earliest to occur of the date of the
termination of this Agreement, the Control Date or the Effective Time, the
Company shall not, and shall not permit any Company Subsidiary to, do any
of the following without the prior written consent of Parent:
(i) (A) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock,
other than dividends and distributions by a direct or indirect
wholly owned subsidiary of the Company to its parent, (B) split,
combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (C) purchase,
redeem or otherwise acquire any shares of capital stock of the
Company or any Company Subsidiary or any other securities thereof or
any rights, warrants or options to acquire any such shares or other
securities;
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(ii) issue, deliver, sell or grant (A) any shares of its
capital stock, (B) any Voting Company Debt or other voting
securities, (C) any securities convertible into or exchangeable for,
or any options, warrants or rights to acquire, any such shares,
Voting Company Debt, voting securities or convertible or
exchangeable securities or (D) any "phantom" stock, "phantom" stock
rights, stock appreciation rights or stock-based performance units,
other than the issuance of Company Common Stock upon the exercise of
Company Stock Options and Company Warrants outstanding on the date
of this Agreement and in accordance with their present terms;
(iii) amend its certificate of incorporation, by-laws or other
comparable charter or organizational documents;
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial equity interest
in or portion of the assets of, or by any other manner, any business
or any corporation, partnership, joint venture, association or other
business organization or division thereof or (B) any assets that are
material, individually or in the aggregate, to the Company and the
Company Subsidiaries taken as a whole;
(v) (A) grant to any current or former director, officer or
key employee of the Company or any Company Subsidiary any increase
in compensation, except to the extent required under employment
agreements in effect as of the date of the most recent audited
financial statements included in the Filed Company SEC Documents or,
with respect to employees (other than directors, officers or key
employees) in the ordinary course of business consistent with prior
practice, (B) grant to any current or former key employee, officer
or director of the Company or any Company Subsidiary any increase in
severance or termination pay, except to the extent required under
any agreement or policy in effect as of the date of the most recent
audited financial statements included in the Filed Company SEC
Documents, (C) enter into any employment, consulting,
indemnification, severance or termination agreement with any such
key employee, officer or director, (D) establish, adopt, enter into
or amend in any material respect any collective bargaining agreement
or Company Benefit Plan or (E) take any action to accelerate any
rights or benefits, or make any material determinations not in the
ordinary course of business consistent with prior practice, under
any collective bargaining agreement or Company Benefit Plan;
(vi) make any change in accounting methods, principles or
practices materially affecting the reported consolidated assets,
liabilities or results of operations of the Company, except insofar
as may have been required by a change in GAAP, the Code or the
treasury regulations under the Code;
29
(vii) sell, lease (as lessor), license or otherwise dispose of
or subject to any Lien any material properties or assets, except for
transactions in the ordinary course of business consistent with past
practice;
(viii) (A) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any
debt securities or warrants or other rights to acquire any debt
securities of the Company or any Company Subsidiary, guarantee any
debt securities of another person, enter into any "keep well" or
other agreement to maintain any financial statement condition of
another person (other than a wholly-owned Company Subsidiary) or
enter into any arrangement having the economic effect of any of the
foregoing, except for short-term borrowings from persons that are
not directors, officers or employees of the Company or any Company
Subsidiary incurred in the ordinary course of business consistent
with past practice (including under the Company's Credit Agreement,
provided such borrowings do not result in the aggregate principal
amount of Term Loans outstanding thereunder plus the aggregate
principal amount of Revolving Credit Advances thereunder exceeding
by $3,000,000 or more, at any given time, the aggregate principal
amount of the Term Loans outstanding on the date hereof plus the
aggregate principal amount of Revolving Credit Advances outstanding
on the date hereof), or (B) make any loans, advances or capital
contributions to, or investments in, any other person, other than to
or in the Company or any direct or indirect wholly owned subsidiary
of the Company;
(ix) make or agree to make any new capital expenditure or
expenditures that are in excess of $100,000 individually or
$1,500,000 in the aggregate;
(x) make or change any material Tax election or settle or
compromise any material Tax liability or refund;
(xi) (A) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent
or otherwise) in excess of $25,000 individually or $150,000 in the
aggregate, other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved
against in, or contemplated by, the most recent consolidated
financial statements (or the notes thereto) of the Company included
in the Filed Company SEC Documents or incurred in the ordinary
course of business consistent with past practice, (B) cancel any
indebtedness for borrowed money in excess of $25,000 individually or
$150,000 in the aggregate or waive any claims or rights of
substantial value or (C) waive the benefits of, or agree to modify
in any manner, any confidentiality, standstill or similar agreement
to which the Company or any Company Subsidiary is a party;
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(xii) enter into, renew, extend, amend, modify or waive any
material provision of, or terminate any lease or similar commitment,
in each case providing for payments in excess of $100,000 over the
term of such lease or commitment (or until the date on which such
lease or commitment may be terminated by the Company without
penalty) other than the renewals of leases in the ordinary course of
business with no material increase in payments due thereunder; or
(xiii) authorize, or commit or agree to take, any of the
foregoing actions.
(b) Other Actions. The Company and Parent shall not, and shall not
permit any of their respective subsidiaries to, take any action that
would, or that would reasonably be expected to, result in (i) any of the
representations and warranties of such party set forth in this Agreement
that is qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that is not so qualified becoming untrue in
any material respect or (iii) any condition to the Offer set forth in
Exhibit A, or any condition to the Merger set forth in Article ---------
VII, not being satisfied.
(c) Advice of Changes. The Company shall promptly advise Parent
orally and in writing of any change or event that has had or would
reasonably be expected to have a Company Material Adverse Effect.
SECTION 5.02. No Solicitation.
(a) The Company shall not, nor shall it authorize or permit
any Company Subsidiary to, nor shall it authorize or permit any
officer, director or employee of, or any investment banker, attorney
or other advisor or representative (collectively, "Representatives")
of, the Company or any Company Subsidiary to, (i) directly or
indirectly solicit, initiate or encourage the submission of, any
Company Takeover Proposal (as defined in Section 5.02(e)), (ii)
enter into any agreement with respect to any Company Takeover
Proposal or (iii) directly or indirectly participate in any
discussions or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Company Takeover Proposal;
provided, however, that prior to the first acceptance for payment of
shares of Company Common Stock pursuant to the Offer the Company
may, to the extent necessary to act in a manner consistent with the
fiduciary obligations of the Company Board, as determined in good
faith by it after consultation with outside counsel, in response to
a Company Takeover Proposal that the Company Board determines, in
good faith after consultation with outside counsel, is reasonably
likely to lead to a Superior Company Proposal (as defined in Section
5.02(e)), that was not solicited by the Company and that did not
otherwise result from a breach or a deemed breach of this Section
5.02(a), and subject to compliance with Section 5.02(c), (x) furnish
information with respect to the Company to the person making such
Company Takeover Proposal and its Representatives pursuant to a
customary confidentiality agreement and (y) participate in
discussions or negotiations with such person and its Representatives
regarding such Company Takeover Proposal; and provided, further,
that prior to the first acceptance for payment of shares of Company
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Common Stock pursuant to the Offer the Company may, in connection
with the Company Credit Agreement Refinancing or otherwise pursuant
to the Company Credit Agreement or the Company's obligations
thereunder, (I) furnish information with respect to the Company to
the Agent and the Lenders under the Company Credit Agreement and
their respective Representatives and (II) participate in discussions
or negotiations with such persons and their Representatives
regarding the Company Credit Agreement or a Company Credit Agreement
Refinancing. Without limiting the foregoing, it is agreed that any
violation of the restrictions set forth in the preceding sentence by
any officer, director, investment banker, attorney or other advisor
or representative of the Company or any Company Subsidiary, whether
or not such person is purporting to act on behalf of the Company or
any Company Subsidiary or otherwise, shall be deemed to be a breach
of this Section 5.02(a) by the Company.
(b) Unless the Company Board, after consultation with outside
counsel, determines in its good faith judgment that it is necessary
to do so in order to fulfill its fiduciary obligations under
applicable Law, neither the Company Board nor any committee thereof
shall (i) withdraw or modify in a manner adverse to Parent or Sub,
or publicly propose to withdraw or modify in a manner adverse to
Parent or Sub, the approval or recommendation by the Company Board
or any such committee of this Agreement, the Offer, the Merger or
the other Recapitalization Transactions, (ii) approve any letter of
intent, agreement in principle, acquisition or similar agreement
relating to any Company Takeover Proposal or (iii) approve or
recommend, or publicly propose to approve or recommend, any Company
Takeover Proposal. The Company shall not take the actions set forth
in clauses (ii) or (iii) of the preceding sentence unless it has
terminated or concurrently terminates this Agreement pursuant to
Section 8.01(e).
(c) The Company promptly shall advise Parent orally and,
within two business days, in writing of any Company Takeover
Proposal or any inquiry with respect to, or that could reasonably be
expected to lead to, any Company Takeover Proposal, the material
terms and conditions of any such Company Takeover Proposal and the
identity of the person making any such Company Takeover Proposal or
inquiry. The Company shall (i) keep Parent fully informed of the
status and details (including any change to the terms thereof) of
any such Company Takeover Proposal and (ii) provide to Parent as
soon as practicable after receipt or delivery thereof with copies of
all correspondence and other written material sent or provided to
the Company by any third party in connection with any Company
Takeover Proposal or sent or provided by the Company to any third
party in connection with any Company Takeover Proposal.
(d) Nothing contained in this Section 5.02 shall prohibit the
Company from taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or
from making any required disclosure to the Company's stockholders
if, in the good faith judgment of the Company Board, after
consultation with outside counsel, failure so to disclose would be
inconsistent with its obligations under applicable law.
(e) For purposes of this Agreement:
32
"Company Credit Agreement Refinancing" means an amendment,
restatement or other transaction whereby Fleet National Bank remains as
Agent under the Credit Agreement and the Lenders continue to hold a
majority in interest of the loans thereunder, but which results in a
change in the material terms of the Company Credit Agreement (including
without limitation, any of the loan amounts, financial covenants or
ratios or maturity (other than a one-time extension of the maturity by
less than 6 months)), whether such transaction is accomplished through a
bankruptcy proceeding or otherwise).
"Company Takeover Proposal" means (i) any proposal or offer for a
merger, consolidation, dissolution, recapitalization, other business
combination or any refinancing (including, without limitation, any
Company Credit Agreement Refinancing) or other equity or debt
restructuring transaction involving the Company or any significant
subsidiary of the Company (as defined in Regulation S-X of the Federal
securities laws), (ii) any proposal for the issuance by the Company of
over 30% of its equity securities as consideration for the assets or
securities of another person or (iii) any proposal or offer to acquire
in any manner, directly or indirectly, over 30% of the equity securities
or consolidated total assets of the Company, in each case other than
pursuant to the Recapitalization Transactions.
"Superior Company Proposal" means any proposal made by a third
party to complete a recapitalization of the Company by (I) acquiring
substantially all of the equity securities or assets of the Company,
pursuant to a tender or exchange offer, a merger, a consolidation, a
liquidation or dissolution, a recapitalization or a sale of all or
substantially all its assets or any combination of the foregoing, (II)
refinancing the Company Credit Agreement, (III) purchasing or causing
the redemption of the Subordinated Notes and / or, (IV) purchasing or
causing the redemption of the Preference Shares, in the aggregate (a) on
terms which the Company Board determines in good faith to be superior
from a financial point of view to the holders of the Company Common
Stock, the Lenders under the Company Credit Agreement, the holders of
the Subordinated Notes and the holders of the Preference Shares, as the
case may be, than the Recapitalization Transactions, taking into account
all the terms and conditions of such proposal and this Agreement
(including any proposal by Parent to amend the terms of the
Recapitalization Transactions), it being understood that such proposal
does not have to be superior to each such category of holders, but must,
in the aggregate, be superior from a financial point of view to the debt
and equity holders of the Company taken as a whole, and (b) that is
reasonably capable of being completed, taking into account all
financial, regulatory, legal and other aspects of such proposal.
SECTION 5.03. Recapitalization Transactions. From and after the date
hereof, without the consent of Parent, the Company shall not take any action to
amend the material or financial terms and conditions set forth in the Notice of
Noteholders' Meeting sent to the holders of the Subordinated Notes or the Notice
of Meeting sent to the holders of Preference Shares or to otherwise change the
terms and conditions of any of the Recapitalization Transactions. From and after
the date hereof, the Company shall use all commercially reasonable efforts to
effect the Recapitalization Transactions in accordance with their terms.
33
ARTICLE VI
Additional Agreements
SECTION 6.01. Preparation of Proxy Statement; Stockholders Meeting.
(a) Subject to the last sentence of Section 6.01(b), the Company
shall, as soon as practicable following the expiration of the Offer and
the purchase of the shares of Company Common Stock pursuant thereto,
prepare and file with the SEC the Proxy Statement in preliminary form, and
each of the Company, Parent and Sub shall use their best efforts to
respond as promptly as practicable to any comments of the SEC with respect
thereto. The Company shall notify Parent promptly of the receipt of any
comments from the SEC or its staff and of any request by the SEC or its
staff for amendments or supplements to the Proxy Statement or for
additional information and shall supply Parent with copies of all
correspondence between the Company or any of its representatives, on the
one hand, and the SEC or its staff, on the other hand, with respect to the
Proxy Statement. If at any time prior to receipt of the Company
Stockholder Approval there shall occur any event that should be set forth
in an amendment or supplement to the Proxy Statement, the Company shall
promptly prepare and mail to its stockholders such an amendment or
supplement. The Company shall not mail any Proxy Statement, or any
amendment or supplement thereto, to which Parent reasonably objects. The
Company shall use its best efforts to cause the Proxy Statement to be
mailed to the Company's stockholders as promptly as practicable after
filing with the SEC.
(b) The Company shall, as soon as practicable following the
expiration of the Offer and the purchase of the shares of Company Common
Stock pursuant thereto, duly call, give notice of, convene and hold a
meeting of its stockholders (the "Company Stockholders Meeting") for the
purpose of seeking the Company Stockholder Approval. Subject to Section
5.02(b)(i), the Company shall, through the Company Board, recommend to its
stockholders that they give the Company Stockholder Approval. Without
limiting the generality of the foregoing, the Company agrees that its
obligations pursuant to the first sentence of this Section 6.01(b) shall
not be affected by the commencement, public proposal, public disclosure or
communication to the Company of any Company Takeover Proposal.
Notwithstanding the foregoing, if Sub or any other subsidiary of Parent
shall acquire at least 90% of the outstanding shares of each series of
Company Capital Stock, the parties shall, at the request of Parent, take
all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the expiration of the Offer without
a stockholders meeting in accordance with Section 253 of the DGCL.
(c) Parent shall cause all shares of Company Common Stock purchased
pursuant to the Offer and all other shares of Company Common Stock owned
by Parent, Sub or any other subsidiary of Parent to be voted in favor of
the approval of this Agreement.
SECTION 6.02. Access to Information; Confidentiality. The Company shall,
and shall cause each of its subsidiaries to, afford to Parent, and to Parent's
officers, employees, accountants, counsel, financial advisors and other
representatives, upon reasonable notice, reasonable access during normal
business hours during the period prior to the Effective Time to
34
all their respective properties, books, contracts, commitments, personnel and
records and, during such period, the Company shall, and shall cause each of its
subsidiaries to, furnish promptly to Parent (a) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of Federal or state securities laws and (b) all
other information concerning its business, properties and personnel as Parent
may reasonably request; provided, however, that the Company may withhold the
documents and information described in the Company Disclosure Letter to the
extent required to comply with the terms of a confidentiality agreement with a
third party in effect on the date of this Agreement; provided further, that the
Company shall use all commercially reasonable efforts to obtain, as promptly as
practicable, any consent from such third party required to permit the Company to
furnish such documents and information to Parent. Subject to Section 6.07, all
information exchanged pursuant to this Section 6.02 shall be subject to the
confidentiality agreement dated as of March 20, 2003 between the Company and
Parent (the "Confidentiality Agreement").
SECTION 6.03. Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties hereto shall use all commercially
reasonable efforts to take, or cause to be taken, all reasonable actions,
and to do, or cause to be done, and to assist and cooperate with the other
parties in doing, all things reasonably necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable,
the Offer, the Merger and the other Recapitalization Transactions,
including (i) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from Governmental Entities and the making
of all necessary registrations and filings (including filings with
Governmental Entities, if any) and the taking of all reasonable steps as
may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, any Governmental Entity, (ii) the obtaining of
all necessary consents, approvals or waivers from third parties, (iii) the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
Recapitalization Transactions, including, when reasonable, seeking to have
any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed and (iv) the execution and
delivery of any additional instruments necessary to consummate the
Recapitalization Transactions and to fully carry out the purposes of this
Agreement. In connection with and without limiting the foregoing, the
Company and the Company Board shall (i) take all action necessary to
ensure that no state takeover statute or similar statute or regulation is
or becomes applicable to any Transaction, this Agreement or the Tender
Agreements and (ii) if any state takeover statute or similar statute or
regulation becomes applicable to this Agreement or the Tender Agreements,
take all action necessary to ensure that the Offer, the Merger and the
other Recapitalization Transactions may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Offer, the Merger
and the other Recapitalization Transactions. Nothing in this Agreement
shall be deemed to require any party to waive any substantial rights or
agree to any substantial limitation on its operations or to dispose of any
significant asset or collection of assets.
35
(b) The Company shall give prompt notice to Parent, and Parent or
Sub shall give prompt notice to the Company, of (i) any representation or
warranty made by it contained in this Agreement that is qualified as to
materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect or (ii) the failure by it to comply
with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement;
provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
SECTION 6.04. Stock Options.
(a) As soon as practicable following the date of this Agreement, the
Company Board (or, if appropriate, any committee administering the Company
Stock Plans) shall adopt such resolutions or take such other actions as
are required to provide notice to holders of Company Stock Options
required under the terms of the Company Stock Plans and to adjust the
terms of all outstanding Company Stock Options heretofore granted under
any Company Stock Plan to provide that, after giving effect to the actions
taken by the Company Board under the Company Stock Plans, such Company
Stock Options will be exercisable at the time of the first acceptance for
payment of shares of Company Common Stock pursuant to the Offer (the
"Exercisable Options"), and further to provide that each such Exercisable
Option outstanding at the time of the first acceptance for payment of
shares of Company Common Stock pursuant to the Offer shall be canceled in
exchange for a cash payment by the Company as soon as practicable
following the first acceptance for payment of shares of Company Common
Stock pursuant to the Offer of an amount equal to (i) the excess, if any,
of (x) the highest price per share of Company Common Stock to be paid
pursuant to the Offer over (y) the exercise price per share of Company
Common Stock subject to such Exercisable Option, multiplied by (ii) the
number of shares of Company Common Stock for which such Exercisable Option
shall not theretofore have been exercised. The Company will be responsible
for any required reporting to Federal, state or local tax authorities.
(b) All amounts payable pursuant to Section 6.04(a) shall be subject
to any required withholding of Taxes or proof of eligibility of exemption
therefrom and shall be paid without interest by the Company as soon as
practicable following the first acceptance for payment of shares of
Company Common Stock pursuant to the Offer. The Company shall use its
commercially reasonable efforts to obtain all consents of the holders of
Company Stock Options as shall be necessary to effectuate the foregoing.
Notwithstanding anything to the contrary contained in this Agreement,
payment shall, at Parent's request, be withheld in respect of the holder
of any particular Company Stock Option until any necessary consent from
such holder with respect to such Company Stock Option is obtained.
(c) The Company Stock Plans shall terminate as of the Effective
Time, and the provisions in any other Company Benefit Plan providing for
the issuance, transfer or grant of any capital stock of the Company or any
interest in respect of any capital stock of the Company shall be deleted
as of the Effective Time, and the Company shall ensure
36
that following the Effective Time no holder of a Company Stock Option or
any participant in any Company Stock Plan, or other Company Benefit Plan
shall have any right thereunder to acquire any capital stock of the
Company or the Surviving Corporation.
(d) The Company shall use its commercially reasonable efforts to
obtain all necessary consents, waivers or releases from holders of Company
Stock Options and shall take such action as may be reasonably necessary to
give effect to, and accomplish, the transactions contemplated by this
Section 6.04; provided, however, that in no event shall this Section
6.04(d) require the Company to pay any consideration to the holders of the
Company Stock Options to obtain such consents, waivers or releases.
(e) In this Agreement:
"Company Stock Option" means any option to purchase Company Common
Stock granted under any Company Stock Plan.
"Company Stock Plans" means the Applied Graphics Technologies, Inc.
1996 Stock Option Plan, the Applied Graphics Technologies, Inc. 1998
Incentive Compensation Plan, as amended and restated, and the Applied
Graphics Technologies, Inc. Non-Employee Directors Non-Qualified Stock
Option Plan and all agreements under which there are outstanding options
to purchase Company Common Stock granted to employees, consultants or any
other person.
SECTION 6.05. Indemnification.
(a) Parent shall, to the fullest extent permitted by Law, cause the
Company (from and after the Control Date) and the Surviving Corporation
(from and after the Effective Time) to honor all the Company's obligations
to indemnify, defend and hold harmless the current and former directors
and officers of the Company and its subsidiaries for acts or omissions by
any such directors and officers occurring prior to the Effective Time to
the maximum extent that such obligations of the Company exist on the date
of this Agreement, whether pursuant to the Company Charter, the Company
By-laws, the DGCL, or otherwise, and such obligations shall survive the
Merger and shall continue in full force and effect in accordance with the
terms of the Company Charter, the Company By-laws and the DGCL from the
Effective Time until the expiration of the applicable statute of
limitations with respect to any claims against such directors or officers
arising out of such acts or omissions. In the event a current or former
director or officer of the Company or any of its subsidiaries is entitled
to indemnification under this Section 6.05(a), such director or officer
shall be entitled to reimbursement from the Company or the Surviving
Corporation (from and after the Effective Time) for reasonable attorney
fees and expenses incurred by such director or officer in pursuing such
indemnification, including payment of such fees and expenses by the
Surviving Corporation or the Company, as applicable, in advance of the
final disposition of such action upon receipt of an undertaking by such
current or former director or officer to repay such payment unless it
shall be adjudicated that such current or former director or officer was
entitled to such payment.
37
(b) From and after the Control Date and for a period of six years
after the Effective Time, Parent shall cause to be maintained in effect
the current policies of directors' and officers' liability insurance
maintained by the Company (provided that Parent may either (i) substitute
therefor policies with reputable and financially sound carriers or (ii)
maintain self insurance or similar arrangements through a financially
sound insurance affiliate of Parent, in each case of at least the same
coverage and amounts containing terms and conditions which are no less
advantageous) with respect to claims arising from or related to facts or
events which occurred at or before the Effective Time; provided, however,
that Parent shall not be obligated to make premium payments over such six
year period for such insurance to the extent such aggregate premiums
exceed $1,300,000 (the "Maximum Premium"). If such insurance coverage
cannot be obtained at all, or can only be obtained at an aggregate premium
in excess of the Maximum Premium, Parent shall maintain the most
advantageous policies of directors' and officers' insurance obtainable for
an aggregate premium equal to the Maximum Premium.
SECTION 6.06. Fees and Expenses.
(a) Except as provided below, all fees and expenses incurred in
connection with the Merger and the other Recapitalization Transactions
(including, without limitation, all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto
and its affiliates) shall be paid by the party incurring such fees or
expenses, whether or not the Recapitalization Transactions are
consummated.
(b) The Company agrees to pay Parent:
(1) a non-refundable fee equal to $4,000,000 plus all
reasonable fees and expenses incurred by Parent, Sub and their
affiliates in connection with the Recapitalization Transactions, up
to a maximum of $1,000,000 (exclusive of any fees and expenses paid
in accordance with clause (c) hereof) if :
(i)(x) this Agreement is terminated for any reason,
other than: (I) a termination by the Company due to a
Parent Breach (as defined below), (II) a Funding Failure
(as defined below), or (III) a termination by Parent in
accordance with Section 8.01(b)(iii) as a result of the
failure of the Offer to close solely as a result of the
failure to meet the condition set forth in clause (c) of
Exhibit A (a "MAC Termination"), and
(y) within 12 months of such termination the Company
enters into a definitive agreement to consummate, or
consummates, a transaction that could constitute a
Company Takeover Proposal other than a Company Credit
Agreement Refinancing.
For purposes of this clause (i):
(A) a "Parent Breach" shall mean Parent willfully and
materially (x) breaches or (y) fails to perform, any of
its representations, warranties
38
or covenants contained in this Agreement, which breach
or failure to perform cannot be or has not been cured
within 15 days after the giving of written notice to
Parent of such breach or failure to perform (provided
that the Company is not then in material breach of any
representation, warranty or covenant contained in this
Agreement).
(B) a "Funding Failure" shall mean that the financing
contemplated by the Commitment Letters shall not have
been consummated in accordance with the terms thereof.
(ii) the Company terminates this Agreement pursuant to
Section 8.01(e); or
(iii) Parent terminates this Agreement pursuant to
Section 8.01(d).
(2) a non-refundable fee equal to $2,500,000 plus all
reasonable fees and expenses incurred by Parent, Sub and their
affiliates in connection with the Recapitalization Transactions, up
to a maximum of $1,000,000 (exclusive of any fees and expenses paid
in accordance with clause (c) hereof) if (i) this Agreement is
terminated for any reason, other than (A) a termination by the
Company due to a Parent Breach, (B) a Funding Failure or (C) a MAC
Termination and (ii) within 12 months of such termination the
Company enters into a definitive agreement to consummate, or
consummates, a Company Credit Agreement Refinancing.
Any fee due under this Section 6.06(b) shall be paid by wire transfer of
same-day funds on the date of termination of this Agreement (except that
in the case of clause (1)(i) or (2) above such payment shall be made on
the date of execution of such definitive agreement or, if earlier,
consummation of such transaction).
(c) Immediately upon execution of this Agreement, the Company agrees
to reimburse Parent for all reasonable fees and expenses incurred by
Parent, Sub and their affiliates in connection with the Recapitalization
Transactions prior to the date hereof, up to a maximum of $500,000, such
payment to be made by wire transfer of same day funds.
(d) Without duplication of any payment required by Section 6.06(b)
or (c), if this Agreement is terminated for any reason other than a
termination by the Company due to a Parent Breach, the Company agrees to
reimburse Parent for all reasonable fees and expenses incurred by Parent,
Sub and their affiliates in connection with the Recapitalization
Transactions up to a maximum of $1,000,000 (exclusive of any fees and
expenses paid in accordance with clause (c) hereof), such payment to be
made by wire transfer of same day funds on the date of termination of this
Agreement.
(e) The Company acknowledges that the agreements contained in this
Section 6.06 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent would not enter into
this Agreement; accordingly, if the Company fails to pay the amounts due
pursuant to this Section 6.06, and, in order to obtain any such payment,
Parent and/or Sub commences a legal proceeding which results
39
in a judgment against the Company for the amounts set forth in this
Section 6.06, the Company shall pay to Parent and Sub their reasonable
costs and expenses (including attorneys' fees) in connection with such
proceeding, together with interest on the amounts set forth in this
Section 6.06 at the prime rate of Citibank N.A. in effect on the date any
such payment was required to be made and Parent agrees that if such legal
proceeding results in a judgment against Parent and/or Sub, as applicable,
then Parent and/or Sub, as applicable shall pay the Company its reasonable
costs and expenses (including attorneys' fees) in connection with such
proceeding.
(f) The obligations of the Company set forth in this Section 6.06
shall be Parent's and Sub's sole remedy with respect to any breach of the
Company's representations, warranties or obligations to be performed prior
to the consummation of the Offer under this Agreement and with respect to
any such breach, Parent and Sub shall waive, to the fullest extent
permitted by Law, any and all rights, claims and causes of action (other
than claims of, or causes of action arising from, fraud) they may have
against the Company with respect to such breach.
SECTION 6.07. Public Announcements. Parent and Sub, on the one hand, and
the Company, on the other hand, shall consult with each other before issuing,
and provide each other the opportunity to review and comment upon, any press
release or other public statements (including any filings with any federal or
state governmental or regulatory agency or with the American Stock Exchange)
with respect to the Recapitalization Transactions and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by applicable Law (including foreign regulations
relating to competition), court process or by obligations pursuant to any
listing agreement with any national securities exchange. Notwithstanding
anything to the contrary herein or in the Confidentiality Agreement, any party
to this Agreement (and each employee, representative, or other agent of such
party) may disclose to any and all persons, without limitation of any kind, the
tax treatment and tax structure of the Recapitalization Transactions and all
materials of any kind (including opinions or other tax analyses) that are
provided to it relating to such tax treatment and tax structure; provided,
however, that this sentence shall not permit any disclosure that otherwise is
prohibited by this Agreement if such disclosure would result in a violation of
applicable federal or state securities Laws.
SECTION 6.08. Transfer Taxes. All stock transfer, real estate transfer,
documentary, stamp, recording and other similar Taxes (including interest,
penalties and additions to any such Taxes) ("Transfer Taxes") incurred in
connection with the Recapitalization Transactions shall be paid by the party
upon whom the primary burden for payment is placed by the applicable Law. Each
party shall cooperate with the other in preparing, executing and filing any Tax
Returns with respect to such Transfer Taxes and shall use commercially
reasonable efforts to avail itself of any available exemptions from such
Transfer Taxes, and shall cooperate in providing any information and
documentation that may be necessary to obtain such exemptions.
SECTION 6.09. Directors. Promptly upon the first acceptance for payment
of, and payment by Sub for, any shares of Company Common Stock pursuant to the
Offer, Sub shall be entitled to designate such number of directors on the
Company Board as will give Sub, subject to compliance with Section 14(f) of the
Exchange Act, representation on the Company Board equal
40
to at least that number of directors, rounded up to the next whole number, which
is the product of (a) the total number of directors on the Company Board (giving
effect to the directors elected pursuant to this sentence) multiplied by (b) the
percentage that (i) such number of shares of Company Common Stock so accepted
for payment and paid for by Sub plus the number of shares of Company Common
Stock otherwise owned by Sub or any other subsidiary of Parent bears to (ii) the
number of such shares outstanding, and the Company shall, at such time, cause
Sub's designees to be so elected; provided, however, that in the event that
Sub's designees are appointed or elected to the Company Board, until the
Effective Time the Company Board shall have at least three directors who are
directors on the date of this Agreement and who are not officers of the Company
(the "Independent Directors"); and provided further that, in such event, if the
number of Independent Directors shall be reduced below three for any reason
whatsoever, any remaining Independent Directors (or Independent Director, if
there shall be only one remaining) shall be entitled to designate persons to
fill such vacancies who shall be deemed to be Independent Directors for purposes
of this Agreement or, if no Independent Directors then remain, the other
directors shall designate three persons to fill such vacancies who are not
officers, stockholders or affiliates of the Company, Parent or Sub, and such
persons shall be deemed to be Independent Directors for purposes of this
Agreement. Subject to applicable Law, the Company shall take all action
requested by Parent necessary to effect any such election, including mailing to
its stockholders the Information Statement containing the information required
by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and
the Company shall make such mailing with the mailing of the Schedule 14D-9
(provided that Sub shall have provided to the Company on a timely basis all
information required to be included in the Information Statement with respect to
Sub's designees). In connection with the foregoing, the Company shall promptly,
at the option of Sub, either increase the size of the Company Board or obtain
the resignation of such number of its current directors as is necessary to
enable Sub's designees to be elected or appointed to the Company Board as
provided above.
SECTION 6.10. Stockholder Litigation. The Company shall give Parent the
opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and its directors relating to any
Recapitalization Transaction; provided, however, that the Company shall not
enter into any such settlement without Parent's consent, which consent shall not
be unreasonably withheld.
SECTION 6.11. Benefit Plans. Except as set forth in Section 6.04, Parent
agrees to cause the Surviving Corporation, for a period of 12 months immediately
following the Effective Time, to provide to each current employee of the Company
and its subsidiaries severance benefits that are not less favorable than the
severance benefits applicable immediately prior to the date hereof and other
benefits (other than equity-based plans) that are not materially less favorable
in the aggregate to such employees than those benefits in effect for such
employees on the date of this Agreement.
ARTICLE VII
Conditions Precedent
SECTION 7.01. Conditions to Each Party's Obligation To Effect The Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
41
(a) Stockholder Approval. The Company shall have obtained the
Company Stockholder Approval, if required.
(b) Antitrust. If required by Law, the waiting period (and any
extension thereof) applicable to the Merger under the HSR Act shall have
been terminated or shall have expired. Any consents, approvals and filings
under any other foreign antitrust Law the absence of which would prohibit
the consummation of Merger, shall have been obtained or made.
(c) No Injunctions or Restraints. No statute, rule, regulation,
executive order, decree, temporary restraining order, preliminary or
permanent injunction or other order enacted, entered, promulgated,
enforced or issued by any Governmental Entity, court of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger or the other Recapitalization Transactions
shall be in effect; provided, however, that prior to asserting this
condition each of the parties shall have used all commercially reasonable
efforts to prevent the entry of any such injunction or other order and to
appeal as promptly as possible any such injunction or other order that may
be entered.
(d) Acceptance of Shares Pursuant to the Offer. Sub shall have
accepted shares of Company Common Stock for payment pursuant to the Offer
and shall have delivered to the Paying Agent or other appropriate party
arranging for payment for such shares, all funds necessary to pay for such
shares accepted; provided, that the obligation of a party to effect the
Merger shall not be conditioned on the fulfillment of the condition set
forth in this clause (d) if the failure of Sub to accept shares of Company
Common Stock for payment pursuant to the Offer or provide the funds
necessary to pay for such shares shall have constituted or resulted from a
material breach of the Offer or this Agreement by such party.
(e) Closing of the other Recapitalization Transactions. Each of the
Recapitalization Transactions other than the Merger shall have closed
immediately prior to or contemporaneously with the Offer.
ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after receipt of Company
Stockholder Approval:
(a) by mutual written consent of Parent, Sub and the Company;
(b) by either Parent or the Company:
(i) if the Offer is not consummated on or before July
31, 2003 (the "Outside Date"), unless the failure to
consummate the Offer is the result of a willful and material
breach of this Agreement by the party seeking to terminate
this Agreement;
42
(ii) if any Governmental Entity issues an order, decree
or ruling or takes any other action permanently enjoining,
restraining or otherwise prohibiting the acceptance for
payment of, or payment for, shares of Company Common Stock
pursuant to the Offer or the Merger and such order, decree,
ruling or other action shall have become final and
nonappealable, provided that such right of termination under
this clause (ii) shall not be available to such party if such
order, decree or ruling was primarily issued due to the
failure of such party to comply in any material respect with
its obligations hereunder; or
(iii) if as the result of the failure of any of the
conditions set forth in Exhibit A to this Agreement, the Offer
shall have terminated or expired in accordance with its terms
without Sub having accepted shares of Company Common Stock for
payment pursuant to the Offer; provided, however, that the
right to terminate this Agreement pursuant to this clause
(iii) shall not be available to any party whose failure to
fulfill any of its obligations under this Agreement results in
the failure of any such condition or if the failure of such
condition results from facts or circumstances that constitute
a willful breach of any representation or warranty under this
Agreement by such party; or
(iv) if Sub fails to commence the Offer as provided in
Section 1.01(a) on or before June 26, 2003 due to the failure
of the condition set forth in paragraph (a) of Exhibit A;
provided, however, that the right to terminate this Agreement
pursuant to this clause (iv) shall not be available to the
Company if its failure to fulfill any of its obligations under
this Agreement results in the failure of the condition
described in paragraph (a) of Exhibit A or if the failure of
the condition described in paragraph (a) of Exhibit A results
from facts or circumstances that constitute a willful breach
of any representation or warranty under this Agreement by the
Company; or
(c) by Parent, if the Company breaches or fails to
perform in any material respect any of its representations,
warranties or covenants contained in this Agreement, which
breach or failure to perform (i) would give rise to the
failure of a condition set forth in Exhibit A, and (ii) cannot
be or has not been cured within 15 days after the giving of
written notice to the Company of such breach (provided that
Parent is not then in material breach of any representation,
warranty or covenant contained in this Agreement) ; provided,
however, that there shall be no notice and right of cure
regarding the obligations of the Company under Section 5.02 or
5.03 hereof; or
(d) by Parent prior to the first acceptance of shares of
Company Common Stock for payment pursuant to the Offer:
(i) if the Company Board or any committee thereof
withdraws or modifies in a manner adverse to Parent or
Sub, or publicly proposes to withdraw or modify in a
manner adverse to Parent or Sub, its approval or
recommendation of this Agreement, the Offer or the
Merger, fails to recommend to the Company's stockholders
that they accept the Offer and give the Company
Stockholder Approval or publicly approves or
43
recommends, or publicly proposes to approve or
recommend, any Company Takeover Proposal; or
(ii) if the Company or any of its officers,
directors, representatives or agents takes any of the
actions that would be proscribed by Section 5.02 but for
the exceptions therein allowing certain actions to be
taken pursuant to the proviso in the first sentence of
Section 5.02(a); or
(e) by the Company prior to the first acceptance of shares of
Company Common Stock for payment pursuant to the Offer only if (i) the
Company Board has received a Superior Company Proposal, (ii) in light of
such Superior Company Proposal the Company Board shall have determined in
good faith, after consultation with outside counsel, that it is necessary
for the Company Board to withdraw or modify its approval or recommendation
of this Agreement, the Offer or the Merger in order to comply with its
fiduciary duty under applicable Law, (iii) the Company has notified Parent
in writing of the determinations described in clause (ii) above, (iv) at
least three business days following receipt by Parent of the notice
referred to in clause (iii) above, and taking into account any revised
proposal made by Parent since receipt of the notice referred to in clause
(iii) above, such Superior Company Proposal remains a Superior Company
Proposal and the Company Board has again made the determinations referred
to in clause (ii) above, (v) the Company is in compliance with Section
5.02, (vi) the Company has previously paid the fee due under Section 6.06,
and (vii) the Company Board concurrently approves, and the Company
concurrently enters into, a definitive agreement providing for the
implementation of such Superior Company Proposal;
(f) by the Company prior to the first acceptance of shares of
Company Common Stock for payment pursuant to the Offer, if Parent breaches
or fails to perform in any material respect any of its representations,
warranties or covenants contained in this Agreement, which breach or
failure to perform cannot be or has not been cured within 15 days after
the giving of written notice to Parent of such breach (provided that the
Company is not then in material breach of any representation, warranty or
covenant contained in this Agreement); provided, however, that there shall
be no notice and right of cure regarding the obligation of Parent and Sub
to commence the Offer in accordance with the terms of Section 1.01(a) or
to their funding obligations in clause 1.01(f).
(g) by Parent prior to the first acceptance of shares of Company
Common Stock for payment pursuant to the Offer, if any of the
Recapitalizations Transactions are not capable of being consummated
contemporaneously with the consummation of the Offer.
SECTION 8.02. Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 8.01, this
Agreement shall forthwith become void and have no effect. Such termination shall
be without any liability or obligation on the part of Parent, Sub or the
Company, other than Section 3.23 (Brokers; Schedule of Fees and Expenses),
Section 4.06 (Brokers), the last sentence of Section 6.02 (Access to
Information; Confidentiality), Section 6.06 (Fees and Expenses), this Section
8.02 and Article IX (General Provisions), which provisions shall survive such
termination, and except to the extent that such
44
termination results from the willful and material breach by a party of any
representation, warranty or covenant set forth in this Agreement.
SECTION 8.03. Amendment. This Agreement may be amended by the parties at
any time before or after receipt of the Company Stockholder Approval; provided,
however, that after receipt of the Company Stockholder Approval, there shall be
made no amendment that by Law requires further approval by the stockholders of
the Company without the further approval of such stockholders; and provided,
further, that after Sub's purchase of shares in the Offer, no such amendment or
modification shall be made that reduces the amount or changes the form of Merger
Consideration or otherwise materially and adversely affects the rights of the
Company's stockholders hereunder, 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 8.04. Extension; Waiver. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) subject to the proviso of
Section 8.03, waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
SECTION 8.05. Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 8.01, an amendment of this
Agreement pursuant to Section 8.03 or an extension or waiver pursuant to Section
8.04 shall, in order to be effective, require in the case of Parent, Sub or the
Company, action by its Board of Directors or the duly authorized designee of its
Board of Directors; provided, that in the case of the Company and in the event
the Offer has been consummated and the shares of Company Common Stock have been
purchased pursuant thereto, such action shall also require action by a majority
of the Independent Directors.
ARTICLE IX
General Provisions
SECTION 9.01. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 9.01
(including any rights arising out of any breach of such representations and
warranties) shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
SECTION 9.02. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given (i) seven days after mailing by certified mail, (ii) when delivered by
hand, (iii) upon confirmation of receipt by telecopy or (iv) one business day
after sending by overnight delivery service, to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
45
(a) if to Parent or Sub, to
KAGT Holdings, INC.
000 Xxxxx Xxxxxx
Xxxxx Xxxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxxxxxxx Xxxxxxxx
Facsimile: 000-000-0000
with a copy to:
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Facsimile: 000-000-0000
(b) if to the Company, to
Applied Graphics Technologies, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Esq.
General Counsel
Facsimile: 212 210-2312
with a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxx X. Xxxxxxx, Esq.
Facsimile: 000-000-0000
SECTION 9.03. Definitions. For purposes of this Agreement:
An "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, such first person.
A "key employee" means an employee of the Company or any Company
Subsidiary whose total annual compensation (including incentive
compensation), after giving effect to any increase after the date of this
Agreement, exceeds $200,000.
A "material adverse effect" solely for purposes of defining Company
Material Adverse Effect and Parent Material Adverse Effect shall mean a
material adverse effect on the business, assets, condition (financial or
otherwise), or results of operations of such party and its subsidiaries,
taken as a whole, other than, in the case of the Company and
46
the Company Subsidiaries, effects solely arising out of or resulting from
changes in general legal, regulatory, political, economic or business
conditions or changes in GAAP that, in each case generally affect
industries in which the Company or the Company Subsidiaries conduct
business.
A "person" means any individual, firm, corporation, partnership,
company, limited liability company, trust, joint venture, association,
Governmental Entity or other entity.
A "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly
or indirectly by such first person.
"to the knowledge" of any specified corporation means to the actual
knowledge of any director or officer of such corporation, after reasonable
inquiry.
SECTION 9.04. Interpretation; Disclosure Letters. When a reference is made
in this Agreement to a Section, such reference shall be to a Section of this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation". Any matter disclosed in
any section of the Company Disclosure Letter shall be deemed disclosed only for
the purposes of the specific Section to which it relates.
SECTION 9.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 9.06. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 9.07. Entire Agreement; Third-Party Beneficiaries. This Agreement,
taken together with the Company Disclosure Letter and the Confidentiality
Agreement, (a) constitute the entire agreement, and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the matters contained herein and (b) except for the
47
provisions of Article II, Section 6.04 and Section 6.05, are not intended to
confer upon any person other than the parties any rights or remedies.
SECTION 9.08. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 9.09. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to Parent or to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Sub of any of its obligations under
this Agreement. Any purported assignment without such consent shall be void.
Subject to the preceding sentences, this Agreement will be binding upon, inure
to the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
SECTION 9.10. Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Delaware state court or any
Federal court located in the State of Delaware, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (a) consents to submit itself to the personal jurisdiction
of any Delaware state court or any Federal court located in the State of
Delaware in the event any dispute arises out of this Agreement or any
Transaction, (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, (c)
agrees that it will not bring any action relating to this Agreement or any
Transaction in any court other than any Delaware state court or any Federal
court sitting in the State of Delaware and (d) waives any right to trial by jury
with respect to any action related to or arising out of this Agreement or any
Transaction.
SECTION 9.11. Consents. Whenever this Agreement requires or permits
consent by or on behalf of any party hereto, such consent shall be given in
writing in a manner consistent with the requirements for a waiver of compliance
as set forth in Sections 8.04 and 8.05. Sub hereby agrees that any consent or
waiver of compliance given by Parent hereunder shall be conclusively binding
upon it, whether given expressly on its behalf or not.
[The remainder of this page is intentionally left blank.]
48
IN WITNESS WHEREOF, Parent, Sub and the Company have duly executed this
Agreement, all as of the date first written above.
KAGT HOLDINGS, INC.
By: /s/ Xxxxxxxxxxx Xxxxxxxx
---------------------------------
Name: Xxxxxxxxxxx Xxxxxxxx
Title: President
KAGT ACQUISITION CORP.
By: /s/ Xxxxxxxxxxx Xxxxxxxx
---------------------------------
Name: Xxxxxxxxxxx Xxxxxxxx
Title: President
APPLIED GRAPHICS TECHNOLOGIES, INC.
By: /s/ Xxxx Xxxxxxx
---------------------------------
Name: Xxxx Xxxxxxx
Title: Chairman of the Board
Chief Executive Officer
EXHIBIT A
CONDITIONS OF THE OFFER
Notwithstanding any other term or provision of the Offer or this
Agreement, Sub shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-l(c) under the
Exchange Act (relating to Sub's obligation to pay for or return tendered shares
of Company Common Stock promptly after the termination or withdrawal of the
Offer), to pay for any shares of Company Common Stock tendered pursuant to the
Offer unless (i) there shall have been validly tendered and not withdrawn prior
to the expiration of the Offer that number of shares of Company Common Stock
which, together with that number of shares of Company Common Stock owned by
Parent, Sub and Parent's other subsidiaries, would represent more than fifty
percent (50%) of the Fully Diluted Shares (the "Minimum Tender Condition") and
(ii) any waiting period under the HSR Act, if applicable to the purchase of
shares of Company Common Stock pursuant to the Offer, shall have expired or been
terminated. The term "Fully Diluted Shares" means all outstanding securities
entitled generally to vote in the election of directors of the Company on a
fully diluted basis, after giving effect to the exercise or conversion of all
In-the-Money Company Stock Options and any other options, rights and securities
exercisable or convertible into such voting securities in connection with the
consummation of the Offer (other than the warrants held by the Lenders on the
date hereof). Furthermore, notwithstanding any other term of the Offer or this
Agreement, Sub shall not be required to accept for payment or, subject as
aforesaid, to pay for any shares of Company Common Stock not theretofore
accepted for payment or paid for, and may terminate or amend the Offer, (A) with
the consent of the Company or (B) without the consent of the Company, if
immediately prior to the expiration of the Offer and before the first acceptance
of such shares for payment or the payment therefor any of the following
conditions exists:
(a) there shall be pending any suit, action or proceeding (other
than (i) by Parent or Sub, or a stockholder of Parent (that is not also a
stockholder of the Company) or Sub, (ii) by a stockholder of the Company
either on his, her or its own behalf, on the behalf of a class, or on the
behalf of the Company, in any case, challenging the Recapitalization
Transactions, or (iii) by a holder of Preference Shares or Subordinated
Notes, in either case, challenging the Recapitalization Transactions)
which, in the reasonable judgment of Parent, has a reasonable likelihood
of success or would require the expenditure of funds that are material in
relation to the Company and its subsidiaries taken as a whole to defend
(i) challenging the acquisition by Parent or Sub of any Company Common
Stock, seeking to restrain or prohibit the making or consummation of the
Offer or the Merger or any other Recapitalization Transactions, or seeking
to obtain from the Company, Parent or Sub any damages that are material in
relation to the Company and its subsidiaries taken as a whole, (ii)
seeking to prohibit or limit the ownership or operation by the Company,
Parent or any of their respective subsidiaries of any material portion of
the business or assets of the Company and its subsidiaries taken as whole
or Parent and its subsidiaries taken as a whole, or to compel the Company,
Parent or any of their respective subsidiaries to dispose of or hold
separate any material portion of the business or assets of the Company and
its subsidiaries taken as whole or Parent and its subsidiaries taken as a
whole, as a result of the Offer or the Merger or any other
Recapitalization Transactions, (iii) seeking to impose limitations on the
ability of Parent or Sub to acquire
or hold, or exercise full rights of ownership of, any shares of Company
Common Stock, including the right to vote the Company Common Stock
acquired by it on all matters properly presented to the stockholders of
the Company, (iv) seeking to prohibit Parent or any of its subsidiaries
from effectively controlling in any material respect the business or
operations of the Company and the Company Subsidiaries, or (v) that
otherwise would reasonably be expected to have a material adverse effect
on the business, assets, condition (financial or otherwise), or results of
operations of the Company and the Company Subsidiaries, taken as a whole;
(b) any Law or Judgment enacted, entered, enforced, promulgated,
amended or issued with respect to, or deemed applicable to, or any
required consent or approval withheld with respect to, (i) Parent, the
Company or any of their respective subsidiaries or (ii) the Offer, the
Merger or any other Recapitalization Transaction, by any Governmental
Entity that is reasonably likely to result, directly or indirectly, in any
of the consequences referred to in paragraph (a) above;
(c) since the date of this Agreement there shall have occurred any
event, change, effect or development that, individually or in the
aggregate, has had or would reasonably be expected to have, a material
adverse effect on the business, assets, condition (financial or
otherwise), or results of operations of the Company and the Company
Subsidiaries, taken as a whole;
(d) the Company Board or any committee thereof shall have withdrawn
or modified in a manner adverse to Parent or Sub, or publicly proposed to
withdraw or modify in a manner adverse to Parent or Sub, its approval or
recommendation of this Agreement, the Offer or the Merger, failed to
recommend to the Company's stockholders that they accept the Offer or
approved or recommended, or publicly proposed to approve or recommend, any
Company Takeover Proposal;
(e) all of the conditions to closing each of the Recapitalization
Transactions (other than the Offer and the Merger) shall not have been met
or waived, resulting in the failure of such Recapitalizations Transactions
either to have been consummated or to be capable of being consummated
contemporaneously with the consummation of the Offer (or, in the case of
the Recapitalization Transactions concerning the Subordinated Notes and
the Preference Shares, in the period as soon as possible following the
consummation of the Offer, after all actions of the holders of
Subordinated Notes and Preference Shares, as the case may be, required to
consummate such Recapitalization Transactions have been taken and are
effective contemporaneously with the consummation of the Offer);
(f) any of the representations and warranties of the Company
contained in the Agreement (as each such representation or warranty would
read as if all qualifications as to materiality were deleted therefrom)
shall not be true and correct when made or at any time prior to the
consummation of the Offer as if made at and as of such time except where
the failure to be so true and correct, individually or in the aggregate,
has not had and would not reasonably be expected to have, a Company
Material Adverse Effect;
(g) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under this
Agreement, which failure to perform or comply cannot be or has not been
cured within five business days after the giving of written notice to the
Company of such breach;
(h) this Agreement shall have been terminated in accordance with its
terms or amended in accordance with its terms to provide for such
termination or amendment to the Offer;
(i) the Company has failed to obtain the consent of Sears Xxxxxxx
and Co. and XxXxxx-Xxxx Companies, Inc., as necessary to consummate the
Recapitalization; or
(j) the financing contemplated in the Debt Commitment Letter shall
not have been consummated in accordance with the terms thereof.
which, in the sole and good faith judgment of Sub or Parent, in any such case,
and regardless of the circumstances giving rise to any such condition (including
any action or inaction by Parent or any of its affiliates, but excluding a
circumstance resulting solely from a willful and material breach by Parent or
Sub), makes it inadvisable to proceed with such acceptance for payment or
payment.
The foregoing conditions are for the sole benefit of Sub and Parent and, subject
to Section 1.01(a), may be asserted by Sub or Parent regardless of the
circumstances giving rise to such condition or may be waived by Sub and Parent
in whole or in part at any time and from time to time in their sole discretion
(subject to the terms of this Agreement). The failure by Parent, Sub or any
other affiliate of Parent at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right, the waiver of any such right
with respect to particular facts and circumstances shall not be deemed a waiver
with respect to any other facts and circumstances and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time.
