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AGREEMENT AND PLAN OF MERGER
BETWEEN
BFH MERGER CORP.
AND
BIG FLOWER HOLDINGS, INC.
DATED AS OF JUNE 29, 1999
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER
SECTION 1.01 The Merger.......................................................2
SECTION 1.02 Effective Time...................................................2
SECTION 1.03 Effects of the Merger............................................2
SECTION 1.04 Certificate of Incorporation and By-Laws of the
Surviving Corporation............................................2
SECTION 1.05 Directors........................................................3
SECTION 1.06 Officers.........................................................3
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
SECTION 2.01 Effect on Capital Stock..........................................3
SECTION 2.02 Options; Stock Plans.............................................6
SECTION 2.03 Modification of Merger Consideration.............................8
SECTION 2.04 Payment for Shares..............................................11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01 Organization and Qualification; Subsidiaries....................18
SECTION 3.02 Capitalization; Subsidiaries....................................19
SECTION 3.03 Authority Relative to this Agreement............................20
SECTION 3.04 No Violations of Law............................................21
SECTION 3.05 No Defaults or Violations Arising from the Merger...............21
SECTION 3.06 Absence of Certain Changes......................................23
SECTION 3.07 SEC Reports and Financial Statements............................23
SECTION 3.08 Information.....................................................24
SECTION 3.09 Litigation......................................................24
SECTION 3.10 Material Contracts..............................................25
SECTION 3.11 Taxes...........................................................25
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SECTION 3.12 Employee Benefits...............................................26
SECTION 3.13 Labor Relations and Employment..................................29
SECTION 3.14 Environmental Matters...........................................31
SECTION 3.15 Intellectual Property...........................................34
SECTION 3.16 Year 2000 Compliance............................................35
SECTION 3.17 Rights Agreement................................................36
SECTION 3.18 Board Recommendation............................................37
SECTION 3.19 Required Company Vote...........................................37
SECTION 3.20 Related Party Transactions......................................37
SECTION 3.21 State Takeover Statutes.........................................38
SECTION 3.22 Brokers and Finders.............................................38
SECTION 3.23 Opinions of Investment Banking Firms............................38
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MERGECO
SECTION 4.01 Organization and Qualification..................................39
SECTION 4.02 Authority Relative to this Agreement............................39
SECTION 4.03 No Violation....................................................39
SECTION 4.04 Information.....................................................40
SECTION 4.05 Financing.......................................................40
SECTION 4.06 Delaware Law....................................................40
SECTION 4.07 Newly Organized.................................................41
ARTICLE V
COVENANTS
SECTION 5.01 Conduct of Business of the Company..............................41
SECTION 5.02 Access to Information...........................................44
SECTION 5.03 Efforts.........................................................44
SECTION 5.04 Public Announcements............................................47
SECTION 5.05 Indemnification; Directors' and Officers' Insurance.............47
SECTION 5.06 Notification of Certain Matters.................................49
SECTION 5.07 Rights Agreement................................................50
SECTION 5.08 State Takeover Laws.............................................50
SECTION 5.09 No Solicitation.................................................50
SECTION 5.10 Affiliate Letters...............................................52
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SECTION 5.11 ISRA Requirements...............................................53
SECTION 5.12 Reports.........................................................53
SECTION 5.13 Stockholders' Meeting...........................................54
SECTION 5.14 Employee Benefit Arrangements...................................55
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 6.01 Conditions......................................................56
SECTION 6.02 Conditions to Obligations of MergeCo............................57
SECTION 6.03 Conditions to Obligation of the Company.........................59
ARTICLE VII
TERMINATION; AMENDMENTS; WAIVER
SECTION 7.01 Termination.....................................................59
SECTION 7.02 Effect of Termination...........................................61
SECTION 7.03 Fees and Expenses...............................................61
SECTION 7.04 Amendment.......................................................62
SECTION 7.05 Extension; Waiver...............................................63
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Non-Survival of Representations and Warranties..................63
SECTION 8.02 Entire Agreement; Assignment....................................63
SECTION 8.03 Validity........................................................64
SECTION 8.04 Notices.........................................................64
SECTION 8.05 Governing Law...................................................65
SECTION 8.06 Descriptive Headings............................................65
SECTION 8.07 Counterparts....................................................65
SECTION 8.08 Parties in Interest.............................................65
SECTION 8.09 Certain Definitions.............................................65
SECTION 8.10 Specific Performance............................................66
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SCHEDULES
Schedule 1.04(a)................... Amendments to Certificate of Incorporation
Schedule 1.04(b)........................................ Amendments to By-Laws
Schedule 2.01(c)(i)(B)(1).............................. Terms of PIK Preferred
Schedule 2.01(c)(i)(B)(2)................................... Terms of Warrants
Schedule 2.01(c)(ii)..................................Holders of Retained Shares
Schedule 2.02(a)......................................... Treatment of Options
Schedule 6.02(e)........................................ Financing Commitments
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TABLE OF DEFINED TERMS
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401(k) Plans.........................................................4, 7, 9, 19
Acquisition Transactions......................................................50
affiliate ..................................................................65
Agreement ...................................................................1
Basic Warrant Entitlement......................................................5
Bona Fide Proposal............................................................52
Business ..................................................................32
Cash Price ...................................................................4
Certificate Amendments.........................................................2
Certificates..................................................................11
Code ..................................................................27
Common Shares..................................................................1
Company ...................................................................1
Company Affiliated Group......................................................25
Company Board..................................................................1
Company Disclosure Schedule...................................................18
Company Representatives.......................................................44
Company Stock Plan............................................................19
Company Stockholder Approval..................................................20
Confidentiality Agreement.....................................................44
Consent ..................................................................44
control ..................................................................65
DGCL ...................................................................1
Dissenting Shares..............................................................6
Effective Time.................................................................2
Environmental Laws............................................................32
Environmental Liabilities and Costs...........................................33
Environmental Permits.........................................................33
ERISA ..................................................................27
ERISA Affiliate...............................................................27
Excess Shares.................................................................16
Exchange Act..................................................................20
Exchange Agent................................................................11
Exchange Fund.................................................................11
Exchanged Option...............................................................7
Exchanged Option Merger Consideration..........................................7
Exchanged Share................................................................4
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Exchanged Share Certificates..................................................16
Exchanged Share Merger Consideration...........................................4
Financial Statements..........................................................23
Form 10-K ..................................................................23
Form S-4 ..................................................................54
Governmental Entity...........................................................21
Hazardous Substances..........................................................33
HSR Act ..................................................................21
Indemnified Parties...........................................................47
Injunction ..................................................................56
Intellectual Property.........................................................34
interested stockholder........................................................40
Investment Instrument.........................................................46
ISRA ..................................................................33
Junior Preferred Stock........................................................19
Laws ..................................................................66
LNA ..................................................................53
Material Adverse Effect on MergeCo............................................39
Material Adverse Effect on the Company........................................18
Material Contracts............................................................25
MergeCo ...................................................................1
MergeCo Representatives.......................................................44
Merger ...................................................................1
Merger Consideration...........................................................6
Offeror ..................................................................51
Option ...................................................................7
Order ..................................................................56
Other Filings.................................................................24
PBGC ..................................................................28
Person ..................................................................66
Persons ..................................................................66
PIK Preferred..................................................................4
PIK Preferred Trust...........................................................16
Plans ..................................................................26
Preferred Stock...............................................................19
Proxy Statement...............................................................54
Purchase Agreement.............................................................9
QUIPS ..................................................................19
Release ..................................................................33
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Relevant Period................................................................8
Remedial Action...............................................................34
Representatives...............................................................50
Retained Option................................................................7
Retained Share.................................................................5
Rights Agreement...............................................................1
Rights Amendment..............................................................36
SEC ..................................................................23
SEC Reports ..................................................................23
Securities Act................................................................53
Shares ...................................................................1
Significant Subsidiary........................................................20
Special Meeting...............................................................54
Subsidiaries..................................................................66
Subsidiary ..................................................................66
Surviving Corporation..........................................................2
Tax Return ..................................................................26
Taxes ..................................................................26
Terminating Company Breach....................................................61
Terminating MergeCo Breach....................................................61
Termination Date..............................................................61
Termination Fee...............................................................62
Title IV Plans................................................................27
Total Post-Merger Common Shares................................................3
Trust Agreement...............................................................19
WARN ..................................................................30
Warrant ...................................................................5
Year 2000 Compliant...........................................................35
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of June 29,
1999, between BFH Merger Corp., a Delaware corporation ("MERGECO"), and Big
Flower Holdings, Inc., a Delaware corporation (the "COMPANY").
WHEREAS, the respective Boards of Directors of MergeCo and the Company
have approved the merger of MergeCo with and into the Company, as set forth
below (the "MERGER"), in accordance with the General Corporation Law of the
State of Delaware (the "DGCL").
WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement, in the Merger, the holders of shares of common stock of the Company,
par value $.01 per share (the "COMMON SHARES"), issued and outstanding
immediately prior to the Effective Time (as defined in Section 1.02), including
the associated Rights issued pursuant to, and defined in, the Rights Agreement,
dated as of November 28, 1995, between the Company and The Bank of New York, as
Rights Agent (the "RIGHTS AGREEMENT", which Rights, together with the Common
Shares, are hereinafter referred to as the "SHARES"), will be entitled to either
(i) receive cash and certain other consideration in exchange for their Shares,
or (ii) retain a certain number of their Shares and receive cash and certain
other consideration in exchange for the remainder of their Shares.
WHEREAS, the Board of Directors of the Company (the "COMPANY BOARD") has,
in light of and subject to the terms and conditions set forth herein: (i)
determined that (A) the consideration to be paid for each Share in the Merger is
fair to the stockholders of the Company, and (B) the Merger is advisable and
otherwise in the best interests of the Company and its stockholders, and (ii)
resolved to approve and adopt this Agreement and the transactions contemplated
hereby and to recommend approval and adoption by the stockholders of the Company
of this Agreement.
WHEREAS, MergeCo and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger, and also to prescribe various conditions to the Merger.
WHEREAS, it is intended that the Merger be recorded as a recapitalization
for financial reporting purposes.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, MergeCo
and the Company agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 THE MERGER. Upon the terms and subject to the
satisfaction or waiver of the conditions hereof, and in accordance with the
applicable provisions of this Agreement and the DGCL, at the Effective Time (as
defined in Section 1.02), MergeCo shall be merged with and into the Company.
Following the Merger, the separate corporate existence of MergeCo shall cease
and the Company shall continue as the surviving corporation (the "SURVIVING
CORPORATION").
SECTION 1.02 EFFECTIVE TIME. As soon as practicable after the satisfaction
or waiver of the conditions set forth in Article VI, the Company shall execute,
in the manner required by the DGCL, and deliver to the Secretary of State of the
State of Delaware, a duly executed and verified certificate of merger, and the
parties shall take such other and further actions as may be required by Law to
make the Merger effective. The time the Merger becomes effective in accordance
with applicable Law is referred to herein as the "EFFECTIVE TIME."
SECTION 1.03 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the properties, rights, privileges, powers
and franchises of the Company and MergeCo shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and MergeCo
shall become the debts, liabilities and duties of the Surviving Corporation.
SECTION 1.04 CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE SURVIVING
CORPORATION.
(a) The certificate of incorporation of the Company, as in effect
immediately prior to the Effective Time, together with amendments substantially
in the form set forth in Schedule 1.04(a) (the "CERTIFICATE AMENDMENTS"), if the
Certificate Amendments are approved by the Company's stockholders in accordance
with the DGCL, shall be the certificate of incorporation of the Surviving
Corporation until thereafter amended in accordance with the provisions thereof
and applicable Law.
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(b) The by-laws of the Company in effect immediately prior to the
Effective Time, together with the amendments set forth in Schedule 1.04(b),
shall be the by-laws of the Surviving Corporation until amended in accordance
with the provisions thereof and applicable Law.
SECTION 1.05 DIRECTORS. Subject to applicable Law, the directors of
MergeCo immediately prior to the Effective Time shall be the initial directors
of the Surviving Corporation and shall hold office until their respective
successors are duly elected and qualified, or their earlier death, resignation
or removal.
SECTION 1.06 OFFICERS. The officers of the Company immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation
and shall hold office until their respective successors are duly elected and
qualified, or their earlier death, resignation or removal.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
SECTION 2.01 EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any Shares or
any shares of capital stock of MergeCo:
(a) COMMON STOCK OF MERGECO. All of the shares of common stock of MergeCo,
par value $0.01 per share, issued and outstanding immediately prior to the
Effective Time shall be converted into a number of Common Shares following the
Merger equal to:
(i) the Total Post-Merger Common Shares (defined below), minus
(ii) the number of Retained Shares together with the number of Common
Shares, if any, issued in the Merger in exchange for Options (as
defined in Section 2.02) pursuant to Section 2.03(c).
The "TOTAL POST-MERGER COMMON SHARES" shall be 9,361,702 Common Shares as long
as the amount of funds that MergeCo and/or its affiliates delivers in respect of
the Investment Instrument (as defined in Section 5.03(c)(ii)) is equal to $60
million.
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If the amount of funds that MergeCo and/or its affiliates delivers in respect of
the Investment Instrument is less than $60 million, the Total Post-Merger Common
Shares shall be the number that is obtained by dividing:
(A) $390 million minus the amount of funds which MergeCo
and/or its affiliates delivers in respect of the
Investment Instrument, by
(B) $35.25.
(b) CANCELLATION OF TREASURY STOCK. Each Share that is owned by the
Company shall automatically be cancelled and retired and shall cease to exist,
and no cash or other consideration shall be delivered or deliverable in exchange
therefor.
(c) TREATMENT OF COMMON SHARES. Each Share issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger, be
treated as follows:
(i) Subject to Section 2.03, each Share held by a Person not
listed in the table set forth on Schedule 2.01(c)(ii), other
than Dissenting Shares (as defined in Section 2.01(d)) and
shares owned by any subsidiary of the Company, (each of such
Shares, together with each of the Shares described in Section
2.01(c)(ii)(B), an "EXCHANGED SHARE") shall be converted into
the right to receive from the Company after the Merger the
following (being the "EXCHANGED SHARE MERGER CONSIDERATION"):
(A) cash in an amount equal to $30 (the "CASH PRICE"), and
(B) the following consideration (being the "PIK
PREFERRED/WARRANT CONSIDERATION"), subject to Section
2.04(i) relating to fractional interests:
(1) 0.21 of a share of 10% Cumulative Exchangeable
Redeemable Paid-In-Kind Preferred Stock of the
Company ("PIK PREFERRED"), such PIK Preferred
having the terms set forth on Schedule
2.01(c)(i)(B)(1), and
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(2) attached to such 0.21 of PIK Preferred (subject to
detachment as set forth on Schedule
2.01(c)(i)(B)(2)) shall be a warrant (a
"WARRANT"), having the terms set forth on
Schedule 2.01(c)(i)(B)(2), to purchase a number
of Common Shares equal to the following (the
number that follows being the "BASIC WARRANT
ENTITLEMENT"):
(x) 0.05 multiplied by a quotient where (aa) the
numerator is the Total Post-Merger Common
Shares and (bb) the denominator is 0.95,
multiplied by
(y) a quotient where (aa) the numerator is one
and (bb) the denominator is the number of
Exchanged Shares plus the number of
Adjusted Exchanged Options (as defined
in Section 2.02(a)) plus the number of
Common Shares into which the QUIPS (as
defined in Section 3.02(c)) are convertible
immediately prior to the Effective Time
pursuant to Section 4.3 of the Trust
Agreement (as defined in Section 3.02(c)),
and each such Exchanged Share shall no longer be outstanding,
shall automatically be cancelled and retired and shall cease
to exist, and each holder of a certificate representing any
such Exchanged Shares shall, to the extent such certificate
represents such Exchanged Shares, cease to have any rights
with respect thereto, except the right to receive the
Exchanged Share Merger Consideration applicable thereto, upon
surrender of such certificate in accordance with Section 2.04.
(ii) Subject to Section 2.03, in respect of the Shares held by each
Person listed in the table set forth on Schedule 2.01(c)(ii):
(A) that number of such Person's Shares which is set forth
in the column of such table headed "Retained Shares"
shall be converted into the right to retain such number
of fully
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paid and nonassessable Common Shares (each of such
Common Shares, a "RETAINED SHARE"); and
(B) each of such Person's Shares which is not a Retained
Share shall be an Exchanged Share and shall be converted
into the right to receive from the Company after the
Merger the Exchanged Share Merger Consideration for each
such Share, and each such Exchanged Share shall no
longer be outstanding, shall automatically be cancelled
and retired and shall cease to exist, and each holder of
a certificate representing any such Exchanged Shares
shall, to the extent such certificate represents such
Exchanged Shares, cease to have any rights with respect
thereto, except the right to receive the Exchanged Share
Merger Consideration applicable thereto, upon surrender
of such certificate in accordance with Section 2.04.
The Retained Shares, together with the Exchanged Share Merger
Consideration, the Exchanged Option Merger Consideration (as defined in Section
2.02(c)), and any other consideration agreed to be provided to holders of Shares
or Options pursuant to Section 2.03 in exchange for such Shares or Options,
shall be referred to as the "MERGER CONSIDERATION".
(d) DISSENTING SHARES. Notwithstanding Section 2.01(c), Shares outstanding
immediately prior to the Effective Time and held by a holder who has not voted
in favor of the Merger or consented thereto in writing and who has demanded
appraisal for such Shares in accordance with the DGCL prior to the Effective
Time ("DISSENTING SHARES") shall not be converted into a right to receive the
Exchanged Share Merger Consideration relating to such Shares, unless such holder
fails to perfect, withdraws or otherwise loses such holder's right to appraisal.
If, after the Effective Time, such holder fails to perfect, withdraws or loses
such holder's right to appraisal, such Shares shall be treated as if they had
been converted as of the Effective Time into a right to receive the Exchanged
Share Merger Consideration relating to such Shares. The Company shall give
MergeCo prompt notice of any demands received by the Company for appraisal of
Shares, and MergeCo shall have the right to participate in all negotiations and
proceedings with respect to such demands. The Company shall not, except with the
prior written consent of MergeCo, make any payment with respect to, or settle or
offer to settle, any such demands.
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SECTION 2.02 OPTIONS; STOCK PLANS. As of the Effective Time, by virtue of
the Merger and without any action on the part of any holder of any outstanding
option to acquire Common Shares granted under any stock option or other similar
plan of the Company, whether or not then exercisable (each such option, an
"OPTION"):
(a) Subject to Section 2.03(c), a portion of each Option may be designated
as a "RETAINED OPTION" and the remaining portion of such Option shall be
designated as an "EXCHANGED OPTION" as set forth on Schedule 2.02(a). For the
purposes of this Agreement, the term "ADJUSTED EXCHANGED OPTIONS" shall mean a
number equal to:
(i) the aggregate of the Total Spread (as defined in Section
2.02(c)(i)(B)) of all Exchanged Options, divided by
(ii) $35.25.
(b) With respect to each portion of an Option designated as a Retained
Option (if any), such portion of such Option shall continue to remain
outstanding and shall remain subject to all terms and conditions which were
applicable to such Option immediately prior to the Merger; provided, however,
that such Option shall become fully vested and exercisable as of the Effective
Time.
(c) With respect to each portion of an Option designated as an Exchanged
Option, such portion of such Option shall be cancelled in exchange for the right
to receive from the Company after the Merger the following (being the "EXCHANGED
OPTION MERGER CONSIDERATION"):
(i) Cash in an amount equal to:
(A) the Cash Price, multiplied by
(B) a quotient where
(1) the numerator is the excess, if any, of $35.25 over
the per share exercise price of such Exchanged Option
(such excess being the "SPREAD" with respect to such
Exchanged Option; and the Spread with respect to an
Exchanged Option multiplied by the number of Common
Shares subject to such Exchanged Option shall be the
"TOTAL SPREAD" for such Exchanged Option), and
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(2) the denominator is $35.25, multiplied by
(C) the number of Common Shares subject to such Exchanged
Option.
(ii) An amount of the PIK Preferred/Warrant Consideration equal to
the following:
(A) Such number of shares of PIK Preferred that is equal to:
(1) 0.21, multiplied by
(2) a quotient where (x) the numerator is the Spread
with respect to such Exchanged Option and (y) the
denominator is $35.25, multiplied by
(3) the number of Common Shares subject to such
Exchanged Option, and
(B) attached to such shares of PIK Preferred (subject to
detachment as set forth on Schedule 2.01(c)(i)(B)(2)), a
Warrant to purchase such number of Common Shares that is
equal to:
(1) the Basic Warrant Entitlement, multiplied by
(2) a quotient where (x) the numerator is the Spread
with respect to such Exchanged Option, and (y) the
denominator is $35.25, multiplied by
(3) the number of Common Shares subject to such
Exchanged Option.
(d) Prior to the Effective Time, the Company shall amend the terms of its
equity incentive plans or arrangements, in each case as is necessary to give
effect to the provisions of this Section 2.02 and any other arrangements made in
respect of the Options pursuant to Section 2.03(c).
SECTION 2.03 MODIFICATION OF MERGER CONSIDERATION.
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(a) If, within the earlier of: (i) 45 days from the date hereof, and (ii)
the date when the Proxy Statement is first mailed to the Company's shareholders
(such period from the date hereof until such date, the "RELEVANT PERIOD"),
Xxxxxx X. Xxx Company ("THL"), Evercore Capital Partners LP ("EVERCORE") or any
of their affiliates (any such entity being a "RELEVANT PURCHASER") enters into
an agreement with any of the Persons listed on Schedule 2.01(c)(ii) (as amended
pursuant to Section 2.03(c)) to purchase from such Person any of such Person's
Exchanged Shares at the Effective Time in exchange for consideration equal to
the Exchanged Share Merger Consideration with respect to such Exchanged Shares
(any such agreement, a "PURCHASE AGREEMENT"):
(i) MergeCo and the Company shall modify this Agreement
(including, without limitation, Section 2.01(c) and any
schedule attached to this Agreement) on or prior to such date
as appropriate to reflect the terms of such Purchase
Agreement, and
(ii) the Company shall take such other actions reasonably requested
by the Relevant Purchaser so that such Purchase Agreement can
be effected.
(b) The parties agree that, during the Relevant Period, Schedule
2.01(c)(ii) may be amended by MergeCo, without the consent of the Company, in
the following manner:
(i) MergeCo and any Person holding Shares may agree at any time
during the Relevant Period as to:
(A) the number of such Person's Shares which shall be
Exchanged Shares,
(B) the number of such Person's Shares which shall be
Retained Shares, and
(C) the number of such Person's Shares, if any, which shall
be exchanged in the Merger in consideration for an
interest in an Investment Instrument (such per Share
interest in an Investment Instrument being the
"INVESTMENT CONSIDERATION" for such Share),
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and MergeCo shall provide the Company with reasonable
evidence of any such agreement.
(ii) Schedule 2.01(c)(ii) shall be amended to reflect such an
agreement reached between MergeCo and a Person holding Shares
as follows:
(A) To the extent such Person is not listed on Schedule
2.01(c)(ii) and such Person has agreed to a number of
such Person's Shares being Retained Shares, such Person
shall be added to Schedule 2.01(c)(ii).
(B) The number of such Person's Shares that such Person and
MergeCo agree shall become Retained Shares shall be
inserted in the column in the table set forth in
Schedule 2.01(c)(ii) headed "Retained Shares" beside
such Person's name and shall be treated in the Merger as
set forth in Section 2.01(c)(ii)(A), subject to further
adjustments under Section 2.03(b)(i).
(C) The number of such Person's Shares that such Person and
MergeCo agree shall be Exchanged Shares shall be treated
in the Merger as set forth in Section 2.01(c)(ii)(B),
subject to further adjustments under Section 2.03(b)(i).
(D) The number of such Person's shares that MergeCo and such
Person agree shall be exchanged in consideration for an
interest in the Investment Instrument shall be treated
in the Merger as set forth in such agreement, subject to
further adjustments under Section 2.03(b)(i).
(c) The parties agree that, during the Relevant Period, the treatment of a
Person's Options in the Merger may be amended by MergeCo:
(i) without the consent of the Company, if MergeCo and such Person
agree that the number of such Person's Options which shall be
Exchanged Options and Retained Option shall be different from
that set forth in Schedule 2.02(a) provided that such Options
shall be Retained Options, Exchanged Options, or a combination
of both, and
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(ii) only with the consent of the Company, such consent not to be
unreasonably withheld, if MergeCo and such Person agree that
all or a portion of such Person's Options shall be treated
differently than the Options which constitute Retained
Options, Exchanged Options or a combination of both,
and Section 2.02 and Schedule 2.02(a) shall be amended to reflect such
agreement, provided that the Exchanged Option Merger Consideration with respect
to an Exchanged Option at the Effective Time, as set forth in Section 2.02(c),
shall not in any event be amended. MergeCo shall provide the Company with
reasonable evidence of any such agreement.
SECTION 2.04 PAYMENT FOR SHARES.
(a) APPOINTMENT OF EXCHANGE AGENT AND DEPOSIT OF MERGER CONSIDERATION.
From and after the Effective Time, such bank or trust company as shall be
mutually acceptable to MergeCo and the Company shall act as exchange agent (the
"EXCHANGE AGENT"). At or prior to the Effective Time, the Company and MergeCo
shall deposit, or the Company and MergeCo shall otherwise take all steps
necessary to cause to be deposited, with the Exchange Agent in an account (the
"EXCHANGE FUND") the aggregate Merger Consideration to which holders of Shares
and Options shall be entitled after the Effective Time pursuant to Sections
2.01(c), 2.02 and 2.03 (including, with respect to the aggregate Cash Price, the
financing arranged by MergeCo in accordance with Section 5.03(c)).
Notwithstanding the foregoing, nothing in this Section 2.04(a) is intended to
detract from, or limit, MergeCo's obligations in Section 5.03(c), or impose any
obligation on the Company with respect thereto.
(b) MAILING OF TRANSMITTAL LETTER. Promptly after the Effective Time, the
Surviving Corporation shall cause the Exchange Agent to mail to each record
holder of certificates (the "CERTIFICATES") that immediately prior to the
Effective Time represented Shares a form of letter of transmittal which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent and instructions for use in surrendering such Certificates and
receiving the Merger Consideration in respect thereof.
(c) DELIVERY OF MERGER CONSIDERATION FOR SHARES UNDER SECTION 2.01(c)(i).
In effecting the delivery of the Exchanged Share Merger Consideration in respect
of Exchanged Shares represented by Certificates entitled to the Exchanged
11
Share Merger Consideration pursuant to Section 2.01(c)(i), upon the surrender of
each such Certificate, and in consideration for such Certificate, the Exchange
Agent shall:
(i) pay the holder of such Certificate the Cash Price multiplied
by the number of such Exchanged Shares,
(ii) deliver to the holder of such Certificate in respect of the
PIK Preferred/Warrant Consideration to which such holder is
entitled:
(A) a certificate representing that number of whole shares
of PIK Preferred which such holder has the right to
receive pursuant to Section 2.01(c)(i)(B)(1);
(B) a certificate representing a Warrant to purchase that
number of Common Shares which such holder has the right
to receive pursuant to Section 2.01(c)(i)(B)(2); and
(C) cash in lieu of fractional interests of PIK
Preferred/Warrant Consideration in accordance with
Section 2.04(i).
Upon such actions by the Exchange Agent, such Certificate shall forthwith
be cancelled and retired, and shall cease to exist.
(d) DELIVERY OF MERGER CONSIDERATION FOR SHARES UNDER SECTION 2.01(c)(ii).
In effecting the:
(i) retention of the Retained Shares,
(ii) delivery of the Exchanged Share Merger Consideration, and
(iii) delivery of the Investment Consideration, if any,
in respect of the Shares held by a holder listed in the table set forth on
Schedule 2.01(c)(ii), upon surrender of the Certificate or Certificates in
respect of such Shares, the Exchange Agent shall:
(A) in respect of the Shares which are set forth in the
column of such table headed "Retained Shares" relating
to such holder, deliver to such holder a certificate
representing
12
that number of Retained Shares which such holder has
the right to retain pursuant to Section 2.01(c)(ii)(A),
(B) in respect of such holder's Exchanged Shares:
(1) pay such holder the Cash Price multiplied by the
number of such holder's Exchanged Shares,
(2) deliver to such holder in respect of the PIK
Preferred/Warrant Consideration to which such
holder is entitled:
(x) a certificate representing that number of whole
shares of PIK Preferred which such holder has
the right to receive pursuant to Section
2.01(c)(ii)(B),
(y) a certificate representing a Warrant to
purchase that number of Common Shares which
such holder has the right to receive pursuant
to Section 2.01(c)(ii)(B), and
(z) cash in lieu of fractional interests of the PIK
Preferred/Warrant Consideration in accordance
with Section 2.04(i), and
(C) in respect of the shares, if any, which are being
exchanged for an interest in the Investment Instrument,
deliver to such holder such documents which reflect such
holder's interest in the Investment Instrument.
Upon such actions by the Exchange Agent, each such Certificate so
surrendered shall forthwith be cancelled and retired, and shall cease to exist.
(e) DELIVERY OF MERGER CONSIDERATION FOR OPTIONS UNDER SECTION 2.02. In
effecting the delivery of the Exchanged Option Merger Consideration, in respect
of each Person entitled to such consideration in the Merger pursuant to Section
2.02(c), the Exchange Agent shall:
(i) pay such Person cash in an amount to which such Person is
entitled pursuant to Section 2.02(c)(i),
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(ii) deliver to such Person in respect of the PIK Preferred/Warrant
Consideration to which such Person is entitled:
(A) a certificate representing that number of whole shares of
PIK Preferred which such Person has the right to receive
pursuant to Section 2.02(c)(ii)(A),
(B) deliver to such Person, a certificate representing a Warrant
to purchase that number of Common Shares which such Person
has the right to receive pursuant to Section 2.02(c)(ii)(B),
and
(C) pay such Person cash in lieu of fractional interests of the
PIK Preferred/Warrant Consideration in accordance with
2.04(i).
Upon such actions by the Exchange Agent, each such Exchanged Option shall be
cancelled and shall cease to exist.
(f) DELIVERY OF MERGER CONSIDERATION FOR OPTIONS UNDER REVISED
TREATMENT. If:
(i) an Option shall be treated differently than that set forth in
Schedule 2.02(a) on the date hereof as a result of an amendment
to Schedule 2.02(a) pursuant to Section 2.03(c), and
(ii) the consideration to be received by a holder of an Option is of a
type which is appropriate for the Exchange Agent to deliver to
such holder,
then after the deposit with the Exchange Agent of such consideration pursuant to
Section 2.04(a), the Exchange Agent shall deliver such consideration to the
holder of such Option. Upon such action by the Exchange Agent, each such Option
for which consideration has been delivered to each holder shall be cancelled and
shall cease to exist.
(g) RIGHTS UNTIL SURRENDER. Until surrendered in accordance with Sections
2.04 (c) or (d) above, each Certificate (other than Certificates representing
(i) Shares held by MergeCo or any of its affiliates, (ii) Shares held in the
treasury of the Company, (iii) Shares held by any subsidiary of the Company or
(iv) Dissenting
14
Shares) shall represent solely the right to receive the aggregate Merger
Consideration relating thereto. No interest or dividends shall be paid or
accrued on the Merger Consideration, except that dividends shall accrue on the
shares of PIK Preferred from the Effective Time and be paid when certificates
representing PIK Preferred are delivered to the holders thereof in accordance
with Sections 2.04(c), (d), or (e) as the case may be. If the Merger
Consideration (or any portion thereof) is to be delivered to any Person other
than the Person in whose name the Certificate formerly representing Shares
surrendered therefor is registered, it shall be a condition to such right to
receive such Merger Consideration that the Certificate so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
Person surrendering such Shares shall pay to the Exchange Agent any transfer or
other taxes required by reason of the payment of the Merger Consideration to a
Person other than the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not applicable.
(h) DISTRIBUTIONS WITH RESPECT TO UNSURRENDERED SHARES. No dividends or
other distributions with respect to Shares with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the Shares represented thereby. No cash payment in lieu of fractional
shares or interests shall be paid to any holder of a Certificate representing
Exchanged Shares pursuant to Section 2.04(i) until the surrender of such
Certificates in accordance with this Section 2.04.
(i) PAYMENT OF CASH IN LIEU OF FRACTIONAL INTERESTS IN PIK
PREFERRED/WARRANT CONSIDERATION. The following provisions shall apply with
respect to the PIK Preferred/Warrant Consideration:
(i) Subject to the effect of applicable Laws:
(A) following the surrender of any Certificate with respect to
Exchanged Shares, there shall be paid to the holder of such
Certificate, and
(B) following the Merger, there shall be paid to each holder of
an Exchanged Option,
the amount, if any, of cash payable in lieu of a fractional share of
PIK Preferred (with attached Warrant) to which such holder is entitled
pursuant to the remaining provisions of this Section 2.04(i).
15
(ii) No certificates or scrip representing a fractional interest in
shares of PIK Preferred (with attached Warrant) shall be issued
upon the surrender for exchange of Certificates representing
Exchanged Shares ("EXCHANGED SHARE CERTIFICATES") or upon the
cancellation of Exchanged Options, and such fractional share
interests shall not entitle the owner thereof to vote or to any
rights of a stockholder of the Surviving Corporation.
(iii) As promptly as practicable following the Effective Time, the
Exchange Agent shall determine the excess of:
(A) the number of shares of PIK Preferred delivered to the
Exchange Agent by MergeCo pursuant to Section 2.04(a), over
(B) the aggregate number of whole shares of PIK Preferred to be
distributed to holders of the Exchanged Share Certificates
and holders of Exchanged Options (such excess shares,
together with the Warrants which are attached to such excess
shares, being the "EXCESS SHARES").
(iv) If the Excess Shares are traded on a national securities
exchange, then the sale of such Excess Shares by the Exchange
Agent shall be executed on such securities exchange through one
or more member firms of such exchange and shall be executed in
round lots to the extent practicable. MergeCo shall bear the cost
of all related charges and fees of the Exchange Agent,
commissions, transfer taxes and other out-of-pocket transaction
costs. Until the proceeds of such sale or sales have been
distributed to the relevant holders of the Exchanged Share
Certificates and the relevant holders of Exchanged Options, the
Exchange Agent shall hold such proceeds in trust for the relevant
holders of the Exchanged Share Certificates and the relevant
holders of Exchanged Options (the "PIK PREFERRED TRUST"). If the
Exchanged Shares are not traded on a national securities
exchange, then MergeCo shall deposit or cause to be deposited
with the Exchange Agent, in trust for such holders, for credit to
the PIK Preferred Trust in consideration of such Excess Shares,
cash in the amount of the product of:
16
(A) the total number of Excess Shares, and
(B) $25.
(v) The Exchange Agent shall determine the portion of the PIK
Preferred Trust to which each holder of an Exchanged Share
Certificate and each holder of an Exchanged Option is entitled,
if any, by multiplying:
(A) the amount of the aggregate proceeds comprising the PIK
Preferred Trust, by
(B) a quotient, the numerator of which is the amount of the
fractional share interests to which such holder of an
Exchanged Share Certificate or such holder of an Exchanged
Option, as the case may be, is entitled and the denominator
of which is the aggregate amount of fractional share
interests to which all holders of the Exchanged Share
Certificates and holders of Exchanged Options are entitled.
(vi) As soon as practicable after the determination of the amount of
cash to be paid to holders of Exchanged Share Certificates and
holders of Exchanged Options in lieu of any fractional share
interests, the Exchange Agent shall make available such amounts,
without interest, to such holders of Exchanged Share Certificates
who have surrendered their Certificates in accordance with
Section 2.04 of the Agreement and to such holders of Exchanged
Options.
(j) TERMINATION OF EXCHANGE AGENT'S DUTIES. Promptly following the date
which is 180 days after the Effective Time, the Exchange Agent shall deliver to
the Surviving Corporation all cash, Certificates and other documents in its
possession relating to the transactions described in this Agreement, and the
Exchange Agent's duties shall terminate. Thereafter, each holder of a
Certificate formerly representing a Share may surrender such Certificate to the
Surviving Corporation and (subject to applicable abandoned property, escheat and
similar Laws) receive in consideration therefor the aggregate Merger
Consideration relating thereto, without any interest or dividends thereon,
except that dividends shall accrue on the shares of PIK Preferred from the
Effective Time and be paid when certificates representing shares of PIK
17
Preferred are delivered to the holders thereof in accordance with Sections
2.04(c), (d) or (e), as the case may be.
(k) NO TRANSFERS OF SHARES. After the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Corporation of any Shares
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates formerly representing Shares are presented to the
Surviving Corporation or the Exchange Agent, they shall be surrendered and
cancelled in return for the payment of the aggregate Merger Consideration
relating thereto, as provided in this Article II.
(l) NO LIABILITY. None of MergeCo, the Company or the Exchange Agent shall
be liable to any Person in respect of any Retained Shares (or dividends or
distributions with respect thereto), any cash from the Exchange Fund, any
certificates representing shares of PIK Preferred, any certificates representing
Warrants or any other Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar Law. If any
Certificates shall not have been surrendered prior to seven years after the
Effective Time (or immediately prior to such earlier date on which any Retained
Shares (or any dividends or distributions with respect thereto), any cash from
the Exchange Fund, any certificates representing shares of PIK Preferred, any
certificates representing Warrants or any other Merger Consideration would
otherwise escheat to or become the property of any Governmental Entity (as
defined in Section 3.03(b)), any such shares, cash, dividends, distributions or
other considerations 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.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to MergeCo as follows:
SECTION 3.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. The Company and
each of its Subsidiaries (as defined in Section 8.09), which Subsidiaries are
listed on Section 3.01 of the disclosure schedule delivered to MergeCo by the
Company on the date hereof (the "COMPANY DISCLOSURE SCHEDULE"), is a
corporation, partnership or a limited liability company duly organized, validly
existing and in good standing under the Laws of its state or jurisdiction of
incorporation and has all requisite power and authority to own, lease and
operate its properties and to carry on
18
its business as now being conducted and is in good standing in each jurisdiction
where the properties owned, leased or operated, or the business conducted, by it
require such qualification and where failure to be in good standing or to so
qualify would have a Material Adverse Effect on the Company. The term "MATERIAL
ADVERSE EFFECT ON THE COMPANY," as used in this Agreement, means any change in
or effect on the business, financial condition, results of operations or
reasonably foreseeable prospects of the Company or any of its Subsidiaries that
would be materially adverse to the Company and its Subsidiaries taken as a
whole. The Company has heretofore made available to MergeCo a complete and
correct copy of its current certificate of incorporation and by-laws.
SECTION 3.02 CAPITALIZATION; SUBSIDIARIES.
(a) The authorized capital stock of the Company consists of 50,000,000
Common Shares and 10,000,000 shares of preferred stock, par value $.01 per share
("PREFERRED STOCK"), of which 250,000 shares are designated Series A Junior
Preferred Stock, par value $.01 per share ("JUNIOR PREFERRED STOCK").
(b) As of the close of business on June 21, 1999, 19,707,347 Common Shares
were issued and outstanding, all of which are entitled to vote on this
Agreement, and no Common Shares were held in treasury. The Company has no shares
of Preferred Stock issued and outstanding.
(c) As of June 21, 1999, except for:
(i) 3,524,230 Common Shares reserved for issuance pursuant to options
granted under the Company Restated 1993 Stock Award and Incentive
Plan (the "COMPANY STOCK PLAN") which options are outstanding on
the date hereof,
(ii) 3,937,144 Common Shares subject to issuance upon conversion of
the 6% Convertible Quarterly Income Preferred Securities due
October 15, 2027 (the "QUIPS") issued pursuant to the Amended and
Restated Trust Agreement (the "TRUST AGREEMENT") dated as of
October 14, 1997 among the Company, The Bank of New York, The
Bank of New York (Delaware) and the Administrative Trustees named
therein,
(iii) 250,000 shares of Junior Preferred Stock reserved for issuance
upon exercise of the Rights, and
19
(iv) 484,375 Common Shares reserved for issuance pursuant to Big
Flower Holdings, Inc. and Subsidiaries Savings Plus 401(k) Plan
and 489,779 Common Shares reserved for issuance pursuant to
Webcraft, Inc. Employees Accumulated Savings Trust Plan and
pursuant to Webcraft Employee Savings Trust Plan (collectively,
the "401(K) PLANS"),
there are not now, and at the Effective Time there will not be, any
existing options, warrants, calls, subscriptions, or other rights, or other
agreements or commitments, obligating the Company to issue, transfer or sell any
shares of capital stock of the Company or any of its Subsidiaries. Following the
Effective Time, in respect of a Trust Security (as such term is defined in the
Trust Agreement), if a holder of such a Trust Security exercises its conversion
right pursuant to Section 4.3 of the Trust Agreement, the conversion rate will
be such that such holder will be entitled, in respect of such Trust Security, to
1.7344 times the Exchanged Share Merger Consideration to which an Exchanged
Share is entitled pursuant to Section 2.01(c)(i).
(d) All issued and outstanding Common Shares are validly issued, fully
paid, nonassessable and free of preemptive rights.
(e) The Significant Subsidiaries of the Company are set forth on Section
3.02(e)(i) of the Company Disclosure Schedule. All of the outstanding shares of
capital stock of each of the Company's Significant Subsidiaries have been
validly issued and are fully paid and non-assessable and, except as set forth on
Section 3.02(e)(ii) of the Company Disclosure Schedule, are owned by either the
Company or another of its Significant Subsidiaries free and clear of all liens,
charges, claims or encumbrances. A "SIGNIFICANT SUBSIDIARY" of any Person means
any subsidiary or Person that constitutes a significant subsidiary of such
Person within the meaning of Rule 1-02(w) of Regulation S-X promulgated pursuant
to the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT").
(f) The information set forth on Section 3.02(f) of the Company Disclosure
Schedule with respect to the Company and its Subsidiaries is true, complete and
correct in all material respects.
SECTION 3.03 AUTHORITY RELATIVE TO THIS AGREEMENT.
(a) The Company has the requisite corporate power and authority to execute
and deliver this Agreement and, except for the approval of this Agreement by a
vote of a majority of the issued and outstanding Common Shares (the "COMPANY
STOCKHOLDER APPROVAL"), to consummate the transactions contemplated hereby. The
20
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Company Board and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions so
contemplated (other than the Company Stockholder Approval). This Agreement has
been duly and validly executed and delivered by the Company, and, assuming this
Agreement constitutes a valid and binding obligation of MergeCo, this Agreement
constitutes a valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms.
(b) Other than in connection with, or in compliance with, the provisions
of the DGCL with respect to the transactions contemplated hereby, the Exchange
Act, the securities Laws of the various states, ISRA (as defined in 3.14(g)) and
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), no authorization, consent or approval of, or filing with, any
Governmental Entity (as defined in this Section 3.03(b)) is necessary for the
consummation by the Company of the transactions contemplated by this Agreement
other than authorizations, consents and approvals the failure to obtain, or
filings the failure to make, which would not, in the aggregate, have a Material
Adverse Effect on the Company. As used in this Agreement, the term "GOVERNMENTAL
ENTITY" means any government or subdivision thereof, domestic, foreign or
supranational or any administrative, governmental or regulatory authority,
agency, commission, tribunal or body, domestic, foreign or supranational.
SECTION 3.04 NO VIOLATIONS OF LAW.
Except as identified in Section 3.04 of the Company Disclosure Schedule:
(a) except for matters relating to Taxes, employee benefit arrangements,
labor relations and employment and environmental matters (which matters are
covered in Sections 3.11, 3.12, 3.13 and 3.14, respectively), the business
operations of the Company and its Subsidiaries have been conducted in compliance
with all applicable federal, state and local statutes, codes, ordinances, rules
and regulations, judgments, decrees, orders, writs and injunctions of the United
States and all other countries and subdivisions thereof to the extent
applicable, and
(b) the Company and its Subsidiaries hold all permits, licenses and
approvals of all Governmental Entities necessary for the conduct of the
businesses of the Company and its Subsidiaries,
21
except in the case of clause (a) for possible violations, and except in the case
of clause (b) for such permits, licenses and approvals, that would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
SECTION 3.05 NO DEFAULTS OR VIOLATIONS ARISING FROM THE MERGER.
Except as set forth in Section 3.05 of the Company Disclosure Schedule,
the execution and delivery of this Agreement by the Company does not, and the
consummation by the Company of the transactions contemplated by this Agreement
and compliance by the Company with the provisions of this Agreement will not:
(a) constitute a breach of,
(b) conflict with,
(c) result in any violation of,
(d) constitute any default (or an event which, with notice or lapse of
time, or both would constitute a default) under,
(e) constitute a "change of control" under,
(f) require consent from, or the giving of notice to, a third party
pursuant to,
(g) give rise to a right of termination, purchase, repurchase,
cancellation or acceleration of any obligation or to loss of any
property, rights or benefits under,
(h) result in the imposition of any additional obligation under, or
(i) result in the creation of any lien or encumbrance upon any of the
properties or assets of the Company or any of its Subsidiaries, in
each case above as applicable under:
(i) the organizational documents of the Company or any of its
Subsidiaries,
(ii) any contract, instrument, permit, concession, franchise, license,
loan or credit agreement, note, bond, mortgage, indenture, deed
of trust, lease or other property agreement, partnership or joint
22
venture agreement or other legally binding agreement, whether
oral or written, to which the Company or any of its Subsidiaries
is bound, or
(iii) subject to the government filings and other matters referred to
in Section 3.03(b), any judgment, order, decree, statute, Law,
ordinance, rule or regulation applicable to the Company or any
of its Subsidiaries or their respective properties or assets,
other than, in the case of clauses (ii) and (iii), any such breaches,
conflicts, violations, defaults, terminations, accelerations, obligations,
rights, encumbrances, liens or adverse consequences resulting from a change of
control or the failure to obtain consents or provide notices that individually
or in the aggregate would not have a Material Adverse Effect on the Company.
SECTION 3.06 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the SEC
Reports (as defined in Section 3.07(a)) filed prior to the date hereof, since
the date of the latest balance sheet in the Form 10-K:
(a) there has not been any Material Adverse Effect on the Company, whether
or not arising from transactions in the ordinary course of business, and
(b) the Company has conducted its business only in the ordinary course
consistent with past practice.
SECTION 3.07 SEC REPORTS AND FINANCIAL STATEMENTS. (a) Since January 1,
1998, the Company has filed all forms, reports and documents ("SEC REPORTS")
with the Securities and Exchange Commission ("SEC") required to be filed by it
pursuant to the federal securities Laws and the SEC rules and regulations
thereunder. Copies of all such SEC Reports have been made available to MergeCo
or its affiliates by the Company. None of such SEC Reports (as of their
respective filing dates) contained any untrue statement of a material fact or
omitted 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.
(b) The audited and unaudited consolidated financial statements of the
Company included in the SEC Reports (collectively, the "FINANCIAL STATEMENTS"),
including without limitation the financial statements included in the Annual
Report on Form 10-K of the Company for the year ended December 31, 1998 (the
"FORM 10-K"), have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as otherwise stated
in such financial
23
statements, including the related notes) and fairly present the financial
position of the Company and its consolidated Subsidiaries as of the dates
thereof and the results of their operations and changes in financial position
for the periods then ended, subject, in the case of the unaudited financial
statements, to year-end audit adjustments. Except as set forth in the SEC
Reports, at the date of the most recent audited financial statements of the
Company included in the SEC Reports, neither the Company nor any of its
Subsidiaries had, and since such date neither the Company nor any of such
Subsidiaries has incurred, any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) which, individually or in the
aggregate, would be required to be disclosed in a balance sheet prepared in
accordance with generally accepted accounting principles and would reasonably be
expected to have a Material Adverse Effect on the Company except liabilities
incurred in the ordinary and usual course of business and consistent with past
practice and liabilities incurred in connection with the transactions
contemplated by this Agreement.
SECTION 3.08 INFORMATION. None of the information supplied by the Company
in writing (other than projections of future financial performance) specifically
for inclusion or incorporation by reference in (i) the Form S-4 or (ii) any
other document to be filed with the SEC or any other Governmental Entity in
connection with the transactions contemplated by this Agreement (the "OTHER
FILINGS") will:
(a) at the respective times filed with the SEC or other Governmental
Entity and,
(b) in the case of the Proxy Statement, at the date the Proxy Statement or
any amendment or supplement to the Proxy Statement is mailed to stockholders, at
the time of the Special Meeting, and at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, no representation is made by the
Company with respect to (i) any forward-looking information which may have been
supplied by the Company, whether or not included by MergeCo in the Form S-4 or
(ii) statements made in any of the foregoing documents based upon information
supplied by MergeCo.
SECTION 3.09 LITIGATION. Except as set forth on Schedule 3.09 of the
Company Disclosure Schedule, there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of the Company, threatened, against
the
24
Company or any of its Subsidiaries, individually or in the aggregate, which
would have a Material Adverse Effect on the Company or would prevent or
materially delay the consummation of the transactions contemplated by this
Agreement. Except as disclosed in the SEC Reports filed prior to the date of
this Agreement, neither the Company nor any of its Subsidiaries is subject to
any outstanding order, writ, injunction or decree which, individually or in the
aggregate, would have a Material Adverse Effect on the Company or would prevent
or materially delay the consummation of the transactions contemplated hereby.
SECTION 3.10 MATERIAL CONTRACTS.
The Company has heretofore furnished or made available to MergeCo or its
affiliates complete and true copies of all material contracts (together, the
"MATERIAL CONTRACTS"), each of which is listed in Section 3.10 of the Company
Disclosure Schedule. Neither the Company nor any of its Subsidiaries is, or has
received any notice or has any knowledge that any other party is, in default
under any such Material Contract, except for those defaults that would not
reasonably be likely, either individually or in the aggregate, to have a
Material Adverse Effect on the Company; and there has not occurred any event
that, with the lapse of time or the giving of notice or both, would constitute
such a material default.
SECTION 3.11 TAXES.
(a) The Company, each of its Subsidiaries and each affiliated, combined,
consolidated, unitary or aggregate group of which the Company or any of its
Subsidiaries is a member (a "COMPANY AFFILIATED GROUP") (i) has, within the time
and in the manner prescribed by applicable Law, filed all Tax Returns (as
hereinafter defined) required to be filed by it, and all such Tax Returns are
true, complete and correct in all material respects, (ii) has timely paid or
caused to be paid all Taxes (as hereinafter defined) required to be paid except
for Taxes contested in good faith and for which adequate reserves have been
established in the Company's financial statements, and (iii) has made adequate
provision in the Company's financial statements for the payment of all Taxes not
yet due and payable (including deferred Taxes), except in each case where the
failure to file, pay or make adequate provision, as applicable, would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
(b) Except as set forth in Section 3.11(b) of the Company Disclosure
Schedule, there are no outstanding agreements, consents, waivers or requests to
extend (i) the application of the statute of limitations with respect to any
Taxes or Tax Return of the Company, any of its Subsidiaries or any Company
Affiliated Group, or
25
(ii) the time within which to file any Tax Returns of the Company, any of its
Subsidiaries or any Company Affiliated Group, which Tax Return has not since
been timely filed.
(c) Except as set forth on Section 3.11(c) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries (i) has been a member
of a group filing consolidated returns for federal income tax purposes (except
for any group of which the Company is the common parent or the Subsidiary was
the common parent at the time such Subsidiary was acquired by the Company), (ii)
is a party to a Tax sharing or Tax indemnity agreement or any other agreement of
a similar nature that remains in effect or (iii) has any liability for Taxes of
any party (other than the Company or any of its Subsidiaries) under Treasury
Regulation Section 1.1502-6 or any similar provision of state, local or foreign
Law, as a transferee or successor, by contract or otherwise.
(d) Except as set forth on Section 3.11(d) of the Company Disclosure
Schedule, no audits or other administrative proceedings or court proceedings are
presently pending or threatened with regard to any Taxes or Tax Return of the
Company, any of its Subsidiaries or any Company Affiliated Group (other than
those being contested in good faith and for which adequate reserves have been
established) and no material issues have been raised by any Tax authority in
connection with any Tax or Tax Return.
(e) There are no material Tax liens upon any assets or properties of the
Company or any of its Subsidiaries except for statutory liens for Taxes not yet
due.
(f) The Company, each of its Subsidiaries and each Company Affiliated
Group have complied in all material respects with all applicable rules and
regulations relating to the withholding of Taxes.
(g) For purposes of this Agreement, the term "TAXES" means all taxes,
charges, fees, levies or other assessments, including, without limitation, all
income, gross receipts, excise, property, sales, use, occupation, transfer,
license, ad valorem, gains, profits, gift, estimated, social security,
unemployment, disability, premium, recapture, credit, payroll, withholding,
severance, stamp, capital stock, franchise and other taxes or similar charges of
any kind imposed by any Governmental Entity, including any interest and
penalties on or additions to or in respect of a failure to comply with any
requirement relating to any Tax Return. For purposes of this Agreement, the term
"TAX RETURN" means any report, return or other information or document required
to be supplied to a Tax authority or jurisdiction in connection with
26
Taxes, including, without limitation, combined, unitary or consolidated returns
for any group of entities.
SECTION 3.12 EMPLOYEE BENEFITS.
(a) Section 3.12(a) of the Company Disclosure Schedule includes a complete
list of all material employee benefit plans and programs providing benefits to
any employee or former employee of the Company and its subsidiaries sponsored or
maintained by the Company or any of its subsidiaries or to which the Company or
any of its subsidiaries contributes or is obligated to contribute ("PLANS").
Without limiting the generality of the foregoing, the term "Plans" includes all
employee welfare benefit plans within the meaning of Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended and the regulations
thereunder ("ERISA"), and all employee pension benefit plans within the meaning
of Section 3(2) of ERISA. Each of the Plans that is subject to Section 302 or
Title IV of ERISA or Section 412 of the Internal Revenue Code of 1986, as
amended (the "CODE") is identified on Section 3.12(a) of the Company Disclosure
Schedule (the "TITLE IV PLANS"). Neither the Company nor any of its Subsidiaries
has any commitment or formal plan, whether legally binding or not, to create any
additional material employee benefit plan or modify or change any existing Plan
that would affect any employee or former employee of the Company or any
Subsidiary in any material respect.
(b) With respect to each Plan, the Company has heretofore delivered or
made available to MergeCo or its affiliates true and complete copies of each of
the following documents:
(i) a copy of the Plan and any amendments thereto (or if the Plan is
not a written Plan, a description of the material terms thereof);
(ii) a copy of the two most recent annual reports and actuarial
reports, if required under ERISA, and the most recent report
prepared with respect thereto in accordance with Statement of
Financial Accounting Standards No. 87;
(iii) a copy of the most recent Summary Plan Description required
under ERISA with respect thereto;
(iv) if the Plan is funded through a trust or any third party funding
vehicle, a copy of the trust or other funding agreement and the
latest financial statements thereof; and
27
(v) the most recent determination letter received from the Internal
Revenue Service with respect to each Plan intended to qualify
under section 401 of the Code.
(c) No material liability under Title IV or Section 302 of ERISA or
Sections 412 or 4871 of the Code has been incurred by the Company with respect
to any Plan or any "single-employer plan," within the meaning of Section
4001(a)(15) of ERISA, of any trade or business (whether or not incorporated)
which would be considered one employer with the Company under Section 4001 of
ERISA or Section 414 of the Code (an "ERISA AFFILIATE") that has not been
satisfied in full, and to the knowledge of the Company no condition exists that
presents a material risk to the Company or any ERISA Affiliate of incurring any
such liability, other than liability for premiums due the Pension Benefit
Guaranty Corporation ("PBGC") (which premiums have been paid when due). Without
limiting the generality of the foregoing, none of the Company, its Subsidiaries
nor any ERISA Affiliate of the Company or any of its Subsidiaries has engaged in
any transaction described in Section 4069 or Section 4204 or 4212 of ERISA.
(d) All contributions required to be made with respect to any Plan on or
prior to the Effective Time have been timely made or are reflected on the
Company's balance sheet, except for instances where failure to make such
contributions would not, either individually or in the aggregate, have a
Material Adverse Effect on the Company.
(e) Except as disclosed in Section 3.12(e) of the Company Disclosure
Schedule, No Title IV Plan is a "multiemployer pension plan," as defined in
section 3(37) of ERISA, nor is any Title IV Plan a plan described in section
4063(a) of ERISA.
(f) Neither the Company nor any Subsidiary has engaged in a transaction
with respect to any Plan or any trust created thereunder in connection with
which the Company or any Subsidiary, could be subject to either a civil penalty
assessed pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to
Section 4975 or 4976 of the Code in an amount which would be material.
(g) Except as set forth in Section 3.12(g) of the Company Disclosure
Schedule, the Company and each of its subsidiaries has complied, and is now in
compliance, in all material respects with all provisions of ERISA, the Code, and
all Laws and regulations applicable to the Plans. With respect to each Plan that
is intended to be a "qualified plan" within the meaning of section 401(a) of the
Code, the IRS has issued a favorable determination letter.
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(h) Except as set forth on Section 3.12(a) of the Company Disclosure
Schedule, no Plan provides medical, surgical, hospitalization, death or similar
benefits (whether or not insured) for employees or former employees of the
Company or any Subsidiary for periods extending beyond their retirement or other
termination of service, other than (i) coverage mandated by applicable Law, (ii)
death benefits under any "pension plan," or (iii) benefits the full cost of
which is borne by the current or former employee (or his beneficiary). No
condition exists that would prevent the Company or any Subsidiary from amending
or terminating any Plan providing health or medical benefits in respect of any
active employee of the Company or any Subsidiary.
(i) Except as set forth on Section 3.12(i) of the Company Disclosure
Schedule, or in the SEC Reports, no amounts payable by the Company to Persons
who are "covered persons" within the meaning of Section 162(M) of the Code or
"disqualified individuals" within the meaning of Section 280G of the Code will
fail to be deductible for federal income tax purposes by virtue of Section
162(M) or 280G of the Code.
SECTION 3.13 LABOR RELATIONS AND EMPLOYMENT.
(a) Except (x) as disclosed in the SEC Reports filed on or before the date
hereof, and, (y) as set forth on Section 3.13(a) of the Company Disclosure
Schedule and (z) for matters which would not (other than in the case of clause
(iii) or (iv) of this sentence) result in a Material Adverse Effect:
(i) there is no labor strike, dispute, slowdown, stoppage or
lockout actually pending, or, to the best knowledge of the
Company, threatened against the Company or any of its
Subsidiaries, and during the past three years there has not
been any such action;
(ii) to the best knowledge of the Company, no union claims to
represent the employees of the Company or any of its
Subsidiaries;
(iii) neither the Company nor any of its Subsidiaries is a party to
or bound by any collective bargaining or similar agreement
with any labor organization, or work rules or practices agreed
to with any labor organization or employee association
applicable to employees of the Company or any of its
Subsidiaries;
29
(iv) none of the employees of the Company or any of its
Subsidiaries is represented by any labor organization and the
Company does not have any knowledge of any current union
organizing activities among the employees of the Company or
any of its Subsidiaries, nor does any question concerning
representation exist concerning such employees;
(v) the Company and its Subsidiaries are, and have at all times
been, in material compliance with all applicable Laws
respecting employment and employment practices, terms and
conditions of employment, wages, hours of work and
occupational safety and health, and are not engaged in any
unfair labor practices as defined in the National Labor
Relations Act or other applicable Law, ordinance or
regulation;
(vi) there is no unfair labor practice charge or complaint against
the Company or any of its Subsidiaries pending or, to the
knowledge of the Company, threatened before the National Labor
Relations Board or any similar state or foreign agency;
(vii) there is no grievance arising out of any collective bargaining
agreement or other grievance procedure;
(viii)no charges with respect to or relating to the Company or any
of its Subsidiaries are pending before the Equal Employment
Opportunity Commission or any other agency responsible for the
prevention of unlawful employment practices;
(ix) neither the Company nor any of its Subsidiaries has received
notice of the intent of any federal, state, local or foreign
agency responsible for the enforcement of labor or employment
Laws to conduct an investigation with respect to or relating
to the Company or any of its Subsidiaries and no such
investigation is in progress;
(x) there are no complaints, lawsuits or other proceedings pending
or to the best knowledge of the Company threatened in any
forum by or on behalf of any present or former employee of the
Company or any of its Subsidiaries alleging breach of any
express or implied contract of employment, any Law or
regulation governing employment or the termination thereof or
30
other discriminatory, wrongful or tortious conduct in
connection with the employment relationship.
(b) Except as set forth in Section 3.13(b) of the Company Disclosure
Schedule, to the best knowledge of the Company, since the enactment of the
Worker Adjustment and Retraining Notification ("WARN") Act, there has not been
(i) a "plant closing" (as defined in the WARN Act) affecting any site of
employment or one or more facilities or operating units within any site of
employment or facility of the Company or any of its Subsidiaries; or (ii) a
"mass layoff" (as defined in the WARN Act) affecting any site of employment or
facility of the Company or any of its Subsidiaries; nor has the Company or any
of its Subsidiaries been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar state or local Law. To the best knowledge of the Company, none of the
employees of the Company or any of its Subsidiaries has suffered an "employment
loss" (as defined in the WARN Act) since three months prior to the date of this
Agreement.
SECTION 3.14 ENVIRONMENTAL MATTERS. Except as disclosed in Schedule 3.14:
(a) The Company and its Subsidiaries have been and are in compliance with
all applicable Environmental Laws as in effect on the date hereof, except for
such violations and defaults as would not, individually or in the aggregate,
have a Material Adverse Effect on the Company.
(b) The Company and its Subsidiaries possess all Environmental Permits
required for the current operation of the Business pursuant to Environmental
Laws as in effect on the date hereof, all such Environmental Permits are in
effect, there are no pending or, to the best knowledge of the Company,
threatened proceedings to revoke such Environmental Permits and the Company and
its Subsidiaries are, to the best knowledge of the Company, in compliance with
all terms and conditions thereof, except for such failures to possess or comply
with Environmental Permits as would not, individually or in the aggregate, have
a Material Adverse Effect on the Company. In connection with any pending
applications or proceedings for new, renewal or modified Environmental Permits,
the Company has not received written notice that modifications to the terms,
conditions and requirements of such Environmental Permits may be imposed or
required that, individually or in the aggregate, would have a Material Adverse
Effect on the Company.
(c) Except for matters which would not, individually or in the aggregate,
have a Material Adverse Effect on the Company, neither the Company nor any
31
Subsidiary has received any written notification that the Company or any
Subsidiary, as a result of any of the current or past operations of the
Business, or any property currently or formerly owned or leased in connection
with the Business, is or may be the subject of any proceeding, investigation,
claim, lawsuit or order by any Governmental Entity or other person, relating to
(i) any violation or alleged violation of Environmental Laws; (ii) any Remedial
Action; or (iii) any Release or threatened Release of Hazardous Substances,
whether or not such Release or threatened Release has occurred or is occurring
at properties currently or formerly owned or operated by the Company or its
Subsidiaries; and (iv) any Environmental Liabilities and Costs.
(d) Except as would not have a Material Adverse Effect on the Company,
none of the Company and its Subsidiaries has entered into any written agreement
with any Governmental Entity, or is subject to any Order or decree, by which the
Company or any subsidiary has assumed responsibility or is responsible, either
directly or as a guarantor or surety, for the remediation of any Release of
Hazardous Substances into the environment in connection with the Business,
including for cost recovery with respect to such Releases.
(e) There is not now and has not been at any time in the past, a Release
of Hazardous Substances for which the Company or any Subsidiary is required or
is reasonably likely to be required to perform a Remedial Action pursuant to
applicable Environmental Laws as currently in effect, or will incur
Environmental Liabilities and Costs that, with respect to any matter covered by
this Section 3.14(e) would, individually or in the aggregate, have a Material
Adverse Effect on the Company.
(f) This Section contains the only representations and warranties
concerning the Company or any Subsidiary relating to any Environmental Law,
Environmental Liabilities and Costs, or Environmental Permits.
(g) For purposes of this Agreement:
(i) "BUSINESS" means the current and former businesses of the
Company and its Subsidiaries including, but not limited to,
businesses or Subsidiaries that have been previously sold by
the Company, its Subsidiaries or any predecessors thereto.
(ii) "ENVIRONMENTAL LAWS" shall mean all foreign, federal, state
and local Laws, regulations, rules and ordinances relating to
pollution or protection of the environment or human health and
safety as it relates to Hazardous Substances, including,
without limitation, Laws relating to Releases or threatened
Releases of
32
Hazardous Substances in the environment (including, without
limitation, ambient air, surface water, groundwater, land,
surface and subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment,
storage, Release, transport or handling of Hazardous
Substances and all Laws and regulations with regard to record
keeping, notification, disclosure and reporting requirements
respecting Hazardous Substances, and all Laws relating to
endangered or threatened species of fish, wildlife and plants
and the management or use of natural resources.
(iii) "ENVIRONMENTAL LIABILITIES AND COSTS" means all damages,
natural resource damages, claims, losses, expenses, costs,
obligations, and liabilities (collectively, "Losses"), whether
direct or indirect, known or unknown, current or potential,
past, present or future, imposed by, under or pursuant to
Environmental Laws, including, but not limited to, all Losses
related to Remedial Actions, and all fees, capital costs,
disbursements, penalties, fines and expenses of counsel,
experts, contractors, personnel and consultants.
(iv) "ENVIRONMENTAL PERMITS" means any federal, state, foreign or
local permit, license, registration, consent, certificate,
approval or other authorization necessary for the conduct of
the Business as currently conducted under any Environmental
Law.
(v) "HAZARDOUS SUBSTANCES" means any substance that (A) is
defined, listed or identified or otherwise regulated as a
"hazardous waste," "hazardous material" or "hazardous
substance" "toxic substance," "hazardous air pollutant,"
"pollutant" or "contaminant" or words of similar meaning and
regulatory effect under any Environmental Law (including,
without limitation, radioactive substances, polychlorinated
biphenyls, petroleum and petroleum derivatives and products)
or (B) requires investigation, removal or remediation under
applicable Environmental Law.
(vi) "ISRA" means the New Jersey Industrial Site Recovery Act,
N.J.S.A. 13:IK-6 et seq.
33
(vii) "RELEASE" shall mean any release, spill, emission, discharge,
leaking, pumping, injection, deposit, discharge, dispersal,
leaching or migration into the environment (including, without
limitation, ambient air, surface water, groundwater, and
surface or subsurface strata) or into or out of any property,
including the movement of Hazardous Substances through the
air, soil, surface water, groundwater or property, but not
including any discharge or emission in compliance with an
Environmental Permit.
(viii)"REMEDIAL ACTION" means all actions required by Governmental
Entity pursuant to Environmental Law or otherwise taken as
necessary to comply with Environmental Law to (A) clean up,
remove, treat or in any other way remediate any Hazardous
Substances; (B) prevent the release of Hazardous Substances so
that they do not migrate or endanger or threaten to endanger
public health or welfare or the environment; or (C) perform
studies, investigations or monitoring in respect of any such
matter.
SECTION 3.15 INTELLECTUAL PROPERTY.
(a) The Company and its Subsidiaries own or possess valid and adequate
licenses or other legal rights to use all material Intellectual Property as are
necessary to permit the Company and its Subsidiaries to conduct the business as
presently conducted, free and clear of all liens, claims, and encumbrances, and
except for those licenses issued to third parties in the ordinary course of
business, free and clear of all material licenses to third parties.
(b) The conduct of the business as presently conducted does not infringe
on the Intellectual Property rights of any Person except for such infringements
which, individually or in the aggregate, would not have a Material Adverse
Effect on the Company.
(c) To the Company's knowledge, all filings, registrations and issuances
pertaining to the material Intellectual Property owned by the Company and its
Subsidiaries, including any and all patents, registered trademarks and copyright
registrations, are in full force and effect and the Company and its Subsidiaries
have good and marketable title thereto.
34
(d) To the Company's knowledge, there are no threats of claims or
challenges to the validity or effectiveness of the Intellectual Property as are
necessary to permit the Company and its Subsidiaries to conduct the business as
presently conducted, which individually or in the aggregate would have a
Material Adverse Effect on the Company.
(e) As employed herein, the term "INTELLECTUAL PROPERTY" shall mean:
(i) registered and unregistered trademarks, service marks, slogans,
trade names, logos, Internet domain names and trade dress
together with the goodwill associated therewith;
(ii) patents, patent applications and invention disclosures;
(iii) registered and unregistered copyrights, including, but not
limited to, copyrights in software and databases;
(iv) software programs and databases;
(v) trade secrets, proprietary information and other proprietary
intellectual property rights, and
(vi) agreements pursuant to which the Company or a Subsidiary has
obtained the right to use any of the foregoing.
SECTION 3.16 YEAR 2000 COMPLIANCE.
(a) Except as set forth in Section 3.16 of the Company Disclosure
Schedule, all software, systems and hardware owned or used by the Company and
its Subsidiaries are substantially Year 2000 Compliant and are reasonably
expected to be Year 2000 Compliant by December 31, 1999, except for such
software, systems and hardware the failure of which to be Year 2000 Compliant
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company.
(b) The Company and its Subsidiaries have taken, or are taking,
commercially reasonable steps to determine whether all material third party
software, systems and hardware used by, for, or on behalf of the Company and its
Subsidiaries are Year 2000 Compliant or are reasonably expected to be Year 2000
Compliant by December 31, 1999.
35
(c) As used herein, "YEAR 2000 COMPLIANT" means for all dates and times,
including, without limitation, dates and times before, on and after December 31,
1999, when used on a stand-alone system or in combination with other software or
systems of the Company and its Subsidiaries, other than any errors or
malfunctions which are the result of any incorrect date and time information
incorporated into calculations from systems external to the Company and its
Subsidiaries:
(i) the application system consistently functions and receives and
processes dates and times correctly without abnormal results;
(ii) no date related calculations are incorrect (including, without
limitation, age calculations, duration calculations and
scheduling calculations) as a result of the advent of the year
2000;
(iii) all manipulations and comparisons of date-related data produce
correct and consistent results for all valid date values within
the scope of the application;
(iv) there is no century ambiguity;
(v) all reports and displays are sorted correctly; and
(vi) leap years are accounted for and correctly identified (including,
without limitation, that the year 2000 is recognized as a leap
year).
SECTION 3.17 RIGHTS AGREEMENT.
(a) The Company and the Company Board have taken all action to amend the
Rights Agreement (the "RIGHTS AMENDMENT") so that the execution and delivery of
this Agreement (and any amendments thereto by the parties hereto) and the
consummation of the Merger and the transactions contemplated thereby, will not
cause:
(i) the Rights (as defined in the Rights Agreement) to become
exercisable pursuant to Section 11(a)(ii) thereof or otherwise,
(ii) MergeCo or any of its affiliates to constitute an "Acquiring
Person" (as defined in the Rights Agreement),
36
(iii) a "Distribution Date," a "Triggering Event," or a "Stock
Acquisition Date" (as each term is defined in the Rights
Agreement) to occur, or
(iv) the Rights to otherwise be operative with respect to the
transactions contemplated by this Agreement, and
such amendment will be in full force and effect from and after the date hereof.
(b) As a result of the Rights Amendment, the Rights will expire as of
immediately before the Effective Time.
SECTION 3.18 BOARD RECOMMENDATION. The Company Board, at a meeting duly
called and held, has:
(a) determined that this Agreement and the transactions contemplated
hereby, taken together, and the Certificate Amendments are advisable and in the
best interests of the Company and its stockholders; and
(b) subject to the other provisions hereof, resolved to recommend that the
holders of the Shares approve this Agreement, and the transactions contemplated
hereby, including the Merger, and the Certificate Amendments.
SECTION 3.19 REQUIRED COMPANY VOTE. The Company Stockholder Approval,
being the affirmative vote of a majority of the Shares, is the only vote of the
holders of any class or series of the Company's securities necessary to approve
this Agreement, the Merger and the other transactions contemplated hereby, and
the Certificate Amendments.
SECTION 3.20 RELATED PARTY TRANSACTIONS. Except as previously disclosed to
MergeCo in writing or as disclosed in the SEC Reports, no director, officer,
partner, "affiliate" or "associate" (as such terms are defined in Rule 12b-2
under the Exchange Act) of the Company or any of its Subsidiaries, to the
knowledge of the Company:
(i) has outstanding any indebtedness or other similar obligations
to the Company or any of its Subsidiaries in excess of
$60,000;
(ii) owns any direct or indirect interest of any kind in (other
than a de minimus interest), or is a director, officer,
employee, partner, affiliate or associate of, or consultant or
lender to, or borrower
37
from, or has the right to participate in the management,
operations or profits of, any person or entity which is:
(A) a competitor, supplier, customer, distributor, lessor,
tenant, creditor or debtor of the Company or any of its
Subsidiaries,
(B) engaged in a business related to the business of the
Company or any of its Subsidiaries,
(C) participating in any transaction to which the Company or
any of its Subsidiaries is a party, or
(iii) is otherwise a party to any contract, arrangement or
understanding with the Company or any of its Subsidiaries
except any such contract, arrangement or understanding
providing for (A) such Person's employment by the Company or
one of its Subsidiaries, or (B) employee or other fringe
benefits, or (C) options or other rights, granted pursuant to
the Company Stock Plan.
SECTION 3.21 STATE TAKEOVER STATUTES. The Company Board has taken such
action so that no statute, takeover statute or similar statute or regulation of
the State of Delaware, including the provisions of Section 203 of the DGCL (and,
to the knowledge of the Company after due inquiry, of any other state or
jurisdiction), applies to this Agreement, the Merger, or any of the other
transactions contemplated hereby. Except for the Rights Agreement, neither the
Company nor any of its Subsidiaries has any rights plan, preferred stock or
similar arrangement which have any of the aforementioned consequences in respect
of the transactions contemplated hereby.
SECTION 3.22 BROKERS AND FINDERS. Except for the engagement of Xxxxxxx,
Xxxxx & Co. and Xxxxxxxx Xxxxxxx & Company, none of the Company, any of its
Subsidiaries, or any of their respective officers, directors or employees has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finder's fees in connection with the transactions contemplated by
this Agreement.
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SECTION 3.23 OPINIONS OF INVESTMENT BANKING FIRMS. The Company has
received the opinions of Xxxxxxx, Xxxxx & Co. and Xxxxxxxx Xxxxxxx & Company,
each dated the date hereof, to the effect that, the Exchanged Share Merger
Consideration to be received by the holders of Shares pursuant to the Merger is
fair to the Company's stockholders (other than holders of Retained Shares, as to
which Xxxxxxx, Xxxxx & Co. and Xxxxxxxx, Xxxxxxx & Company express no opinion)
from a financial point of view.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MERGECO
MergeCo represents and warrants to the Company as follows:
SECTION 4.01 ORGANIZATION AND QUALIFICATION. MergeCo is a corporation duly
organized, validly existing and in good standing under the Laws of its state or
jurisdiction of incorporation and is in good standing as a foreign corporation
in each other jurisdiction where the properties owned, leased or operated, or
the business conducted, by it require such qualification and where failure to be
in good standing or to so qualify would have a Material Adverse Effect on
MergeCo. The term "MATERIAL ADVERSE EFFECT ON MERGECO", as used in this
Agreement, means any change in or effect on the business, financial condition,
results of operations or reasonably foreseeable prospects of MergeCo or any of
its Subsidiaries that would be materially adverse to MergeCo.
SECTION 4.02 AUTHORITY RELATIVE TO THIS AGREEMENT.
(a) MergeCo has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of MergeCo and no other corporate proceedings on the part of
MergeCo are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by MergeCo and, assuming this Agreement constitutes a valid and
binding obligation of the Company, this Agreement constitutes a valid and
binding agreement of MergeCo, enforceable against MergeCo in accordance with its
terms.
(b) Other than in connection with, or in compliance with, the provisions
of the DGCL with respect to the transactions contemplated hereby, the Exchange
Act,
39
the securities Laws of the various states and the HSR Act, no authorization,
consent or approval of, or filing with, any Governmental Entity is necessary for
the consummation by MergeCo of the transactions contemplated by this Agreement
other than authorizations, consents and approvals the failure to obtain, or
filings the failure to make, which would not, in the aggregate, have a Material
Adverse Effect on MergeCo.
SECTION 4.03 NO VIOLATION. Neither the execution or delivery of this
Agreement by MergeCo nor the consummation by MergeCo of the transactions
contemplated hereby will:
(a) constitute a breach or violation of any provision of the certificate
of incorporation or by-laws of MergeCo, or
(b) constitute a breach, violation or default (or any event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in the
creation of any lien or encumbrance upon any of the properties or assets of
MergeCo under, any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument to which MergeCo is a party or by which it
or any of its properties or assets are bound,
other than breaches, violations, defaults, terminations, accelerations or
creation of liens and encumbrances which, in the aggregate, would not have a
Material Adverse Effect on MergeCo.
SECTION 4.04 INFORMATION. None of the information supplied by MergeCo in
writing (other than projections of future financial performance) specifically
for inclusion or incorporation by reference in (i) the Form S-4 or (ii) the
Other Filings will:
(a) at the respective times filed with the SEC or other Governmental
Entity and,
(b) in the case of the Proxy Statement, at the date the Proxy Statement or
any amendment or supplement to the Proxy Statement is mailed to stockholders, at
the time of the Special Meeting and at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
40
Notwithstanding the foregoing, no representation is made by MergeCo with respect
to statements made in any of the foregoing documents based upon information
supplied by the Company.
SECTION 4.05 FINANCING. Schedule 6.02(e) sets forth true and complete
copies of written documentation from third parties which provides for financing
in amounts sufficient to consummate the transactions contemplated hereby as
contemplated by Section 6.02(e). As of the date hereof, none of MergeCo., its
representatives or its affiliates has any reason to believe that the financing
contemplated by such written documentation will not be obtained on the terms and
subject to the conditions set forth in such documentation, or that such
conditions will not be satisfied.
SECTION 4.06 DELAWARE LAW. MergeCo was not immediately prior to the
execution of this Agreement, an "interested stockholder" within the meaning of
Section 203 of the DGCL and neither MergeCo, nor any of its "affiliates" or
"associates" (as such terms are defined in the Rights Agreement) beneficially
owns any Common Shares on the date hereof.
SECTION 4.07 NEWLY ORGANIZED. MergeCo was formed solely for the purpose of
engaging in the Merger and the other transactions contemplated by this Agreement
and has engaged in no other business activities.
ARTICLE V
COVENANTS
SECTION 5.01 CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by
this Agreement or as expressly agreed to in writing by MergeCo, during the
period from the date of this Agreement to the Effective Time, the Company shall,
and shall cause each of its Subsidiaries to, conduct its operations according to
its ordinary and usual course of business and consistent with past practice and
use its and their respective reasonable best efforts to preserve intact their
current business organizations, keep available the services of their current
officers and employees and preserve their relationships with customers,
suppliers, licensors, licensees, advertisers, distributors and others having
business dealings with them and to preserve goodwill. Without limiting the
generality of the foregoing, and except as (x) otherwise expressly provided in
this Agreement, (y) required by Law, or (z) as set forth on Section 5.01 of the
Company Disclosure Schedule, prior to the Effective
41
Time, the Company shall not, and shall cause its Subsidiaries not to, without
the consent of MergeCo (which consent shall not be unreasonably withheld):
(a) except with respect to annual bonuses made in the ordinary course of
business consistent with past practice, and except as required by Law, adopt or
amend in any material respect any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right, pension,
retirement, employment or other employee benefit agreement, trust, plan or other
arrangement for the benefit or welfare of any director, officer or employee of
the Company or any of its Subsidiaries or increase in any manner the
compensation or fringe benefits of any director, officer or employee of the
Company or any of its Subsidiaries or pay any benefit not required by any
existing agreement or place any assets in any trust for the benefit of any
director, officer or employee of the Company or any of its Subsidiaries not
required by any existing agreement (in each case, except with respect to
employees and directors in the ordinary course of business consistent with past
practice);
(b) incur any indebtedness for borrowed money in excess of $1,000,000 on
an aggregate basis, other than indebtedness under existing lines of credit drawn
to fund working capital (defined as current assets (excluding cash and cash
equivalents) minus current liabilities, each as determined in accordance with
generally acceptable accounting principles applied on a consistent basis) in the
ordinary course of business and consistent with past practice;
(c) expend funds for capital expenditures (including capitalized software
and lease-buybacks but other than expenditures permitted pursuant to Section
5.01(i)) that in the aggregate would cause total capital expenditure (including
capitalized software and lease-buybacks but other than expenditures permitted
pursuant to Section 5.01(i)) for the period from January 1, 1999 to the
Effective Time to exceed an amount equal to $102,500,000;
(d) sell, lease, license, mortgage or otherwise encumber or subject to any
lien or otherwise dispose of any of its properties or assets other than
immaterial properties or assets (or immaterial portions of properties or
assets), except in the ordinary course of business consistent with past
practice;
(e) (i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock (except (A) as
contemplated by the Rights Agreement and (B) for dividends paid by Subsidiaries
to the Company with respect to capital stock), (ii) 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
42
substitution for shares of its capital stock or (iii) purchase, redeem or
otherwise acquire any shares of capital stock of the Company or any of its
Subsidiaries or any other securities thereof or any rights, warrants or options
to acquire any such shares or other securities;
(f) except for issuances (i) upon exercise of presently outstanding awards
under the Company Stock Plan and (ii) upon conversion of the QUIPS, (iii) of up
to 50,000 Common Shares pursuant to the 401(k) Plans, or (iv) as previously
disclosed in writing to MergeCo or its affiliates, authorize for issuance,
issue, deliver, sell or agree or commit to issue, sell or deliver (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise), pledge or otherwise encumber
any shares of its capital stock or the capital stock of any of its Subsidiaries,
any other voting securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting securities or
convertible securities or any other securities or equity equivalents (including
without limitation stock appreciation rights);
(g) amend its certificate of incorporation, by-laws or equivalent
organizational documents or alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or ownership of
any material subsidiary of the Company;
(h) except as provided in Section 5.01(c), make or agree to make any
acquisition of assets which is material to the Company and its Subsidiaries,
taken as a whole, except for (i) purchases of inventory and supplies in the
ordinary course of business or (ii) pursuant to purchase orders entered into in
the ordinary course of business which do not call for payments in excess of
$5,000,000 per annum;
(i) except as previously disclosed to MergeCo in writing, acquire any
business (whether by merger, consolidation, purchase of assets or otherwise) or
acquire any equity interest in any person not an affiliate (whether through a
purchase of stock, establishment of a joint venture or otherwise);
(j) change its principles of accounting in effect at December 31, 1998,
except as required by changes in generally accepted accounting principles or Law
or regulation or as discussed in the SEC Reports, or change any of its methods
of reporting income and deductions for federal income tax purposes from those
employed in the preparation of the federal income tax returns of the Company for
the taxable year ending December 31, 1998, except as required by changes in Law
or regulation;
43
(k) settle or compromise any shareholder derivative suits arising out of
the transactions contemplated hereby or any other material litigation (whether
or not commenced prior to the date of this Agreement) or settle, pay or
compromise any claims not required to be paid, other than in consultation and
cooperation with MergeCo, and, with respect to any such settlement, with the
prior written consent of MergeCo (which consent will not be unreasonably
withheld);
(l) enter into or amend in a manner adverse to MergeCo any new agreement
which has a non-competition, geographical restriction or similar covenant that
would be material to the Company;
(m) make or rescind any material election relating to Taxes, or settle any
material claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes; or
(n) authorize, or commit or agree to take, any of the foregoing actions.
SECTION 5.02 ACCESS TO INFORMATION. From the date of this Agreement until
the Effective Time, the Company shall, and shall cause its Subsidiaries, and
each of their respective officers, directors, employees, counsel, advisors and
representatives (collectively, the "COMPANY REPRESENTATIVES") to, give MergeCo
and their respective officers, employees, counsel, advisors, representatives
(collectively, the "MERGECO REPRESENTATIVES") and representatives of financing
sources identified by MergeCo reasonable access, upon reasonable notice and
during normal business hours, to the offices and other facilities and to the
books and records of the Company and its Subsidiaries and will cause the Company
Representatives and the Company's Subsidiaries to furnish MergeCo and the
MergeCo Representatives and representatives of financing sources identified by
MergeCo with such financial and operating data and such other information with
respect to the business and operations of the Company and its Subsidiaries as
MergeCo and representatives of financing sources identified by MergeCo may from
time to time reasonably request. MergeCo agrees that any information furnished
pursuant to this Section 5.02 shall be subject to the provisions of the letter
agreement dated March 11, 1999 between THL and the Company (the "CONFIDENTIALITY
AGREEMENT").
SECTION 5.03 EFFORTS.
(a) Each of the Company and MergeCo shall, and the Company shall cause
each of its Subsidiaries to, make all necessary filings with Governmental
Entities as promptly as practicable in order to facilitate prompt consummation
of the transactions contemplated by this Agreement. In addition, each of MergeCo
and the
44
Company shall use its reasonable best efforts (including, without limitation,
payment of any required fees) and shall cooperate fully with each other to:
(i) comply as promptly as practicable with all governmental
requirements applicable to the transactions contemplated by
this Agreement, including the making of all filings necessary
or proper under applicable Laws and regulations to consummate
and make effective the transactions contemplated by this
Agreement, including, but not limited to, cooperation in the
preparation and filing of the Form S-4 and any actions or
filings related thereto, the Proxy Statement and any
amendments to any thereof,
(ii) obtain promptly all consents, waivers, approvals,
authorizations or permits of, or registrations or filings with
or notifications to (any of the foregoing being a "CONSENT"),
any Governmental Entity necessary for the consummation of the
transactions contemplated by this Agreement (except for such
Consents the failure of which to obtain would not prevent or
materially delay the consummation of the Merger), and
(iii) take such other reasonable actions to implement the trans-
actions contemplated hereby.
Subject to the Confidentiality Agreement, MergeCo and the Company shall
furnish to one another such necessary information and reasonable assistance as
MergeCo or the Company may reasonably request in connection with the foregoing.
(b) Without limiting Section 5.03(a), MergeCo and the Company shall each:
(i) promptly make or cause to be made the filings required of such
party under the HSR Act with respect to the Merger;
(ii) use its reasonable best efforts to avoid the entry of, or to
have vacated or terminated, any decree, order, or judgment
that would restrain, prevent or delay the consummation of the
Merger, including without limitation defending through
litigation on the merits any claim asserted in any court by
any party; and
(iii) take any and all steps which, in such party's judgment, are
commercially reasonable to avoid or eliminate each and every
impediment under any antitrust, competition, or trade
regulation
45
Law that may be asserted by any Governmental Entity with
respect to the Merger so as to enable consummation thereof to
occur as soon as reasonably possible.
Each party hereto shall promptly notify the other party of any
communication to that party from any Governmental Entity and permit the other
party to review in advance any proposed communication to any Governmental
Entity. MergeCo and the Company shall not (and shall cause their respective
affiliates and representatives not to) agree to participate in any meeting with
any Governmental Entity in respect of any filings, investigation or other
inquiry unless it consults with the other party in advance and, to the extent
permitted by such Governmental Entity, give the other party the opportunity to
attend and participate therein. Subject to the Confidentiality Agreement, each
of the parties hereto shall coordinate and cooperate fully with the other
parties hereto in exchanging such information and providing such assistance as
such other parties may reasonably request in connection with the foregoing and
in seeking early termination of any applicable waiting periods under the HSR Act
or in connection with other Consents. Each of the Company and MergeCo agrees to
respond promptly to and comply fully with any request for additional information
or documents under the HSR Act. Subject to the Confidentiality Agreement, the
Company shall provide MergeCo, and MergeCo shall provide the Company, with
copies of all correspondence, filings or communications (or memoranda setting
forth the substance thereof) between such party or any of its representatives,
on the one hand, and any Governmental Entity or members of its staff, on the
other hand, with respect to this Agreement and the transactions contemplated
hereby.
(c) MergeCo shall use commercially reasonable efforts to cause the
financing necessary for satisfaction of the condition in Section 6.02(e) to be
obtained on the terms set forth in the commitment letters attached to Schedule
6.02(e); provided, however, that MergeCo shall be entitled to:
(i) enter into commitments for equity and debt financing with
other nationally recognized financial institutions, which
commitments will have substantially the same terms as those
set forth in the commitment letters and which commitments may
be substituted for such commitment letters, and
(ii) modify the capital structure set forth in such commitment
letters so long as:
(A) the total committed common equity equals at least $390
million (including (1) the Retained Shares, (2) the
portion
46
of any Options which at the time of the Merger is
exchanged for Common Shares and (3) the Investment
Instrument, if any, as defined below),
(B) the aggregate Cash Price paid to all stockholders of the
Company is no less than otherwise would have been paid in
accordance with this Agreement, and
(C) such modified financing is no less certain than that set
forth in such commitment letter.
"INVESTMENT INSTRUMENT" shall mean securities, instruments or arrangements
which replace a portion of the equity commitment set forth in Schedule 6.02 by
means of (x) redeemable stock, (y) prepaid forward contracts, or (z) some other
securities, instruments or arrangements; provided, however, that:
(A) such securities, instruments or arrangements shall have an
interest or dividend rate of no more than 10%,
(B) such securities, instruments or arrangements shall in no
event be entitled to a call on more than $60 million in
the aggregate of the assets of the Company and its
Subsidiaries, such amount to increase at a rate of 10% per
annum, compounding semiannually, such total amount to be
valued at the time such assets leave the control of the
Company, and
(C) such arrangement may include the establishment of an
entity to be funded by (1) a cash contribution by MergeCo
or any of its affiliates and (2) subject to the Company's
existing agreements, a contribution by the Company of
assets identified by MergeCo, in each case in exchange for
equity interests in such entity.
(d) At the direction of MergeCo, the Company shall take commercially
reasonable actions to implement an Investment Instrument at the Effective Time,
the terms of which shall be established by MergeCo.
47
SECTION 5.04 PUBLIC ANNOUNCEMENTS. The Company and MergeCo:
(a) agree to consult promptly with each other prior to issuing any press
release or otherwise making any public statement with respect to the Merger and
the other transactions contemplated hereby,
(b) agree to provide to the other party for review a copy of any such
press release or statement, and
(c) shall not issue any such press release or make any such public
statement prior to such consultation and review, unless required by applicable
Law or any listing agreement with a securities exchange.
SECTION 5.05 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) From and after the Effective Time, MergeCo shall and shall cause the
Surviving Corporation to indemnify, defend and hold harmless the present and
former officers, directors, employees and agents of the Company and its
Subsidiaries (the "INDEMNIFIED PARTIES") against all losses, claims, damages,
expenses or liabilities arising out of or related to actions or omissions or
alleged actions or omissions occurring at or prior to the Effective Time:
(i) to the full extent permitted by the DGCL or,
(ii) if the protections afforded thereby to an Indemnified Party
are greater, to the same extent and on the same terms and
conditions (including with respect to advancement of expenses)
provided for in the Company's certificate of incorporation and
by-laws and agreements in effect at the date hereof (to the
extent consistent with applicable Law), which provisions will
survive the Merger and continue in full force and effect after
the Effective Time.
Without limiting the foregoing:
(i) MergeCo shall and shall cause the Surviving Corporation to
periodically advance expenses (including attorney's fees) as
incurred by an Indemnified Party with respect to the foregoing
to the full extent permitted under applicable Law, and
48
(ii) any determination required to be made with respect to whether
an Indemnified Party shall be entitled to indemnification
shall, if requested by such Indemnified Party, be made by
independent legal counsel selected by the Surviving
Corporation and reasonably satisfactory to such Indemnified
Party.
(b) MergeCo agrees that the Company, and, from and after the Effective
Time, the Surviving Corporation, shall cause to be maintained in effect for not
less than six years from the Effective Time the current policies of the
directors' and officers' liability insurance maintained by the Company subject
to the following:
(i) the Surviving Corporation may substitute therefor other
policies of at least the same coverage amounts and which are
underwritten by insurers of at least equal claims paying
ratings and which contain terms and conditions not less
advantageous to the beneficiaries of the current policies;
provided, that such substitution shall not result in any gaps
or lapses in coverage with respect to matters occurring prior
to the Effective Time; and
(ii) the Surviving Corporation shall not be required to pay an
annual premium in excess of 250% of the last annual premium
paid by the Company prior to the date hereof and if the
Surviving Corporation is unable to obtain the insurance
required by this Section 5.05(b) it shall obtain as much
comparable insurance as possible for an annual premium equal
to such maximum amount; and
(iii) MergeCo and the Surviving Corporation shall be entitled to
purchase and maintain tail insurance coverage for such six
year period, which insurance coverage shall comply with the
coverage amount requirement, and the other requirements, of
Section 5.05(b)(i), and the purchase and maintenance of such
tail insurance coverage by MergeCo or the Surviving
Corporation, as the case may be, shall be deemed to fulfill
MergeCo's and the Surviving Corporation's obligations under
this Section 5.05(b).
(c) This Section 5.05 shall survive the consummation of the Merger at the
Effective Time, is intended to benefit the Company, the Surviving Corporation
and
49
the Indemnified Parties, shall be binding on all successors and assigns of
MergeCo and the Surviving Corporation, and shall be enforceable by the
Indemnified Parties.
SECTION 5.06 NOTIFICATION OF CERTAIN MATTERS. MergeCo and the Company
shall promptly notify each other of:
(a) the occurrence or non-occurrence of any fact or event which would be
reasonably likely:
(i) to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect
at any time from the date hereof to the Effective Time, or
(ii) to cause any covenant, condition or agreement under this
Agreement not to be complied with or satisfied, and
(b) any failure of the Company, or MergeCo, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that no such notification shall
affect the representations or warranties of any party or the conditions to the
obligations of any party hereunder. Each of the Company and MergeCo shall give
prompt notice to the other of any notice or other communication from any third
party alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement.
SECTION 5.07 RIGHTS AGREEMENT. Subject to the provisions of Section 3.17,
the Company covenants and agrees that it shall not (i) redeem the Rights prior
to the Effective Time, (ii) amend the Rights Agreement, or (iii) take any action
which would allow any Person (as defined in the Rights Agreement) other than
MergeCo to acquire beneficial ownership of 15% or more of the Common Shares
without causing a "Distribution Date," a "Triggering Event" or a "Stock
Acquisition Date" (as each term is defined in the Rights Agreement) to occur.
Notwithstanding the foregoing, the Company may take any of the actions described
in the preceding sentence, if the Company Board determines in good faith, after
consultation with counsel, that taking such action is necessary for the Company
Board to comply with its fiduciary duties to stockholders under applicable Law.
SECTION 5.08 STATE TAKEOVER LAWS. The Company shall, upon the request of
MergeCo, take all reasonable steps to assist in any challenge by MergeCo to the
validity or applicability to the transactions contemplated by this Agreement,
including the Merger, of any state takeover Law.
50
SECTION 5.09 NO SOLICITATION.
(a) From and after the date hereof until the termination of this
Agreement, the Company and its Subsidiaries (x) shall not, (y) shall use their
best efforts to cause their respective affiliates not to, and (z) shall instruct
their respective officers, directors, employees, agents or other representatives
(including, without limitation, any investment banker, attorney or accountant
retained by the Company or its Subsidiaries) (the "REPRESENTATIVES") not to:
(i) directly or indirectly solicit, initiate, or encourage (including
by way of furnishing nonpublic information or assistance), or
take any other action to facilitate, any inquiries or proposals
from any person that constitute, or may reasonably be expected to
lead to, an acquisition, purchase, merger, consolidation, share
exchange, recapitalization, business combination or other similar
transaction involving 15% or more of the assets or any securities
of, any merger consolidation or business combination with, or any
public announcement of a proposal, plan, or intention to do any
of the foregoing by, the Company or any of its Subsidiaries (such
transactions being referred to herein as "ACQUISITION
TRANSACTIONS"),
(ii) enter into, maintain, or continue discussions or negotiations
with any person in furtherance of such inquiries or to obtain a
proposal for an Acquisition Transaction,
(iii) agree to or endorse any proposal for an Acquisition Transition,
or
(iv) authorize or permit the Company's or any of its affiliates'
Representatives to take any such action.
Notwithstanding the foregoing, nothing in this Agreement shall prohibit
the Company Board from:
(A) furnishing information to, and engaging in discussions or
negotiations with, any Person (an "OFFEROR") that makes an
unsolicited and written Bona Fide Proposal (as defined
below) to acquire the Company and/or its Subsidiaries
pursuant to a merger, consolidation, share exchange, tender
offer or other similar transaction, but only to the
51
extent that independent legal counsel (who may be the
Company's regularly engaged outside legal counsel) advises
the Company Board in good faith that furnishing such
information to, or engaging in such discussions or
negotiations with, such Offeror is necessary for the Company
Board to comply with its fiduciary duties to stockholders
under applicable Law; provided, that prior to taking such
action, the Company Board notifies MergeCo of its intentions
and obtains an executed confidentiality agreement from the
Offeror and such other appropriate parties substantially
similar to the Confidentiality Agreement (other than with
respect to the standstill provisions of the Confidentiality
Agreement in a situation where the Offeror has commenced a
tender offer to acquire at least 15% or more of the Common
Shares prior to the date of the furnishing of information,
and the discussions or negotiations, referenced above),
(B) failing to make or withdrawing or modifying its
recommendation referred to in Section 5.13 if the Company
Board, after consultation with and based upon the advice of
independent legal counsel (who may be the Company's
regularly engaged outside legal counsel), determines in good
faith that such action is necessary for the Company Board to
comply with its fiduciary duties to stockholders under
applicable Law, and
(C) disclosing to the Company's shareholders a position
contemplated by Rules 14d-9 and 14e-2 promulgated under the
Exchange Act with respect to any tender offer, or taking any
other legally required action (including, without
limitation, the making of public disclosure as may be
necessary or advisable under applicable securities Laws);
and
provided, further, that the Company's or the Company Board's exercise of its
rights under clause (A), (B) or (C) above shall not constitute a breach by the
Company of this Agreement. For the purposes of this Agreement, "BONA FIDE
PROPOSAL" means a proposal which the Company Board determines in good faith, and
after receipt and consideration of advice from its legal and financial advisors,
is reasonably capable of
52
being consummated by the Person making the proposal, taking into account
regulatory, legal, financial and other relevant matters.
(b) The Company shall promptly notify MergeCo of the receipt of any
proposal for an Acquisition Transaction, the terms and conditions of such
proposal and the identity of the person making it. The Company also shall
promptly notify MergeCo of any change to or modification of such proposal for an
Acquisition Transaction and the terms and conditions thereof.
(c) The Company shall immediately cease and cause its affiliates and its
and their Representatives to cease any and all existing activities, discussions
or negotiations with any parties (other than MergeCo) conducted heretofore with
respect to any of the matters set forth in Section 5.09(a)(i) to (iv) and shall
use its reasonable best efforts to cause any such parties in possession of
confidential information about the Company that was furnished by or on behalf of
the Company to return or destroy all such information in the possession of any
such party (other than MergeCo or its affiliates) or in the possession of any
Representative of any such party.
SECTION 5.10 AFFILIATE LETTERS. Prior to the Effective Time, the Company
shall deliver to MergeCo a letter identifying all Persons who are, at the time
this Agreement is submitted for approval to the stockholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act of
1993, as amended (the "SECURITIES ACT"). The Company shall use its reasonable
best efforts to cause each such person to deliver to MergeCo on or prior to the
Effective Time a written agreement in a form reasonably satisfactory to MergeCo
and the Company.
SECTION 5.11 ISRA REQUIREMENTS. Prior to the Effective Time, the Company
shall commence compliance with the requirements of ISRA applicable to this
transaction by submitting all required filings for each property subject to ISRA
in order to obtain authorizations that will allow the transactions contemplated
by this Agreement to be effected pursuant to N.J.S.A. 13:1K-11.2 or pursuant to
N.J.S.A. 13:1K-11.5, as the case may be. If the Company is unable to obtain an
ISRA authorization for any property subject to ISRA prior to the Effective Time,
then the Company shall seek a letter of non-applicability (a "LNA") if, in the
reasonable judgment of MergeCo and the Company, there is a reasonable
probability of obtaining a LNA in order to effect the transactions contemplated
by this Agreement according to the time schedule desired by MergeCo and the
Company. If it is determined not to seek a LNA, or an application to seek a LNA
is denied, then the Company shall obtain a Remediation Agreement with respect to
such property or properties in order to allow the transactions contemplated by
this Agreement to be
53
effected. The Company shall consult with MergeCo with respect to its ISRA
filings and strategy, including allowing MergeCo to comment on such filings, and
shall provide copies of all correspondence to and from the DEP with respect to
ISRA compliance. MergeCo shall cooperate with the Company in connection with the
ISRA applications and filings by the Company relating to approval and allow the
transactions contemplated by this Agreement to be effected in a timely manner,
including, without limitation, signing any documents reasonably requested by the
Company and providing any information within the possession, custody or control
of MergeCo.
SECTION 5.12 REPORTS. During the period from the date of this Agreement to
the Effective Time, the Company shall provide MergeCo with monthly financial
statements (balance sheet, cash flow statement, income statement and, if
available, notes thereto), broken out by operating unit (except as to the cash
flow statement, which shall be a consolidated statement), no later than the
fifteenth business day following the end of each calendar month following the
date of this Agreement; provided, that for calendar months that are also the end
of a calendar quarter, the Company may provide such financial information to
MergeCo on the same date such information is publicly released in accordance
with the past practice of the Company.
SECTION 5.13 STOCKHOLDERS' MEETING.
(a) The Company, acting through the Company Board, shall, in accordance
with applicable Law:
(i) duly call, give notice of, convene and hold a special meeting
of its stockholders (the "SPECIAL MEETING") as soon as
practicable following the execution of this Agreement for the
purpose of considering and taking action upon this Agreement
and the Certificate Amendments;
(ii) prepare and file with the SEC a preliminary proxy statement
relating to this Agreement, and use its reasonable efforts:
(A) to obtain and furnish the information required to be
included by the SEC in a definitive proxy statement (the
"PROXY STATEMENT") and Form S-4 in which the Proxy
Statement will be included (collectively with the Proxy
Statement, the "FORM S-4") and, after consultation with
MergeCo, to respond promptly to any comments made by
54
the SEC with respect to the preliminary Proxy Statement
and cause the Proxy Statement to be mailed to its
stockholders and
(B) to obtain the necessary approvals of the Merger, this
Agreement and the Certificate Amendments by its
stockholders; and
(iii) subject to the fiduciary duties of the Company Board as
provided in Section 5.09, the Company Board shall declare that
this Agreement is advisable and recommend that the Agreement
and the transactions contemplated hereby be approved and
adopted by the stockholders of the Company and include in the
Form S-4 and Proxy Statement a copy of such recommendations;
provided, however, that the Company Board shall, if requested
to do so in writing by MergeCo, submit this Agreement to the
Company's stockholders whether or not the Company Board
determines at any time subsequent to declaring its
advisability that this Agreement is no longer advisable and
recommends that the stockholders of the Company reject it.
(b) Unless the Company Board has withdrawn its recommendation of this
Agreement in compliance with Section 5.09, the Company shall use its reasonable
best efforts to solicit from stockholders of the Company proxies in favor of the
Merger and shall use its reasonable best efforts to take all other action
necessary or advisable to secure the vote or consent of stockholders required by
the DGCL to effect the Merger.
(c) The Company represents that the Form S-4 will comply in all material
respects with the provisions of applicable federal securities Laws except that
no representation is made by the Company with respect to information supplied by
MergeCo or its affiliates for inclusion in the Form S-4. Each of the Company, on
the one hand, and MergeCo, on the other hand, agree promptly to correct any
information provided by either of them for use in the Form S-4 if and to the
extent that it shall have become false or misleading, and the Company further
agrees to take all steps necessary to cause the Form S-4 as so corrected to be
filed with the SEC and to be disseminated to the holders of Shares, in each
case, as and to the extent required by applicable federal securities Laws.
SECTION 5.14 EMPLOYEE BENEFIT ARRANGEMENTS.
55
(a) MergeCo agrees that the Company shall honor, and, from and after the
Effective Time, MergeCo shall cause the Surviving Corporation to honor, in
accordance with their respective terms as in effect on the date hereof, the
employment, severance and bonus arrangements to which the Company is a party and
which have been previously disclosed in writing to MergeCo or its affiliates.
(b) MergeCo agrees that for a period of two years following the Effective
Time, the Surviving Corporation shall continue the (i) compensation (including
bonus and incentive awards) programs and plans, and (ii) employee benefit and
welfare plans, programs, contracts, agreements and policies (including insurance
and pension plans), fringe benefits and vacation policies, which are currently
provided by the Company; provided, that notwithstanding anything in this
Agreement to the contrary the Surviving Corporation shall not be required to
maintain any individual plan or program so long as the benefit plan and
agreements maintained by the Surviving Corporation are, in the aggregate, not
materially less favorable than those provided by the Company immediately prior
to the date of this Agreement, and; provided, further, that this provision shall
terminate with respect to the participation in any plans or programs by
employees of any business transferred to any third party after the Effective
Time.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 6.01 CONDITIONS. The respective obligations of MergeCo and the
Company to consummate the Merger are subject to the satisfaction, at or before
the Effective Time, of each of the following conditions:
(a) STOCKHOLDER APPROVAL. The stockholders of the Company shall have duly
approved this Agreement and transactions contemplated by this Agreement.
(b) FORM S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order, and any material "blue sky" and other state securities
Laws applicable to the registration and qualification of Common Shares to be
retained in the Merger shall have been complied with.
(c) SOLVENCY LETTERS. Each of the Company Board and the Board of Directors
of MergeCo shall have received a solvency letter, in form and substance and from
an independent evaluation firm reasonably satisfactory to each such board, as to
56
the solvency of the Company and its Subsidiaries on a consolidated basis after
giving effect to the transactions contemplated by this Agreement, including all
financings contemplated hereby.
(d) ORDERS AND INJUNCTIONS. No order shall have been entered in any action
or proceeding before any United States federal or state court or governmental
agency or other United States regulatory or administrative agency or commission
(an "ORDER"), or a preliminary or permanent injunction by a United States court
of competent jurisdiction shall have been issued and remain in effect (an
"INJUNCTION"), which, in either case, would have the effect of (i) preventing
consummation of the Merger, or (ii) imposing material limitations on the ability
of MergeCo effectively to acquire or hold the business of the Company and its
Subsidiaries taken as a whole or to exercise full rights of ownership of the
Common Shares acquired by it; provided, however, that in order to invoke this
condition, MergeCo shall have used in its good faith judgment, its commercially
reasonable best efforts to prevent such Order or Injunction or ameliorate the
effects thereof.
(e) ILLEGALITY. There shall not have been any United States federal or
state statute, rule or regulation enacted or promulgated after the date of this
Agreement that could, in the reasonable judgment of MergeCo, result in any of
the adverse consequences referred to in Section 6.01(d).
(f) HSR ACT. Any waiting period (and any extension thereof) under the HSR
Act applicable to the Merger shall have expired or terminated.
SECTION 6.02 CONDITIONS TO OBLIGATIONS OF MERGECO. The obligations of
MergeCo to effect the Merger are further subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company set forth in this Agreement shall be true and correct in all
respects in each case as of the date of this Agreement and as of the Effective
Time as though made on and as of the Effective Time; provided, however, that,
with respect to representations and warranties other than Sections 3.02 and
3.03(a) and representations and warranties otherwise qualified by Material
Adverse Effect, for purposes of this Section 6.02(a), such representations and
warranties and statements shall be deemed to be true and correct in all respects
unless the failure or failures of such representations and warranties and
statements to be so true and correct, individually or in the aggregate, would
result in a Material Adverse Effect on the Company. MergeCo shall have received
a certificate signed on behalf of the Company by its Executive Vice President -
Office of the Chairman, or such other
57
executive officer of the Company reasonably satisfactory to MergeCo to the
effect set forth in this paragraph.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed the obligations required to be performed by it under this Agreement at
or prior to the Effective Time, except for such failures to perform as have not
had or would not, individually or in the aggregate, have a Material Adverse
Effect with respect to the Company or materially adversely affect the ability of
the Company to consummate the transactions contemplated hereby.
(c) [Intentionally omitted]
(d) NO LITIGATION. There shall not be pending by any Governmental Entity
any suit, action or proceeding (or by any other person any suit, action or
proceeding which has a reasonable likelihood of success):
(i) challenging or seeking to restrain or prohibit the
consummation of the Merger or any of the other transactions
contemplated by this Agreement or seeking to obtain from
MergeCo, the Company or any of their affiliates any damages
that would have a Material Adverse Effect on the Company,
(ii) seeking to prohibit or limit the ownership or operation by the
Company or any of its Subsidiaries of any material portion of
the business or assets of the Company or any of its
Subsidiaries, taken as a whole, to dispose of or hold separate
any material portion of the business or assets of the Company
or any of its Subsidiaries taken as a whole, as a result of
the Merger or any of the other transactions contemplated by
this Agreement, or
(iii) seeking to impose limitations on the ability of MergeCo (or
any designee of MergeCo), to acquire or hold, or exercise full
rights of ownership of, any Common Shares, including, without
limitation, the right to vote Common Shares on all matters
properly presented to the stockholders of the Company.
(e) FINANCING. The Company, its Subsidiaries and MergeCo shall have
received the proceeds of financing pursuant to the commitment letters set forth
on Schedule 6.02(e) on terms and conditions set forth therein (or, as modified
in accordance with Section 5.03(c), on such other terms and conditions, or
involving such other financing sources, as MergeCo and the Company shall
reasonably agree
58
and are not materially more onerous) in amounts sufficient to consummate the
transactions contemplated by this Agreement, including, without limitation:
(i) to pay, with respect to all Shares in the Merger, the cash
portion of the Merger Consideration pursuant to Section
2.01(c) and Section 2.02,
(ii) to refinance the outstanding indebtedness of the Company
(other than that indebtedness which the commitment letters set
forth in Schedule 6.02(e) contemplate will remain
outstanding),
(iii) to pay any fees and expenses in connection with the
transactions contemplated by this Agreement or the financing
thereof, and
(iv) to provide for the working capital needs of the Company
following the Merger.
(f) TOTAL FUNDED INDEBTEDNESS. MergeCo shall be reasonably satisfied that
the total funded indebtedness of the Company on a consolidated basis immediately
prior to the Effective Time (including the current portion of indebtedness but
net of (i) cash, (ii) cash equivalents and (iii) indebtedness in respect of the
QUIPS) is less than an amount equal to $970 million plus indebtedness incurred
in consummating the acquisitions permitted by Section 5.01(i).
SECTION 6.03 CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of
the Company to effect the Merger is further subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
MergeCo set forth in this Agreement shall be true and correct in all respects,
in each case as of the date of this Agreement and as of the Effective Time as
though made on and as of the Effective Time; provided, that for purposes of this
Section 6.03(a), with respect to representations and warranties other than
Section 3.02(a) and the representations and warranties otherwise qualified by
Material Adverse Effect, such representations and warranties shall be deemed to
be true and correct in all respects unless the failure or failures of such
representations and warranties to be so true and correct, individually or in the
aggregate, would result in a Material Adverse Effect on MergeCo. The Company
shall have received certificates signed on behalf of MergeCo, by an authorized
officer of MergeCo, to the effect set forth in this paragraph.
(b) PERFORMANCE OF OBLIGATIONS OF MERGECO. MergeCo shall have performed
the obligations required to be performed by it under this Agreement at or prior
to the Effective Time, except for such failures to perform as have not had or
59
could not reasonably be expected, either individually or in the aggregate, to
have a Material Adverse Effect on MergeCo or adversely affect the ability of
MergeCo to consummate the transactions herein contemplated or perform its
obligations hereunder.
ARTICLE VII
TERMINATION; AMENDMENTS; WAIVER
SECTION 7.01 TERMINATION. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the stockholders of the Company:
(a) by the mutual written consent of MergeCo and the Company, by action of
their respective Boards of Directors;
(b) by MergeCo or the Company if the Merger shall not have been
consummated on or before the Termination Date (as defined below) and; provided,
that neither MergeCo nor the Company may terminate this Agreement pursuant to
this Section 7.01(b) if such party shall have materially breached this
Agreement;
(c) by MergeCo or the Company if any court of competent jurisdiction in
the United States or other United States Governmental Entity has issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other action
shall have become final and nonappealable; provided, however, that the party
seeking to terminate this Agreement shall have used its reasonable best efforts
to remove or lift such order, decree, ruling or other action;
(d) by the Company if, prior to the Effective Time, any Person has made a
Bona Fide Proposal relating to an Acquisition Transaction, or has commenced a
tender or exchange offer for the Common Shares, and the Company Board determines
in good faith (i) after consultation with its financial advisors, that such
transaction constitutes a superior offer from a financial point of view to the
offer constituted by this Agreement and (ii) after consultation with counsel,
that the approval of such Bona Fide Proposal and termination of this Agreement
is necessary for the Company Board to comply with its fiduciary duties to the
Company's stockholders under applicable Law; provided, however, that
notwithstanding anything in this Agreement to the contrary, the termination of
this Agreement by the Company in compliance
60
with this Section 7.01(d) shall not be deemed to violate any other obligations
of the Company under this Agreement;
(e) by MergeCo if (i) the Company breaches its covenant in Section 5.07,
or (ii) takes an action pursuant to the second sentence of Section 5.07;
(f) by MergeCo, if the Company Board shall have (i) failed to recommend to
the stockholders of the Company that they give the Company Stockholder Approval,
(ii) withdrawn or modified in a manner adverse to MergeCo its approval or
recommendation of this Agreement or the Merger, (iii) shall have approved or
recommended an Acquisition Transaction (other than the Acquisition Transaction
contemplated by this Agreement), (iv) shall have resolved to effect any of the
foregoing or (v) shall have otherwise taken steps to impede the Company
Stockholder Approval;
(g) by either MergeCo or the Company, if the Company Stockholder Approval
shall not have been obtained by reason of the failure to obtain the required
vote upon a vote held at a duly held meeting of stockholders or at any
adjournment thereof;
(h) by MergeCo, upon a material breach of any covenant or agreement on the
part of the Company set forth in this Agreement, or if any representation or
warranty of the Company hereunder shall become untrue or inaccurate, in any case
such that the conditions set forth in Section 6.02(a) or Section 6.02(b) would
not be satisfied (a "TERMINATING COMPANY BREACH"); provided, that if such
Terminating Company Breach is curable by the Company through the exercise of its
reasonable efforts, and the Company continues to exercise such reasonable
efforts, MergeCo may not terminate this Agreement under this Section 7.01(h) if
such Terminating Company Breach has been cured prior to the Termination Date; or
(i) by the Company, upon material breach of any covenant or agreement on
the part of MergeCo set forth in this Agreement, or if any representation or
warranty of MergeCo shall be or become untrue or inaccurate, in any case such
that the conditions set forth in Section 6.03(a) or Section 6.03(b) would not be
satisfied (a "TERMINATING MERGECO BREACH"); provided, that if such Terminating
MergeCo Breach is curable by MergeCo through the exercise of its reasonable
efforts, the Company may not terminate this Agreement under this Section 7.01(i)
if such Terminating MergeCo Breach has been cured prior to the Termination Date.
"TERMINATION DATE" shall mean the later of (i) October 31, 1999 and (ii)
the date determined by adding to October 31, 1999 the number of days after
September 1,
61
1999 that the Proxy Statement is first mailed to stockholders; provided,
however, that the Termination Date shall not be later than December 31, 1999.
SECTION 7.02 EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Section 7.01, this Agreement shall forthwith become
void and have no effect, without any liability on the part of any party or its
directors, officers or stockholders, other than the provisions of the last
sentence of Section 5.02 and the provisions of this Section 7.02 and Section
7.03, which shall survive any such termination. Nothing contained in this
Section 7.02 shall relieve any party from liability for any breach of this
Agreement.
SECTION 7.03 FEES AND EXPENSES.
(a) If this Agreement is terminated for any reason other than a material
breach by MergeCo, and the Company has not paid previously to MergeCo the
Termination Fee in accordance with Section 7.03(b), the Company shall promptly
reimburse THL, Evercore and MergeCo, as the case may be, collectively, an
aggregate amount of up to $10 million, for out-of-pocket expenses and fees
(including, without limitation, expenses payable to all banks, investment
banking firms and other financial institutions, (which shall include, without
limitation, fees and expenses of such banks', firms' and institutions' legal
counsel), and all fees and expenses of counsel, accountants, financial printers,
experts and consultants to THL, Evercore and their affiliates), whether incurred
prior to, on or after the date hereof, in connection with the Merger and the
consummation of all transactions contemplated by this Agreement, and the
financing thereof; provided, that the Company shall be entitled to pay MergeCo
the total amount of such out-of-pocket expenses and fees and MergeCo shall be
obligated to forward to THL and Evercore the portion of such amount for
out-of-pocket expenses and fees owing to THL and Evercore in the circumstances.
Except as otherwise specifically provided for herein, whether or not the Merger
is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring such expenses.
(b) If:
(i) this Agreement is terminated pursuant to Section 7.01(d),
(e)(i) or (f), or
(ii) any Person (other than THL, Evercore or any of their
affiliates) shall have made, or proposed, communicated or
disclosed in a manner which is or otherwise becomes public a
proposal for an
62
Acquisition Transaction prior to the Special Meeting, the
Stockholder Approval has not been obtained and, thereafter,
this Agreement is terminated,
then the Company shall promptly pay MergeCo a termination fee of $30 million
(the "TERMINATION FEE"), less amounts paid under Section 7.03(a); provided, that
in no event shall more than one Termination Fee be payable by the Company under
this Section 7.03, and; provided, further, that MergeCo shall be obligated to
forward to THL and Evercore that share of such Termination Fee owing to THL and
Evercore in the circumstances.
SECTION 7.04 AMENDMENT. This Agreement may be amended by the Company and
MergeCo at any time before or after any approval of this Agreement by the
stockholders of the Company but, after any such approval, no amendment shall be
made which decreases the Merger Consideration or which adversely affects the
rights of the Company's stockholders hereunder without the approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of all the parties.
SECTION 7.05 EXTENSION; WAIVER. At any time prior to the Effective Time,
MergeCo, on the one hand, and the Company, on the other hand, may, subject to
applicable Law, (i) extend the time for the performance of any of the
obligations or other acts of the other, (ii) waive any inaccuracies in the
representations and warranties contained herein of the other or in any document,
certificate or writing delivered pursuant hereto by the other or (iii) waive
compliance by the other with any of the agreements or conditions. Any agreement
on the part of any party to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made in this Agreement shall not survive beyond
the Effective Time. Notwithstanding the foregoing, the agreements set forth in
Article II, the last sentence of Section 5.02, Section 5.05 and Section 5.14
shall survive the Effective Time indefinitely (except to the extent a shorter
period of time is explicitly specified therein).
63
SECTION 8.02 ENTIRE AGREEMENT; ASSIGNMENT.
(a) This Agreement (including the documents and the instruments referred
to herein) and the Confidentiality Agreement constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof and thereof.
(b) Neither this Agreement nor any of the rights, interests or obligations
hereunder may be assigned by any of the parties hereto (whether by operation of
Law or otherwise) without the prior written consent of the other party (except
that MergeCo may assign its rights, interest and obligations to any affiliate or
direct or indirect subsidiary of MergeCo without the consent of the Company;
provided, that such assignee is an affiliate of THL and no such assignment shall
relieve MergeCo of any liability for any breach by such assignee). Subject to
the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
SECTION 8.03 VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, each of which shall remain in full force and
effect.
SECTION 8.04 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by overnight courier or facsimile to the
respective parties as follows:
If to MergeCo:
c/o Xxxxxx X. Xxx Company
00 Xxxxx Xxxxxx, Xxx. 0000
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx X. XxXxxx
Xxxxx X. Xxxxxxxx
Facsimile : (000) 000-0000
64
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
with a copy to:
Evercore Capital Partners LP.
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
If to the Company:
Big Flower Holdings, Inc.
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above;
provided, that notice of any change of address shall be effective only upon
receipt thereof.
SECTION 8.05 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Delaware, without
reference to principles of conflicts or choice of Laws, or any other Law that
would make the Laws of any jurisdiction other than the State of Delaware
applicable hereto.
65
SECTION 8.06 DESCRIPTIVE HEADINGS. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 8.07 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 8.08 PARTIES IN INTEREST. Except with respect to Sections 2.01,
2.02, 2.03, 2.04, 5.05 and 5.14 (which are intended to be for the benefit of the
persons identified therein, and may be enforced by such persons), this Agreement
shall be binding upon and inure solely to the benefit of each party hereto, and
nothing in this Agreement, express or implied, is intended to confer upon any
other person any rights or remedies of any nature whatsoever under or by reason
of this Agreement.
SECTION 8.09 CERTAIN DEFINITIONS. As used in this Agreement:
(a) the term "AFFILIATE", as applied to any person, shall mean any other
person directly or indirectly controlling, controlled by, or under common
control with, that person. For the purposes of this Agreement, "CONTROL"
(including, with correlative meanings, the terms "CONTROLLING," "CONTROLLED BY"
and "UNDER COMMON CONTROL WITH"), as applied to any person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that person, whether through the
ownership of voting securities, by contract or otherwise;
(b) the term "LAWS" means all (A) constitutions, treaties, statutes, Laws
(including, but not limited to, the common Law), rules, regulations, ordinances,
executive orders or codes of any Governmental Entity, (B) Environmental Permits,
and (C) orders, decisions, injunctions, judgments, awards and decrees of any
Governmental Entity;
(c) the term "PERSON" or "PERSONS" shall include individuals,
corporations, partnerships, trusts, other entities and groups (which term shall
include a "group" as such term is defined in Section 13(d)(3) of the Exchange
Act); and
(d) the term "SUBSIDIARY" or "SUBSIDIARIES" means, with respect to
MergeCo, the Company or any other person, any corporation, partnership, joint
venture or other legal entity of which MergeCo, the Company or such other
person, as the case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, stock or other equity interests the
holders of which are generally entitled to more than 50% of the vote for the
election of the board of directors or other
66
governing body of such corporation or other legal entity or otherwise controls
such corporation or other legal entity.
SECTION 8.10 SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at Law or in equity.
67
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its respective officer thereunto duly authorized, all
as of the day and year first above written.
BIG FLOWER HOLDINGS, INC.
By:
------------------------------------
Name:
Title:
BFH MERGER CORP.
By:
------------------------------------
Name:
Title:
SCHEDULE 2.01(c)(i)(B)(1)
TERMS OF 10% CUMULATIVE EXCHANGEABLE REDEEMABLE
PAID-IN-KIND PREFERRED STOCK ("PIK PREFERRED")
ISSUER: Big Flower Holdings, Inc. (the "COMPANY")
AMOUNT: $123,044,766, subject to adjustment in accordance
with Section 2.03 of the Merger Agreement between
the Company and BFH Merger Corp.
NUMBER OF SHARES: 4,921,791, subject to adjustment in accordance with
Section 2.03 of the Agreement
ISSUANCE DATE: Date of Effective Time
ISSUE PRICE PER SHARE: $25 per share of PIK Preferred.
LIQUIDATION PREFER- $25 per share of PIK Preferred.
ENCE PER SHARE:
RANKING: Senior to common stock.1
DIVIDENDS: Cumulative, accruing and compounded from the
effective date of the Merger at an annual rate of
10% (or $2.50 per share of PIK Preferred),
calculated semi-annually. The Company will
determine the timing of the actual declaration and
payment of such dividends and will have the option
to pay the PIK Preferred dividends in additional
shares of PIK Preferred at a rate of one share per
$25 of such semi-annual dividend not paid in cash.
No dividends can be declared or paid on the common
stock or any other junior securities while accrued
dividends on the PIK Preferred are unpaid.2
----------
1 To the extent an Investment Instrument is implemented pursuant to Section
5.03(c), such instrument will be secured by, and will have priority over,
the relevant investment assets and proceeds from the sale of such assets
subject to a maximum of $60 million plus accrued interest or dividends.
2 The Investment Instrument will not be subject to this restriction; any
disposition by the Company of up to $60 million of the proceeds from the
sale of Investment assets which are
(continued...)
MANDATORY RE- All of the outstanding PIK Preferred will be
DEMPTION DATE: redeemed by the Company on December 15, 2012 at the
Liquidation Preference plus accrued and unpaid
dividends.
OPTIONAL REDEMP- Subject to Equity Clawback described below,
TION non-callable for five years; callable at option of
Company in year 6 at 102.50% of Liquidation
Preference plus accrued and unpaid dividends;
callable in year 7 at 101.25% of Liquidation
Preference plus accrued and unpaid dividends;
callable in year 8 and thereafter at 100% of
Liquidation Preference plus accrued and unpaid
dividends.
CHANGE OF CONTROL: In the event of a "Change of Control", (i) the
holders can put the PIK Preferred and (ii) the
Company can call the PIK Preferred, in each case at
101% of the Liquidation Preference plus accrued and
unpaid dividends.
A "Change of Control" will be deemed to have
occurred if (i) the initial investor group
(comprising MergeCo, THL, Evercore, Xxxxxxxx Xxxxx)
owns less than 25% of the fully diluted common
equity, and (ii) a new investor group owns more
than 50% of the fully diluted common equity.
The percentage of PIK Preferred redeemed pursuant
to a Change of Control can be 1-49% or 100% of the
then outstanding PIK Preferred and will be done on
a pro rata basis if applicable.
EXCHANGEABLE: Exchangeable at Company's option at any time into
equivalent face amount of junior subordinated
debentures having substantially similar terms.
----------
2(..continued)
the security for the Investment Instrument (plus an amount for any interest
or dividends on such Investment Instrument) will not constitute a dividend
for the purposes of this restriction.
2
EQUITY CLAWBACK: Upon the occurrence of an IPO, the Company will
have the right to redeem up to 100% of the then
outstanding PIK Preferred out of the proceeds of
the IPO at 102.5% of Liquidation Preference plus
accrued and unpaid dividends.
The percentage of PIK Preferred redeemed may be
1-49% or 100% and will be done on a pro rata basis
if applicable.
CONVERSION: The PIK Preferred will have no conversion rights.
VOTING RIGHTS: 1. To elect two directors upon the occurrence of
any one or more of the following: (i) the default
of three semi-annual dividends, (ii) default under
any bonds existing as of the Effective Time or any
replacements for such bonds, (iii) bankruptcy, and
(iv) failure to redeem the PIK Preferred as
required by its terms (collectively, the "TRIGGER-
ING EVENTS").
If any of the above Triggering Events occur,
holders of the PIK Preferred will have the right to
elect two directors to the board of the Company.
Such election shall occur at the later of (i) 90
days after one of the Triggering Events has
occurred, or (ii) the expiration of the cure period
in the applicable bond indenture. In the event that
the PIK Preferred investors have elected board
members and the Triggering Event is remedied, the
board members which were elected by the PIK
Preferred investors shall be removed from the
board.
2. To approve any charter or by-laws amendment that
would adversely affect the terms of the PIK
Preferred, including any such amendment effected
pursuant to a merger or similar transaction.
A vote will not be required for the Company to
increase the authorized amount of PIK Preferred or
to issue securities which are senior to, or pari
passu with, or junior to, the PIK Preferred.
REGISTRATION/LISTING: The PIK Preferred will be registered under the
Securities Act of 1933.
3
SCHEDULE 2.01(c)(i)(B)(2)
TERMS OF COMMON STOCK WARRANTS
------------------------------
WARRANTS: Warrants to purchase 5% of a number where the
numerator is equal to the Total Post-Merger Common
Shares (as defined in the Agreement) and the
denominator is 0.95.
WARRANT EXERCISE $0.01
PRICE:
EXERCISABILITY: Upon IPO or sale of the Company or any other event
that results in a public market in the common stock
(a "LIQUIDITY EVENT").
WARRANT The earlier of 180 days, a Liquidity Event or a
DETACHABILITY: "Change of Control" as set forth in Schedule
2.01(c)(i)(B)(1).
REGISTRATION: The warrants will be registered under the
Securities Act of 1933.
WARRANT PIGGYBACK None
REGISTRATION RIGHTS:
WARRANT EXPIRA- December 15, 2012
TION:
ANTI-DILUTION: Standard anti-dilution provisions.
FRACTIONAL INTERESTS: To be cashed-out upon exercise.
