Exhibit 10.1
AGREEMENT AND PLAN OF MERGER
AMONG
TRUE NORTH COMMUNICATIONS INC.
CHEROKEE ACQUISITION CORPORATION
AND
BOZELL, JACOBS, XXXXXX & XXXXXXXX, INC.
Dated as of July 30, 1997
TABLE OF CONTENTS Page
----------------- ----
ARTICLE I THE MERGER........................................................ 2
Section 1.1 The Merger................................................ 2
Section 1.2 Effective Time............................................ 2
Section 1.3 Effects of the Merger..................................... 2
Section 1.4 Charter and By-laws; Directors; Officers.................. 2
Section 1.5 Conversion of Securities.................................. 3
Section 1.6 Parent to Make Certificates Available..................... 4
Section 1.7 Dividends; Transfer Taxes; Withholding.................... 5
Section 1.8 No Fractional Securities.................................. 6
Section 1.9 Return of Exchange Fund................................... 7
Section 1.10 Adjustment of Exchange Ratio............................. 7
Section 1.11 No Further Ownership Rights in Company Common Stock...... 7
Section 1.12 Closing of Company Transfer Books........................ 7
Section 1.13 Lost Certificates........................................ 8
Section 1.14 Further Assurances....................................... 8
Section 1.15 Closing.................................................. 8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB................. 9
Section 2.1 Organization, Standing and Power.......................... 9
Section 2.2 Subsidiaries.............................................. 10
Section 2.3 Capital Structure......................................... 10
Section 2.4 Authority................................................. 11
Section 2.5 Consents and Approvals; No Violations..................... 11
Section 2.6 SEC Documents and Other Reports........................... 12
Section 2.7 Absence of Certain Changes or Events...................... 13
Section 2.8 Permits and Compliance.................................... 14
Section 2.9 Tax Matters............................................... 14
Section 2.10 Actions and Proceedings.................................. 16
Section 2.11 Certain Agreements....................................... 16
Section 2.12 Benefit Plans............................................ 18
Section 2.13 Compliance with Certain Laws............................. 21
Section 2.14 Liabilities.............................................. 21
Section 2.15 Labor Matters............................................ 21
Section 2.16 Intellectual Property.................................... 22
Section 2.17 Continuity of Business................................... 22
Section 2.18 Company.................................................. 22
Section 2.19 Information in Registration Statement.................... 23
Section 2.20 Opinion of Financial Advisor............................. 23
Section 2.22 Required Vote of Parent Stockholders..................... 23
Section 2.23 Pooling of Interests..................................... 23
Section 2.24 Operations of Sub........................................ 24
Section 2.25 Brokers.................................................. 24
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................... 24
Section 3.1 Organization.............................................. 24
Section 3.2 Subsidiaries.............................................. 24
Section 3.3 Capital Structure......................................... 25
Section 3.4 Authority................................................. 26
Section 3.5 Consent and Approvals; No Violations...................... 26
Section 3.6 Company Financial Information............................. 27
Section 3.7 Absence of Certain Changes or Events...................... 27
Section 3.8 Permits and Compliance.................................... 28
Section 3.9 Tax Matters............................................... 29
Section 3.10 Actions and Proceedings.................................. 30
Section 3.11 Certain Agreements....................................... 30
Section 3.12 Benefit Plans............................................ 32
Section 3.13 Compliance with Certain Laws............................. 34
Section 3.14 Liabilities.............................................. 35
Section 3.15 Labor Matters............................................ 35
Section 3.16 Intellectual Property.................................... 35
Section 3.17 Continuity of Business................................... 35
Section 3.18 Company Employees........................................ 36
Section 3.19 Information in Registration Statement.................... 36
Section 3.20 Opinion of Financial Advisor............................. 36
Section 3.21 State Takeover Statutes.................................. 36
Section 3.22 Required Vote of Company Stockholders.................... 36
Section 3.23 Pooling of Interests..................................... 37
Section 3.24 Brokers.................................................. 37
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS........................ 37
Section 4.1 Conduct of Business by the Company Pending the Merger..... 37
Section 4.2 Conduct of Business by Parent Pending the Merger.......... 40
Section 4.3 No Solicitation........................................... 42
Section 4.4 Third Party Standstill Agreements......................... 44
Section 4.5 Pooling of Interests; Reorganization...................... 45
Section 4.6 Other Actions............................................. 45
ARTICLE V ADDITIONAL AGREEMENTS............................................. 45
Section 5.1 Stockholder Meetings...................................... 45
Section 5.2 Proxy Statement; Filings; Other Actions................... 46
Section 5.3 Comfort Letters........................................... 47
Section 5.4 Access to Information; Financial Reports.................. 47
Section 5.5 Compliance with the Securities Act........................ 48
Section 5.6 Stock Exchange Listings................................... 49
Section 5.7 Fees and Expenses......................................... 49
Section 5.8 Company Stock Options..................................... 50
Section 5.9 Reasonable Best Efforts................................... 51
Section 5.10 Public Announcements..................................... 52
Section 5.11 Real Estate Transfer and Gains Tax....................... 52
Section 5.12 State Takeover Laws...................................... 53
Section 5.13 Indemnification; Directors and Officers Insurance........ 53
Section 5.14 Notification of Certain Matters.......................... 54
Section 5.15 Employee Benefit Plans................................... 54
Section 5.16 Management of Parent..................................... 56
Section 5.17 Board of Directors of Parent and Committees Thereof...... 57
Section 5.18 Certain Litigation....................................... 57
Section 5.19 FIRPTA Certificate....................................... 57
ARTICLE VI CONDITIONS PRECEDENT TO THE MERGER............................... 58
Section 6.1 Conditions to Each Party's Obligation to Effect
the Merger.............................................. 58
Section 6.2 Conditions to Obligation of the Company to Effect
the Merger.............................................. 59
Section 6.3 Conditions to Obligations of Parent and Sub to Effect
the Merger.............................................. 61
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER............................... 63
Section 7.1 Termination............................................... 63
Section 7.2 Effect of Termination..................................... 66
Section 7.3 Amendment................................................. 66
Section 7.4 Extension; Waiver......................................... 66
ARTICLE VIII GENERAL PROVISIONS............................................. 66
Section 8.1 Non-Survival of Representations and Warranties............ 66
Section 8.2 Notices................................................... 67
Section 8.3 Interpretation............................................ 67
Section 8.4 Counterparts.............................................. 68
Section 8.5 Entire Agreement; No Third-Party Beneficiaries............ 68
Section 8.6 Governing Law............................................. 68
Section 8.7 Assignment................................................ 68
Section 8.8 Severability.............................................. 68
Section 8.9 Enforcement of this Agreement............................. 68
Section 8.10 Obligations of Subsidiaries.............................. 69
Schedule 1 - Principal Stockholders
Schedule 2 - Initial Parent Board Committees Following
Effective Time
Exhibit A - Company Stockholders Agreement
Exhibit B - Parent Stockholders Agreement
Exhibit C - Xxxxx Xxxxx Employment Agreement
Exhibit D - Xxxxxxx X. Xxxxxxx, Xx. Employment Agreement
Exhibit E - Xxxxxxx X. Xxxxxxxx Agreements
Exhibit 5.5(a)
Exhibit 5.5(b)
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated as of July 30, 1997 (this
"Agreement"), among True North Communications Inc., a Delaware corporation
("Parent"), Cherokee Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Parent ("Sub"), and Bozell, Jacobs, Xxxxxx &
Xxxxxxxx, Inc., a Delaware corporation (the "Company") (Sub and the Company
being hereinafter collectively referred to as the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have approved the merger of Sub and the Company (the "Merger"), upon the
terms and subject to the conditions set forth herein, whereby each issued and
outstanding share of the Company's Class A Common Stock, par value $.001 per
share ("Class A Common Stock"), and Class B Common Stock, par value $.001 per
share ("Class B Common Stock" and, together with Class A Common Stock, "Company
Common Stock"), not owned directly by Parent or the Company will be converted
into shares of Parent Common Stock, par value $.33 per share ("Parent Common
Stock");
WHEREAS, the respective Boards of Directors of Parent and the Company
have determined that the Merger is in furtherance of and consistent with their
respective long-term business strategies and is in the best interest of their
respective stockholders;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, it is intended that the Merger shall be recorded for
accounting purposes as a pooling of interests; and
WHEREAS, concurrently with the execution and delivery of this
Agreement and as an inducement to each other to enter into this Agreement,(i)
the stockholders of the Company listed on Schedule 1 hereto (the "Principal
Stockholders") have entered into an agreement with Parent, substantially in the
form attached hereto as Exhibit A (the "Company Stockholder Agreement"),
pursuant to which the Principal Stockholders have agreed, among other things, to
vote their shares of Company Common Stock in favor of the Merger, and (ii)
certain stockholders of Parent have entered into an agreement with the Company,
substantially in the form attached hereto as Exhibit B (the "Parent Stockholder
Agreement"), pursuant to which such stockholders have agreed, among other
things, to vote their shares of Parent Common Stock in favor of the Charter
Amendment (as hereinafter defined), the Share Issuance (as hereinafter defined)
and the election of directors provided for herein; and
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the Delaware General Corporation Law (the
"DGCL"), Sub shall be merged with and into the Company at the Effective Time (as
hereinafter defined). Following the Merger, the separate corporate existence of
Sub shall cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Sub in accordance with the DGCL.
Section 1.2 Effective Time. The Merger shall become effective when a
Certificate of Merger (the "Certificate of Merger"), executed in accordance with
the relevant provisions of the DGCL, is filed with the Secretary of State of the
State of Delaware. When used in this Agreement, the term "Effective Time" shall
mean the date and time at which the Certificate of Merger is accepted for
record. The filing of the Certificate of Merger shall be made on the date of the
Closing (as defined in Section 1.15).
Section 1.3 Effects of the Merger. The Merger shall have the effects
set forth in Section 259 of the DGCL.
Section 1.4 Charter and By-laws; Directors; Officers. (a) At the
Effective Time, the Restated Certificate of Incorporation of the Company, as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law; provided, however, that at the
Effective Time, Article FOURTH of the Restated Certificate of Incorporation of
the Company shall be amended to read in its entirety as follows: "The total
number of shares of all classes of capital stock which the Corporation shall
have authority to issue is 1,000 shares of Common Stock, par value $.01 per
share." At the Effective Time, the By-laws of the Company, as in effect
immediately prior to the Effective Time, shall be the By-laws of the Surviving
Corporation until thereafter changed or amended as provided therein or by the
Certificate of Incorporation.
(b) At the Effective Time, the Board of Directors of the Surviving
Corporation shall be comprised of the following individuals: Xxx-Xxxxxx
Xxxxxxxxx, Xxxxxxx X. Xxxxxxx, Xx., Xxxxx X. Xxxx, Xxxxxx XxXxxxx and Valentine
X. Xxxxxx.
(c) Sections 5.16 and 5.17 hereof set forth agreements as to officers
and directors, respectively, of Parent.
Section 1.5 Conversion of Securities. As of the Effective Time, by
virtue of the Merger and without any action on the part of Sub, the Company or
the holders of any securities of the Constituent Corporations:
(a) Capital Stock of Sub. Each issued and outstanding share of common
stock, par value $.01 per share, of Sub shall be converted into one validly
issued, fully paid and nonassessable share of common stock of the Surviving
Corporation.
(b) Cancellation of Treasury Stock and Parent Owned Stock. All shares
of Company Common Stock that are held in the treasury of the Company and any
shares of Company Common Stock owned by Parent or by any wholly-owned
2
Subsidiary of Parent shall be canceled and no capital stock of Parent or other
consideration shall be delivered in exchange therefor. For all purposes of this
Agreement, shares held of record by the Company's Stock Bonus Plan and its
Profit Sharing and Savings Plan shall be treated as issued and outstanding and
shall not be considered treasury shares.
(c) Conversion of Shares of Company Common Stock. Subject to the
provisions of Sections 1.8 and 1.10, each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time (other than shares to be
canceled in accordance with Section 1.5(b) and Dissenting Shares (as hereinafter
defined)) shall be converted into 0.51 (such number being the "Exchange Ratio")
validly issued, fully paid and nonassessable shares of Parent Common Stock. All
such shares of Company Common Stock, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and each holder of a
certificate representing any such shares shall cease to have any rights with
respect thereto, except the right to receive (i) any dividends and other
distributions in accordance with Section 1.7, (ii) certificates representing the
shares of Parent Common Stock into which such shares are converted and (iii) any
cash, without interest, in lieu of fractional shares to be issued or paid in
consideration therefor upon the surrender of such certificate in accordance with
Section 1.8.
(d) Warrants, Stock Options, Etc. Except to the extent otherwise
provided in Section 5.8, each outstanding stock option or other right to
purchase shares of Company Common Stock (excluding the Warrants (as hereinafter
defined)), whether or not then exercisable or vested, shall remain outstanding
after the Effective Time and shall, at the Effective Time, be converted into and
become the right to purchase, subject to the satisfaction of the vesting
provisions and the payment of the exercise price thereof, that number of shares
of Parent Common Stock equal to the Exchange Ratio, for each share of Company
Common Stock that would have been issued if such option or other right had been
exercised immediately prior to the Effective Time. Each outstanding Warrant
shall be converted into that number of shares of Parent Common Stock and such
other property as would have been received by the holder if such Warrant had
been exercised immediately prior to the Effective Time and the Company Common
Stock that would have been received upon such exercise had been converted
pursuant to Section 1.5(c).
(e) Shares of Dissenting Stockholders. Notwithstanding anything in
this Agreement to the contrary, any issued and outstanding shares of Company
Common Stock held by a person (a "Dissenting Stockholder") who objects to the
Merger and complies with all the provisions of the DGCL concerning the right of
holders of shares of Company Common Stock to dissent from the Merger and require
appraisal of their shares (the "Dissenting Shares") shall not be converted as
described in Section 1.5(c), but shall be converted into the right to receive
such consideration as may be determined to be due to such Dissenting Stockholder
pursuant to the DGCL. If, after the Effective Time, such Dissenting Stockholder
withdraws his demand for appraisal or fails to perfect or otherwise loses his
right of appraisal, in any case pursuant to the DGCL, his shares of Company
Common Stock shall be deemed to be converted as of the Effective Time solely
into the amount of shares of Parent Common Stock provided in Section 1.5(c).
Section 1.6 Parent to Make Certificates Available.
(a) Exchange of Certificates. Parent shall authorize First Chicago
Trust Company of New York (or such other bank or trust company as shall be
acceptable to Parent and the Company) to act as the Exchange Agent
3
hereunder (the "Exchange Agent"). Within three business days after the Effective
Time (but subject to Section 1.8), Parent shall deposit with the Exchange Agent,
in trust for the holders of shares of Company Common Stock converted in the
Merger, (i) certificates representing the shares of Parent Common Stock issuable
pursuant to Section 1.5(c) in exchange for outstanding shares of Company Common
Stock or issuable pursuant to Section 1.5(d) in exchange for outstanding
Warrants, (ii) cash required to make payments in lieu of any fractional shares
pursuant to Section 1.8 and (iii) cash or other property to pay or make any
dividends or distributions pursuant to Section 1.7 (such cash and shares of
Parent Common Stock, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund"). The Exchange
Agent shall, pursuant to irrevocable instructions, deliver the Parent Common
Stock contemplated to be issued pursuant to Section 1.5(c) out of the Exchange
Fund.
(b) Exchange Procedures. Within three business days after the
Effective Time, the Exchange Agent shall mail to each record holder of a
certificate or certificates that immediately prior to the Effective Time
represented outstanding shares of Company Common Stock or outstanding Warrants
converted in the Merger (the "Certificates") a letter of transmittal in form
reasonably acceptable to the Company (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
actual delivery of the Certificates to the Exchange Agent, and shall contain
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Parent Common Stock and cash in lieu of
fractional shares). Upon surrender for cancellation to the Exchange Agent of a
Certificate, together with such letter of transmittal, duly executed, the holder
of such Certificate shall be entitled to receive in exchange therefor (i) a
certificate representing that number of whole shares of Parent Common Stock into
which the shares or Warrants represented by the surrendered Certificate shall
have been converted at the Effective Time pursuant to this Article I, (ii) cash
in lieu of any fractional share in accordance with Section 1.8 and (iii) certain
dividends and other distributions in accordance with Section 1.7. Any
Certificate so surrendered shall forthwith be canceled.
Section 1.7 Dividends; Transfer Taxes; Withholding. No dividends or
other distributions that are declared on or after the Effective Time on Parent
Common Stock, or are payable to the holders of record thereof on or after the
Effective Time, will be paid to any person entitled by reason of the Merger to
receive a certificate representing Parent Common Stock until such person
surrenders the related Certificate or Certificates, as provided in Section 1.6,
and no cash payment in lieu of fractional shares will be paid to any such person
pursuant to Section 1.8 until such person shall so surrender the related
Certificate or Certificates. Subject to the effect of applicable escheat,
abandoned property or similar laws, there shall be paid to each record holder of
a new certificate representing such Parent Common Stock: (i) at the time of such
surrender or as promptly as practicable thereafter, the amount of any dividends
or other distributions theretofore paid with respect to the shares of Parent
Common Stock represented by such new certificate and having a record date on or
after the Effective Time and a payment date prior to such surrender; (ii) at the
appropriate payment date or as promptly as practicable thereafter, the amount of
any dividends or other distributions payable with respect to such shares of
Parent Common Stock and having a record date on or after the Effective Time but
prior to such surrender and a payment date on or subsequent to such surrender;
and (iii) at the time of such surrender or as promptly as practicable
thereafter, the amount of any cash payable with respect to a fractional share of
Parent Common Stock to which
4
such holder is entitled pursuant to Section 1.8. In no event shall the person
entitled to receive such dividends or other distributions be entitled to receive
interest on such dividends or other distributions. If any certificate
representing shares of Parent Common Stock or cash or other property is to be
issued or delivered in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of such
exchange that the Certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
exchange shall pay to the Exchange Agent any transfer or other taxes required by
reason of the issuance of certificates for such shares of Parent Common Stock in
a name other than that of 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. Parent or the Exchange Agent shall be entitled
to deduct and withhold from the consideration otherwise payable pursuant to this
Agreement such amounts as Parent or the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the Code or under any
provision of federal, state, local or foreign tax law. To the extent that
amounts are so withheld by Parent or the Exchange Agent, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
person in respect of which such deduction and withholding was made by Parent or
the Exchange Agent.
Section 1.8 No Fractional Securities. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates pursuant to this Article I, and no Parent
dividend or other distribution or stock split shall relate to any fractional
share, and no fractional share shall entitle the owner thereof to vote or to any
other rights of a security holder of Parent. In lieu of any such fractional
share, each holder of Company Common Stock who would otherwise have been
entitled to a fraction of a share of Parent Common Stock upon surrender of
Certificates for exchange pursuant to this Article I will be paid an amount in
cash (without interest), rounded to the nearest cent, determined by multiplying
(i) the per share closing price on the New York Stock Exchange, Inc. (the
"NYSE") of Parent Common Stock (as reported in the NYSE Composite Transactions)
on the trading day prior to the date of the Effective Time by (ii) the
fractional interest to which such holder would otherwise be entitled. Within
three business days after the determination of the amount of cash, if any, to be
paid to holders of fractional share interests, the Exchange Agent shall so
notify Parent, and Parent shall deposit such amount with the Exchange Agent and
shall cause the Exchange Agent to forward payments to such holders of fractional
share interests subject to and in accordance with the terms of Section 1.7 and
this Section 1.8. For purposes of paying such cash in lieu of fractional shares,
all Certificates surrendered for exchange by a Company stockholder shall be
aggregated, and no such Company stockholder will receive cash in lieu of
fractional shares in an amount equal to or greater than the value of one full
share of Parent Common Stock with respect to such Certificates surrendered.
Section 1.9 Return of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the former stockholders of the Company for
one year after the Effective Time shall be delivered to Parent and any such
former stockholders who have not theretofore complied with this Article I shall
thereafter look only to Parent for payment of their claim for Parent Common
Stock, any cash in lieu of fractional shares of Parent Common Stock and any
dividends or distributions with respect to Parent Common Stock. Neither Parent
nor the Surviving Corporation shall be liable to any former holder of Company
Common Stock for any such shares of Parent Common Stock, cash and dividends and
distributions held in the Exchange Fund which is
5
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
Section 1.10 Adjustment of Exchange Ratio. Subject to Section 4.2,
in the event of any reclassification, stock split or stock dividend with respect
to Parent Common Stock, any change or conversion of Parent Common Stock into
other securities or any other dividend or distribution with respect to the
Parent Common Stock, other than normal quarterly cash dividends (or if a record
date with respect to any of the foregoing should occur), prior to the Effective
Time, appropriate and proportionate adjustments, if any, shall be made to the
Exchange Ratio, and all references to the Exchange Ratio in this Agreement shall
be deemed to be to the Exchange Ratio as so adjusted.
Section 1.11 No Further Ownership Rights in Company Common Stock.
All shares of Parent Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms hereof (including any cash paid
pursuant to Section 1.8) shall be deemed to have been issued in full
satisfaction of all rights pertaining to the shares of Company Common Stock
represented by such Certificates.
Section 1.12 Closing of Company Transfer Books. At the Effective
Time, the stock transfer books of the Company shall be closed and no transfer of
shares of Company Common Stock or Warrants shall thereafter be made on the
records of the Company. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, the Exchange Agent or the Parent, such
Certificates shall be canceled and exchanged as provided in this Article I.
Section 1.13 Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent or the Exchange Agent, the posting by such person of a bond,
in such reasonable amount as Parent or the Exchange Agent may direct (but
consistent with the practices Parent applies to its own stockholders) as
indemnity against any claim that may be made against them with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the shares of Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock to which the holders thereof are
entitled pursuant to Section 1.8 and any dividends or other distributions to
which the holders thereof are entitled pursuant to Section 1.7.
Section 1.14 Further Assurances. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Corporations, or (b) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations, all such
deeds, bills of sale, assignments and assurances and to do, in the name and on
behalf of either Constituent Corporation, all such other acts and things as may
be necessary, desirable or proper to vest, perfect or confirm the Surviving
Corporation's right, title or interest in, to or under any of the rights,
privileges, powers, franchises, properties or assets of such Constituent
Corporation and otherwise to carry out the purposes of this Agreement.
6
Section 1.15 Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") and all actions specified in this Agreement to
occur at the Closing shall take place at the offices of Sidley & Austin, One
First National Plaza, Chicago, Illinois, at 10:00 a.m., local time, no later
than the second business day following the day on which the last of the
conditions set forth in Article VI shall have been fulfilled or waived, or at
such other time and place as Parent and the Company shall agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
------------------------------------------------
Parent and Sub represent and warrant to the Company as follows:
Section 2.1 Organization, Standing and Power. Parent, Sub and each
of Parent's Significant Subsidiaries (as hereinafter defined) is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now being conducted, except where the
failure to be so organized, validly existing or in good standing would not have
a Material Adverse Effect (as hereinafter defined) on Parent or prevent or
materially delay the consummation of the Merger. Parent and each of its
Significant Subsidiaries is duly qualified or licensed to do business and in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except in such jurisdictions where the
failure to be so duly qualified or licensed and in good standing would not have
a Material Adverse Effect on Parent or prevent or materially delay the
consummation of the Merger. Parent has made available to the Company complete
and correct copies of its Restated Certificate of Incorporation and By-Laws and
the Restated Certificate of Incorporation and By-laws (or similar organizational
documents) of its Significant Subsidiaries.
As used in this Agreement, any reference to any state of facts, event,
change or effect having a "Material Adverse Effect" on or with respect to Parent
or the Company, as the case may be, means such state of facts, event, change or
effect has had, or would reasonably be expected to have, a material adverse
effect on the business, properties, results of operations or financial condition
of Parent and its Subsidiaries, taken as a whole, or the Company and its
Subsidiaries, taken as a whole, as the case may be. No dollar amounts used as a
threshold in any provision hereof (including without limitation the amount
appearing in Sections 2.17 and 3.17) shall be determinative of materiality. For
purposes of this Agreement, (i) "Subsidiary" means any corporation, partnership,
limited liability company, joint venture or other legal entity of which Parent
or the Company, as the case may be (either alone or through or together with any
other Subsidiary), owns, directly or indirectly, more than 50% of the stock or
other equity interests the holders of which are generally entitled to vote for
the election of the board of directors or other governing body of such
corporation, partnership, joint venture or other legal entity and (ii)
"Significant Subsidiary" means any Subsidiary of Parent or the Company, as the
case may be, that would constitute a "significant subsidiary" of Parent or the
Company within the meaning of Rule 1.02(v) of Regulation S-X as promulgated by
the Securities and Exchange Commission (the "SEC").
7
Section 2.2 Subsidiaries. Except as set forth in item 2.2 of the
letter dated the date hereof and delivered on the date hereof by Parent to the
Company, which letter relates to this Agreement and is designated therein as the
Parent Letter (the "Parent Letter"), Exhibit 21 to Parent's Annual Report on
Form 10-K for the year ended December 31, 1996, as filed with the SEC (the
"Parent Annual Report"), is a true, accurate and correct statement in all
material respects of all of the information required to be set forth therein by
the regulations of the SEC.
Section 2.3 Capital Structure. (a) The authorized capital stock of
Parent consists of 50,000,000 shares of Parent Common Stock and 100,000 shares
of Preferred Stock, par value $1.00 per share ("Parent Preferred Stock"), of
which 30,000 shares have been designated as "Series A Junior Participating
Preferred Stock" (the "Series A Preferred Stock"). At the close of business on
July 29, 1997, (i) 25,099,092 shares of Parent Common Stock were issued and
outstanding, all of which were validly issued, fully paid and nonassessable and
free of preemptive rights, and (ii) no shares of Parent Preferred Stock were
outstanding.
(b) As of the date of this Agreement, except for stock options held by
current and former employees and directors of Parent and its Subsidiaries, as
described on item 2.3(b) of the Parent Letter (the "Parent Stock Options"), and
the rights to purchase shares of Series A Preferred Stock (the "Rights") issued
pursuant to the Rights Agreement (the "Rights Agreement") dated as of November
16, 1988, as amended, and any other matter set forth in item 2.3(b) of the
Parent Letter, there are no options, warrants, calls, rights or agreements to
which Parent or any of its Subsidiaries is a party or by which any of them is
bound obligating Parent or any of its Subsidiaries to issue or sell, or cause to
be issued, delivered or sold, additional shares of capital stock of Parent or
any Subsidiary or obligating Parent or any of its Subsidiaries to grant, extend
or enter into any such option, warrant, call, right or agreement.
(c) Each of the outstanding shares of capital stock of each of
Parent's Significant Subsidiaries is duly authorized, validly issued, fully paid
and nonassessable and is owned by a direct or indirect wholly owned Subsidiary
of Parent, free and clear of all liens, pledges, security interests, rights of
first refusal, claims and other encumbrances (collectively, "Liens"), in each
case except as reflected in item 2.3(c) of the Parent Letter.
(d) Except as set forth in item 2.3(d) of the Parent Letter, as of the
date of this Agreement, there are no outstanding obligations of Parent or any of
its Subsidiaries (i) to repurchase, redeem or otherwise acquire any shares of
capital stock of Parent or any of its Subsidiaries, (ii) to vote or to dispose
of any shares of the capital stock of any of Parent's Subsidiaries or (iii) to
make or pay any dividend, distribution or other payment in respect of its
capital stock or other equity related right of Parent or any of its
Subsidiaries.
(e) Except for shares of Parent Common Stock, no voting rights with
respect to Parent are conferred on the holders of any outstanding equity or debt
instruments of Parent.
Section 2.4 Authority. The Boards of Directors of Parent and Sub
have duly approved this Agreement and the election of directors and officers as
provided in Sections 5.16 and 5.17. The Board of Directors of Parent has
declared advisable an amendment to Parent's Restated Certificate of
8
Incorporation to increase the number of authorized shares of Parent Common Stock
to 90,000,000 (the "Charter Amendment"), and the Board of Directors of Parent
has resolved to recommend the approval by Parent's stockholders of the Charter
Amendment and the issuance of Parent Common Stock in connection with the Merger
(the "Share Issuance"). Each of Parent and Sub has all corporate power and
authority to enter into this Agreement and, subject to approval by the
stockholders of Parent of the Charter Amendment, the Share Issuance and the
election of directors as provided in Section 5.17, to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Parent and Sub and the consummation by Parent and Sub of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and Sub, subject to approval by the
stockholders of Parent of the Charter Amendment and the Share Issuance. This
Agreement has been duly executed and delivered by Parent and Sub and (assuming
the valid authorization, execution and delivery of this Agreement by the
Company) constitutes the valid and binding obligation of Parent and Sub
enforceable against each of them in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity. The Charter
Amendment, the Share Issuance and the filing of a registration statement on Form
S-4 with the SEC by Parent under the Securities Act of 1933, as amended
(together with the rules and regulations promulgated thereunder, the "Securities
Act"), for the purpose of registering shares of Parent Common Stock to be issued
in the Merger (together with any amendments or supplements thereto, whether
prior to or after the effective date thereof, the "Registration Statement") have
been duly authorized by Parent's Board of Directors.
Section 2.5 Consents and Approvals; No Violations. Except as set
forth in item 2.5 of the Parent Letter, the execution and delivery by Parent and
Sub of this Agreement do not, and the consummation of the transactions
contemplated hereby and compliance by Parent and Sub with the provisions hereof
will not, result in any violation of, or default (with or without notice or
lapse of time, or both) under, or give a right of termination, cancellation or
acceleration of any obligation or the loss of a benefit under, or result in the
creation of any Lien upon, any of the properties or assets of Parent or any of
its Subsidiaries under, (i) the Restated Certificate of Incorporation, By-laws
or comparable organization documents of Parent or any of its Subsidiaries, (ii)
any loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license applicable to
Parent or any of its Subsidiaries or (iii) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Parent or any of its
Subsidiaries or any of their respective properties or assets, other than, in the
case of clause (ii) or (iii), any such violations, defaults, rights, losses or
Liens that, individually or in the aggregate, would not have a Material Adverse
Effect on Parent or prevent or materially delay the consummation of Merger. No
filing or registration with, or authorization, consent or approval of, any
domestic (federal and state), foreign or supranational court, commission,
governmental body, regulatory agency, authority or tribunal (a "Governmental
Entity") is required by or with respect to Parent or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by Parent or Sub or
is necessary for the consummation of the Merger and the other transactions
contemplated by this Agreement, except (i) in connection, or in compliance, with
the provisions of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), the Securities Act and the Securities Exchange Act of
1934, as amended (together with the rules and regulations promulgated
thereunder, the "Exchange
9
Act"), (ii) the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware in accordance with the DGCL, (iii) such filings and
consents as may be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required approval
triggered by the Merger, (iv) such filings as may be required in connection with
the taxes described in Section 5.11 and such filings contemplated by Section
5.19, (v) applicable requirements, if any, of state securities or "blue sky"
laws ("Blue Sky Laws") and the NYSE, (vi) as may be required under foreign laws,
(vii) such filings as may be required under the DGCL in connection with the
Charter Amendment and (viii) such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made would not, individually or in the aggregate, have a Material Adverse Effect
on Parent, or prevent or materially delay the consummation of the Merger.
Section 2.6 SEC Documents and Other Reports. Except as set forth in
item 2.6 of the Parent Letter, Parent has timely filed all required documents
with the SEC since January 1, 1996 (the "Parent SEC Documents"). As of their
respective dates, the Parent SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and, at the respective times they were filed, none of the Parent SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements (including, in each case,
any notes thereto) of Parent included in the Parent SEC Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto as of their
respective dates of filing, were prepared in accordance with United States
generally accepted accounting principles (except, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated therein or in the notes
thereto) and fairly presented in all material respects the consolidated
financial position of Parent and its consolidated Subsidiaries as at the
respective dates thereof and the consolidated results of their operations and
their consolidated cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein). Except as disclosed in the Parent SEC Documents
or as required by United States generally accepted accounting principles, Parent
has not, since December 31, 1996, made any change in the accounting practices or
policies applied in the preparation of financial statements.
Section 2.7 Absence of Certain Changes or Events. Except as
disclosed in Parent SEC Documents filed with the SEC prior to the date of this
Agreement and except as disclosed in item 2.7 of the Parent Letter, since
December 31, 1996: (A) Parent and its Subsidiaries have not incurred any
material liability or obligation (indirect, direct or contingent), or entered
into any material oral or written agreement or other transaction, that is not in
the ordinary course of business or that could reasonably be expected to result
in a Material Adverse Effect on Parent; (B) Parent and its Subsidiaries have not
sustained any loss or interference with their business or properties from fire,
flood, windstorm, accident or other calamity (whether or not covered by
insurance) that has had or that could reasonably be expected to have a Material
Adverse Effect on Parent; (C) there has been no material change in the
indebtedness of Parent or its Subsidiaries and no change in the capital stock of
Parent except for the issuance of shares of Parent Common Stock pursuant to
Parent Stock Options; (D) there has been no event causing a
10
Material Adverse Effect on the Parent nor any development that could,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect on Parent; and (E) during the period from December 31, 1996
through the date of this Agreement, neither Parent nor any of its Subsidiaries
has taken any action that, if taken during the period from the date of this
Agreement through the Effective Time, would constitute a breach of Section 4.2.
Section 2.8 Permits and Compliance. Each of Parent and its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for Parent or any of
its Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Parent Permits"), except where the
failure to have any of the Parent Permits would not, individually or in the
aggregate, have a Material Adverse Effect on Parent or prevent or materially
delay the Merger, and, as of the date of this Agreement, no suspension or
cancellation of any of the Parent Permits is pending or, to the Knowledge of
Parent (as hereinafter defined), threatened, except where the suspension or
cancellation of any of the Parent Permits would not, individually or in the
aggregate, have a Material Adverse Effect on Parent or prevent or materially
delay the Merger. Neither Parent nor any of its Subsidiaries is in violation of
(A) its Restated Certificate of Incorporation, By-laws or other comparable
organizational documents, (B) any applicable law, ordinance, administrative or
governmental rule or regulation or (C) any order, decree or judgment of any
Governmental Entity having jurisdiction over Parent or any of its Subsidiaries,
except, in the case of clauses (A), (B) and (C), for any violations that,
individually or in the aggregate, would not have a Material Adverse Effect on
Parent or prevent or materially delay the Merger. Except as set forth in the
Parent SEC Documents or item 2.8 of the Parent Letter, prior to the date of this
Agreement, no event of default or event that, but for the giving of notice or
the lapse of time or both, would constitute an event of default exists or, upon
the consummation by Parent of the transactions contemplated by this Agreement,
will exist under any indenture, mortgage, loan agreement, note or other
agreement or instrument for borrowed money, any guarantee of any agreement or
instrument for borrowed money or any lease, contractual license or other
agreement or instrument to which Parent or any of its Subsidiaries is a party or
by which Parent or any such Subsidiary is bound or to which any of the
properties, assets or operations of Parent or any such Subsidiary is subject,
other than any defaults that, individually or in the aggregate, would not have a
Material Adverse Effect on Parent or prevent or materially delay the Merger.
For purposes of this Agreement, "Knowledge of Parent" means the actual knowledge
of the individuals identified in item 2.8 of the Parent Letter.
Section 2.9 Tax Matters. (a) Except as otherwise set forth in item
2.9(a) of the Parent Letter, and other than exceptions which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, (i) Parent and each of its Subsidiaries have filed all Tax
Returns required to be filed and have paid all Taxes shown to be due on such Tax
Returns; (ii) all Tax Returns filed by Parent and each Subsidiary are complete
and accurate and disclose all Taxes required to be paid by Parent and each of
its Subsidiaries for the periods covered thereby; (iii) none of Parent or any of
its Subsidiaries has waived in writing or been requested to waive in writing any
statute of limitations in respect of income Taxes which waiver is currently in
effect; (iv) the Tax Returns referred to in clause (i) relating to income or
franchise Taxes have been examined by the appropriate taxing authority or the
period for assessment of the Taxes in respect of which such
11
Tax Returns were required to be filed has expired; (v) there is no action, suit,
investigation, audit, claim or assessment pending or proposed or threatened in
writing with respect to Taxes of Parent or any Subsidiary; (vi) all deficiencies
asserted or assessments made as a result of any examination of the Tax Returns
referred to in clause (i) have been paid in full or reserved against on the
books of the Parent and its Subsidiaries; and (vii) all Taxes which Parent or
any of its Subsidiaries are required by law to withhold or to collect for
payment have been duly withheld and collected, and have been paid or accrued,
reserved against and entered on the books of Parent or its Subsidiaries.
(b) Except as set forth in item 2.9(b) of the Parent Letter, no
payment or other benefit, and no acceleration of the vesting of any options,
payments or other benefits, will, as a direct or indirect result of the
transactions contemplated by this Agreement, be (or under Section 280G of the
Code and the Treasury Regulations thereunder be presumed to be) a "parachute
payment" to a "disqualified individual" (as those terms are defined in Section
280G of the Code and the Treasury Regulations thereunder) with respect to Parent
or any of its Subsidiaries, without regard to whether such payment or
acceleration is reasonable compensation for personal services performed or to be
performed in the future. The approximate aggregate amount of "parachute
payments" related to the matters set forth in such item 2.9(b), assuming the
Closing occurs on October 31, 1997 and termination of all listed individuals
without cause on such date is set forth in such item 2.9(b).
(c) For purposes of this Agreement (i) "Tax" (and, with correlative
meaning, "Taxes") shall mean: (A) any federal, state, local or foreign net
income, gross income, gross receipts, windfall profit, severance, property,
production, sales, use, license, excise, franchise, employment, payroll,
withholding, alternative or add-on minimum, ad valorem, value-added, transfer,
stamp, or environmental tax, or any other tax, custom, duty, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest or penalty, addition to tax or additional amount imposed by any
governmental authority; and (B) any liability of Parent, Company or any
Subsidiary for the payment of amounts with respect to payments of a type
described in clause (A) as a result of being a member or an affiliated,
consolidated, combined or unitary group, or as a result of any obligation of
Parent, Company or any Subsidiary under any Tax Sharing Arrangement or Tax
indemnity arrangement; (ii) "Tax Return" shall mean any return, report or
similar statement required to be filed with respect to any Tax (including any
attached schedules), including, without limitation, any information return,
claim for refund, amended return or declaration of estimated Tax; and (iii) "Tax
Sharing Arrangement" shall mean any written or unwritten arrangement for the
allocation or payment of Tax liabilities or payment for Tax benefits with
respect to a consolidated, combined or unitary Tax Return which Tax Return
includes or has includes Parent, Company or any Subsidiary.
Section 2.10 Actions and Proceedings. Except as set forth in the
Parent SEC Documents filed prior to the date of this Agreement and except as set
forth in item 2.10 of the Parent Letter, there are no outstanding orders,
judgments, injunctions, awards or decrees of any Governmental Entity against or
involving Parent or any of its Subsidiaries, or against or involving any of the
present or former directors, officers, employees, consultants, agents or
stockholders of Parent or any of its Subsidiaries, as such, any of its or their
properties, assets or business or any Parent Benefit Plan (as hereinafter
defined) that, individually or in the aggregate, would have a Material Adverse
Effect on Parent or prevent or materially delay the
12
consummation of the Merger. As of the date of this Agreement, except as set
forth in item 2.10 of the Parent Letter, there are no actions, suits or claims
or legal, administrative or arbitrative proceedings, labor disputes or
investigations pending or, to the Knowledge of Parent, threatened against or
involving Parent or any of its Subsidiaries or any of its or their present or
former directors, officers, employees, consultants, agents or stockholders, as
such, or any of its or their properties, assets or business or any Parent
Benefit Plan that, individually or in the aggregate, would have a Material
Adverse Effect on Parent, or prevent or materially delay the consummation of the
Merger. As of the date hereof, except as set forth in item 2.10 of the Parent
Letter, there are no actions, suits, labor disputes or other litigation, legal
or administrative proceedings or governmental investigations pending or, to the
Knowledge of Parent, threatened against or affecting Parent or any of its
Subsidiaries or any of its or their present or former officers, directors,
employees, consultants, agents or stockholders, as such, or any of its or their
properties, assets or business relating to the transactions contemplated by this
Agreement.
Section 2.11 Certain Agreements. (a) Except as disclosed in the
Parent SEC Documents filed prior to the date of this Agreement or as listed in
item 2.11(a) of the Parent Letter, as of the date hereof, there is no Contract
(as defined in Section 3.11) to which Parent or any of its Subsidiaries is a
party or is otherwise bound that is material (without regard to dollar value) to
Parent and its Subsidiaries taken as a whole. Item 2.11(a) of the Parent Letter
sets forth a list of the following Contracts to which Parent or any of its
Subsidiaries is a party or otherwise bound: (i) material Contracts of
partnership, joint venture or strategic alliance or with stockholders or a
significant business partner; (ii) Contracts containing covenants of Parent or
any of its Subsidiaries not to compete in any line of business or with any
person in any geographical area; (iii) Contracts relating to any material
acquisition or divestiture, consummated within the last three years, of any
operating business or assets or capital stock of any person; (iv) Contracts
relating to the borrowing of money or guarantee of any payment by a third party
in excess of $10 million; (v) confidentiality Contracts with respect to
information relating to Parent or any of its Subsidiaries (other than such
Contracts entered into in contemplation of a possible business combination);
(vi) any other Contracts pursuant to the terms of which there is either a
current or future obligation or right of Parent or any of its Subsidiaries to
make payment or incur obligations in excess of $5 million or receive payment or
value in excess of $5 million which can be canceled without liability, premium
or penalty only on ninety days or more notice; and (vii) Contracts with the ten
largest client accounts of Parent and its Subsidiaries and any other Contract
which is material (without regard to dollar value) to Parent and its
Subsidiaries taken as a whole (such Contracts required to be listed in item
2.11(a) of the Parent Letter being referred to herein as the "Parent Material
Contracts").
(b) There have been delivered or made available to the Company true,
complete and correct copies of all Parent Material Contracts which are not
exhibits to Parent SEC Documents filed prior to the date of this Agreement. To
the Knowledge of Parent, all Parent Material Contracts are valid and binding
upon Parent or one of its Subsidiaries, as the case may be, in accordance with
their terms. There exists no event of default by Parent or its Subsidiaries
under any of such Parent Material Contracts or, to the Knowledge of Parent, by
any third party thereto, nor any event which, with notice or lapse of time or
both, would constitute an event of default by Parent or any of its Subsidiaries
thereunder, except in each case for any event of default that, individually or
in the aggregate, would not have a
13
Material Adverse Effect on Parent or prevent or materially delay the
consummation of the Merger.
(c) Except as listed in item 2.11(c) of the Parent Letter, neither
Parent nor any of its Subsidiaries is a party to any agreement or plan,
including any stock option plan, stock appreciation rights plan, restricted
stock plan or stock purchase plan, any of the benefits of which will be paid,
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement. No holder of any option to
purchase shares of Parent Common Stock, or shares of Parent Common Stock granted
in connection with the performance of services for Parent or its Subsidiaries,
is or will be entitled to receive cash from Parent or any Subsidiary of Parent
in lieu of or in exchange for such option or shares as a result of the
transactions contemplated by this Agreement.
(d) Parent has made available to the Company, complete and correct
copies of the Agreement dated May 19, 1997 among Publicis SA and its affiliates,
on the one hand, and Parent and its affiliates, on the other hand, and the
principal related documents (the "Publicis Unwind Agreements"). The Publicis
Unwind Agreements constitute the valid and binding obligations of Parent and
Publicis and their respective affiliates enforceable against each of them in
accordance with their terms, except that such enforceability (i) may be limited
by bankruptcy, insolvency, moratorium or other similar laws affecting or
relating to the enforcement of creditors' rights generally and (ii) is subject
to general principles of equity. There has occurred no event of default (nor
any event which, with notice or lapse of time or both, would constitute an event
of default) by Parent under the Publicis Unwind Agreements, or to the Knowledge
of Parent, by any third parties thereto, except for any event of default (or any
event which, with notice or lapse of time or both, would constitute an event of
default) that, individually or in the aggregate, would not have a Material
Adverse Effect on Parent or prevent or materially delay the consummation of the
Merger. Parent has delivered to the Company a document entitled "Summary of
Publicis Proposal - Impact on Continuing Operations" pro forma for the twelve
months ended March 31, 1997 (accompanied by an "agreed-upon procedures letter"
from Xxxxxx Xxxxxxxx LLP) showing the effects on net income and earnings per
share of the transactions contemplated by the Publicis Unwind Agreements as
though they had occurred at the beginning of such period.
Section 2.12 Benefit Plans. (a) Item 2.12(a) of the Parent Letter
contains a list of each Parent Benefit Plan (as hereinafter defined). With
respect to each Parent Benefit Plan, Parent has made, or will as soon as
practicable after the date hereof make, available to the Company a true and
correct copy of (i) the most recent annual report (Form 5500 and accompanying
schedules) filed with the Internal Revenue Service (the "IRS") for such plans
required to file such reports, (ii) the plan document for such Parent Benefit
Plan, including any amendments thereto, if such plan is in writing, (iii) each
trust agreement, insurance contract or administration agreement, if any,
relating to such Parent Benefit Plan, (iv) the most recent summary plan
description for each Parent Benefit Plan for which a summary plan description is
required, (v) the most recent actuarial report or valuation relating to a Parent
Benefit Plan subject to Title IV of ERISA, (vi) the most recent determination
letter, if any, issued by the IRS with respect to any Parent Benefit Plan
intended to be qualified under Section 401(a) of the Code,(vii) any request for
a determination currently pending before the IRS and (viii) all correspondence
with the IRS, the Department of Labor or the Pension
14
Benefit Guaranty Corporation relating to any outstanding controversy or audit.
Benefits under all Parent Benefit Plans are as represented, and subsequent to
the date as of which documents have been made available to the Company no such
benefits have been materially increased and neither Parent nor any Subsidiary of
Parent has entered into, adopted or amended (except as required to maintain the
tax-qualified status of any Parent Benefit Plan intended to be qualified under
Section 401(a) of the Code) any Parent Benefit Plan, and, except as disclosed in
item 2.12(a) of the Parent Letter, does not have any obligation or present
intention to do so. With respect to each employee benefit plan (including,
without limitation, any "employee benefit plan", as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and
any material bonus, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
vacation, severance, death benefit, insurance or other plan, arrangement or
understanding (whether or not legally binding), in each case maintained or
contributed to for the benefit of employees of Parent or any of its Subsidiaries
or ERISA Affiliates (as hereinafter defined) (collectively, the "Parent Benefit
Plans"), individually and in the aggregate, no event has occurred, and to the
Knowledge of Parent, there exists no condition or set of circumstances, in
connection with which Parent or any of its Subsidiaries or ERISA Affiliates
could be subject to any liability that, individually or in the aggregate, would
have a Material Adverse Effect on Parent, under the terms of such Parent Benefit
Plans, ERISA, the Code or any other applicable law. Except as listed on item
2.12(b) of the Parent Letter, all Parent Benefit Plans that are intended to be
qualified under Section 401(a) of the Code have been determined by the IRS to be
so qualified, or a timely application for such determination is now pending or
will be filed on a timely basis and, except as listed on item 2.12(b) of the
Parent Letter, to the Knowledge of Parent, there is no reason why any Parent
Benefit Plan is not so qualified in operation. Neither Parent nor any of its
Subsidiaries has any liability or obligation under any welfare plan to provide
life insurance or medical benefits after termination of employment to any
employee or dependent other than as disclosed in item 2.12(b) of the Parent
Letter or as required by (1) Part 6 of Title I of ERISA or (2) the laws of a
jurisdiction outside the United States.
(b) With respect to the Parent Benefit Plans, there are no funded
benefit obligations for which contributions have not been made to the extent
required by law or the terms of such plans, as the case may be, or if not yet
made because such contributions are not due under law or the terms of such
plans, properly accrued in accordance with United States generally accepted
accounting principles in the financial statements of Parent and its Subsidiaries
and there are no unfunded benefit obligations as of the date hereof which have
not been accounted for in accordance with generally accepted accounting
principles in the financial statements of the Parent or any of its Subsidiaries.
(c) (i) Each Parent Benefit Plan is in substantial compliance with
ERISA, the Code and all other applicable statutes and governmental rules and
regulations, (ii) no "reportable event" (within the meaning of Section 4043 of
ERISA) has occurred with respect to any Parent Benefit Plan subject to Title IV
of ERISA which could result in material liability to Parent or its ERISA
Affiliates, (iii) neither Parent nor any of its ERISA Affiliates would be
subject to any withdrawal liability under Part 1 of Subtitle E of Title IV of
ERISA if, as of the Effective Time, Parent or any such ERISA Affiliate were to
engage in a complete withdrawal (as defined in Section 4203 of ERISA) or partial
withdrawal (as defined in Section 4205 of ERISA) from any Parent Multiemployer
Plan (as hereinafter defined), and neither Parent nor any of its
15
ERISA Affiliates has instituted, or is currently considering taking, any action
to contribute to any "multiemployer plan" (within the meaning of Section
4001(a)(3) of ERISA) other than a Parent Multiemployer Plan, (iv) except as set
forth in item 2.12(a) of the Parent Letter, no action has been taken, or is
currently being considered to terminate any Parent Benefit Plan subject to Title
IV of ERISA, and (v) neither Parent nor any of its Subsidiaries has incurred any
material liability to the IRS with respect to any Parent Benefit Plan,
including, without limitation, any liability imposed under Chapter 43 of the
Code, and no condition or circumstance has existed that would give rise to any
such liability. As of the date of the most recent actuarial report or valuation
for each Parent Benefit Plan subject to Title IV of ERISA, the fair value of the
assets of each such plan are at least equal to the accumulated benefit
obligation of such plan, based on the actuarial methods, tables and assumptions
set forth in such report or valuation, and, to the Knowledge of Parent, there
has been no change since such date to cause such accumulated benefit obligation
to exceed the current fair value of such assets.
(d) Item 2.12(d) of the Parent Letter contains a list, as of the date
of this Agreement, of all (i) severance and employment agreements with senior
management of Parent and its Subsidiaries, (ii) severance programs and policies
of Parent or a Subsidiary of Parent with or relating to their employees and
(iii) plans, programs, agreements and other arrangements of Parent and each of
its Subsidiaries with or relating to their employees which contain change of
control or similar provisions. Parent has provided to the Company a true and
complete copy of each of the foregoing, or, with respect to agreements with
officers of Subsidiaries of Parent, will provide such a copy as soon as
practical after the date hereof.
(e) No asset of Parent or any of its Subsidiaries is subject to any
lien arising under ERISA or the Code on account of any Parent Benefit Plan, and
no event has occurred and no condition or circumstance has existed that could
give rise to any such lien. Neither Parent nor any of its Subsidiaries has been
required to provide any security under Section 307 of ERISA or Section
401(a)(29) or 412(f) of the Code, and no event has occurred and no condition or
circumstance has existed that could give rise to any such requirement to provide
any such security.
(f) As used herein, "Parent Multiemployer Plan" means a "multiemployer
plan" (as defined in Section 4001(a)(3) of ERISA) to which Parent or any of its
ERISA Affiliates is or has been obligated to contribute or otherwise with
respect to which is subject to any liability.
Section 2.13 Compliance with Certain Laws. The properties, assets
and operations of Parent and its Subsidiaries are in compliance with all
applicable federal, state, local and foreign laws, rules and regulations,
orders, decrees, judgments, permits and licenses relating to public and worker
health and safety (collectively, "Worker Safety Laws") and the protection and
clean-up of the environment and activities or conditions related thereto,
including, without limitation, those relating to the generation, handling,
disposal, transportation or release of hazardous materials (collectively,
"Environmental Laws"), except for any violations that, individually or in the
aggregate, are disclosed in the Parent SEC Documents or would not have a
Material Adverse Effect on Parent or prevent or materially delay the
consummation of the Merger. With respect to such properties, assets and
operations, including any previously owned, leased or operated properties,
assets or operations, there are no past, present or reasonably anticipated
future events, conditions, circumstances, activities, practices, incidents,
16
actions or plans of Parent or any of its Subsidiaries that may interfere with or
prevent compliance or continued compliance with applicable Worker Safety Laws
and Environmental Laws, other than any such interference or prevention as would
not, individually or in the aggregate with any such other interference or
prevention, have a Material Adverse Effect on Parent.
Section 2.14 Liabilities. Except as set forth in the Parent SEC
Documents filed prior to the date hereof, as of the date hereof, Parent and its
Subsidiaries have no liabilities, absolute or contingent, other than liabilities
that, individually or in the aggregate, would not have a Material Adverse Effect
on Parent.
Section 2.15 Labor Matters. As of the date of this Agreement,
neither Parent nor any of its Subsidiaries is a party to any collective
bargaining agreement or labor contract in the United States, except for the
collective bargaining agreements (i) between R/ Xxxxxxxxx Associates New York
and International Alliance of Theatrical Stage Employees, Local 600 and (ii)
with major commercial talent unions, including Screen Actors Guild and American
Federation of Television and Radio Artists. Neither Parent nor any of its
Subsidiaries has engaged in any unfair labor practice with respect to any
persons employed by or otherwise performing services primarily for Parent or any
of its Subsidiaries in the United States (the "Parent Business Personnel"), and
there is no unfair labor practice complaint against Parent or any of its
Subsidiaries by the National Labor Relations Board or any comparable state
agency pending or threatened in writing with respect to the Parent Business
Personnel, except where such unfair labor practice or complaint, individually or
in the aggregate, would not have a Material Adverse Effect on Parent. There is
no labor strike, dispute, slowdown or stoppage pending or, to the Knowledge of
Parent, threatened against or affecting Parent or any of its Subsidiaries that
may interfere with the respective business activities of Parent or any of its
Subsidiaries, except where such dispute, strike or work stoppage, individually
or in the aggregate, would not have a Material Adverse Effect on Parent.
Section 2.16 Intellectual Property. Parent and its Subsidiaries have
all patents, patent rights, trademarks, trade names, service marks, trade
secrets, copyrights and other proprietary intellectual property rights
(collectively, "Intellectual Property Rights") as are necessary in connection
with the business of Parent and its Subsidiaries, taken as a whole, except where
the failure to have such Intellectual Property Rights, individually or in the
aggregate, would not have a Material Adverse Effect on Parent. Neither Parent
nor any of its Subsidiaries has infringed any Intellectual Property Rights of
any third party other than any infringements that, individually or in the
aggregate, would not have a Material Adverse Effect on Parent.
Section 2.17 Continuity of Business. To the Knowledge of Parent,
except as described in item 2.17 of the Parent Letter, no client from which
Parent and its Subsidiaries received commission and fee income in the year ended
December 31, 1996 in excess of $40 million has given notice of its intent to
terminate, materially reduce or put up for review the provision of services by
Parent or any of its Subsidiaries or has indicated that it is considering such
action.
Section 2.18 Company Employees. To the Knowledge of Parent except as
described in item 2.18 of the Parent Letter, since December 31, 1996 no employee
or group of employees of Parent or any of its Subsidiaries who is or are
responsible for a business operation of Parent or any of its Subsidiaries which
is material to Parent and its Subsidiaries, taken as a
17
whole, has or have delivered any notice of termination or indicated that he or
she is considering such an action.
Section 2.19 Information in Registration Statement. None of the
information to be supplied by Parent or Sub for the purpose of inclusion or
incorporation by reference in the Registration Statement or the joint proxy
statement/prospectus included therein (together with any amendments or
supplements thereto, the "Joint Proxy Statement") relating to the Stockholder
Meetings (as defined in Section 5.1) will, at the time the Registration
Statement is filed with the SEC, at the time it becomes effective under the
Securities Act 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 therein, in light of the
circumstances under which they are made, not misleading.
Section 2.20 Opinion of Financial Advisor. Parent has received the
written opinion of Xxxxxx Xxxxxxx & Co. Incorporated, dated the date hereof, to
the effect that, as of the date hereof, the Exchange Ratio is fair to Parent
from a financial point of view, a copy of which opinion has been delivered to
the Company.
Section 2.21 State Takeover Statutes. The Board of Directors of the
Parent has, to the extent such statutes are applicable, (a) taken all action
necessary to exempt Company, its Subsidiaries and affiliates, the Merger, this
Agreement, the Parent Stockholders' Agreement and the transactions contemplated
hereby and thereby from Section 203 of the DGCL or satisfy the requirements
thereof and (b) taken, or prior to the Effective Time will take, all actions
necessary to satisfy the provisions of Section 203 of the DGCL. To the
Knowledge of the Parent, no other state takeover statutes governing Parent are
applicable to the Merger, the Parent Stockholders' Agreement, this Agreement and
the transactions contemplated hereby and thereby.
Section 2.22 Required Vote of Parent Stockholders. The affirmative
vote of a majority of the outstanding shares of Parent Common Stock is required
to approve the Charter Amendment. The affirmative vote of a majority of the
votes cast on the Share Issuance is required to approve the Share Issuance,
provided that the total votes cast on the proposal represent a majority of the
outstanding shares of Parent Common Stock. The affirmative vote of a majority
of the votes cast in the election of directors as provided in Section 5.17 is
required to approve such election. No other vote of the stockholders of Parent
is required by law, the Restated Certificate of Incorporation or By-laws of
Parent or otherwise in order for Parent to consummate the Merger and the
transactions contemplated hereby.
Section 2.23 Pooling of Interests. To the Knowledge of Parent,
neither Parent nor any of its Subsidiaries has taken any action or failed to
take any action which action or failure would (i) jeopardize the treatment of
the Merger as a pooling of interests for accounting purposes or (ii) jeopardize
the treatment of the Merger as a reorganization within the meaning of Section
368(a) of the Code.
Section 2.24 Operations of Sub. Sub is a direct, wholly-owned
subsidiary of Parent, was formed solely for the purpose of engaging in the
transactions contemplated hereby, has engaged in no other business activities
and has conducted its operations only as contemplated hereby.
18
Section 2.25 Brokers. No broker, investment banker or other person,
other than Xxxxxx Xxxxxxx & Co. Incorporated, the fees and expenses of which
will be paid by Parent (as reflected in an agreement, a copy of which has been
delivered to the Company), is entitled to any broker's, finder's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to Parent and Sub as follows:
Section 3.1 Organization. The Company and each of its Significant
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to carry on its business as now being
conducted, except where the failure to be so organized, validly existing or in
good standing would not have a Material Adverse Effect on the Company or prevent
or materially delay the consummation of the Merger. The Company and each of its
Significant Subsidiaries is duly qualified or licensed to do business and in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except in such jurisdictions where the
failure to be so duly qualified or licensed and in good standing would not have
a Material Adverse Effect on the Company or prevent or materially delay the
consummation of the Merger. The Company has made available to Parent complete
and correct copies of its Restated Certificate of Incorporation and By-laws and
the Certificate of Incorporation and By-laws (or similar organizational
documents) of its Significant Subsidiaries.
Section 3.2 Subsidiaries. Item 3.2(a) of the letter from the Company
to Parent dated the date hereof, which letter relates to this Agreement and is
designated therein as the Company Letter (the "Company Letter"), lists the name
of each Subsidiary of the Company and the jurisdiction of its organization, the
authorized, issued and outstanding number of shares of its equity securities and
the record holder of the shares of its equity securities.
Section 3.3 Capital Structure. (a) The authorized capital stock of
the Company consists of 12,000,000 shares of Class A Common Stock, 43,000,000
shares of Class B Common Stock, and 103,665 shares of Serial Preferred Stock,
par value $.01 per share ("Company Preferred Stock"). At the close of business
on July 29, 1997, (i) 8,266,959 shares of Class A Common Stock were issued and
outstanding, all of which were validly issued, fully paid and nonassessable and
free of preemptive rights, (ii) 26,789,344 shares of Class B Common Stock were
issued and outstanding, all of which were validly issued, fully paid and
nonassessable and free of preemptive rights and (iii) no shares of Company
Preferred Stock were outstanding.
(b) As of the date of this Agreement, except for stock options
covering not in excess of 2,100,000 shares of Company Common Stock under the
Company's stock option plan(s) (collectively, the "Company Stock Options"), and
warrants to purchase not in excess of 1,670,496 shares of Company Common Stock
(the "Warrants") as disclosed in item 3.3(b) of the Company Letter, there are no
options, warrants, calls, rights or agreements to which the
19
Company or except as disclosed in item 3.3(b) of the Company Letter any of its
Subsidiaries is a party or by which any of them is bound obligating the Company
or any of its Subsidiaries to issue or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of the Company or any Subsidiary or
obligating the Company or any of its Subsidiaries to grant, extend or enter into
any such option, warrant, call, right or agreement.
(c) Each of the outstanding shares of capital stock of each of the
Company's Significant Subsidiaries is duly authorized, validly issued, fully
paid and nonassessable and is owned by a direct or indirect wholly owned
Subsidiary of the Company, free and clear of all Liens, in each case except as
reflected in item 3.3(c) of the Company Letter.
(d) Except as set forth in item 3.2(d) of the Company Letter, as of
the date of this Agreement, there are no outstanding obligations of the Company
or any of its Subsidiaries (i) to repurchase, redeem or otherwise acquire any
shares of capital stock of the Company or any its Subsidiaries, (ii) to vote or
to dispose of any shares of the capital stock of any of the Company's
Subsidiaries or (iii) to make or pay any dividend, distribution or other payment
in respect of its capital stock or other equity related right of the Company or
any of its Subsidiaries.
(e) Except for shares of Company Common Stock, no voting rights with
respect to the Company are conferred on the holders of any outstanding equity or
debt instruments of the Company.
Section 3.4 Authority. The Board of Directors of the Company has
duly approved this Agreement, and has resolved to recommend the adoption of this
Agreement by the Company's stockholders and directed that this Agreement be
submitted to the Company's stockholders for approval. The Company has all
corporate power and authority to enter into this Agreement and, subject to
adoption of this Agreement by the stockholders of the Company, to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Company, subject to adoption of
this Agreement by the stockholders of the Company. This Agreement has been duly
executed and delivered by the Company and (assuming the valid authorization,
execution and delivery of this Agreement by Parent and Sub) constitutes the
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is subject to general
principles of equity.
Section 3.5 Consent and Approvals; No Violations. Except as set
forth in item 3.5 of the Company Letter, the execution and delivery by the
Company of this Agreement does not, and the consummation by the Company of the
transactions contemplated hereby and compliance by the Company with the
provisions hereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or the loss of a
benefit under, or result in the creation of any Lien upon any of the properties
or assets of the Company or any of its Subsidiaries under, (i) the Certificate
of Incorporation, By-laws or comparable organization documents of the Company or
any of its Subsidiaries, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to the Company or any of its
20
Subsidiaries or (iii) any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to the Company or any of its Subsidiaries or any of
their respective properties or assets, other than, in the case of clause (ii) or
(iii), any such violations, defaults, rights, losses or Liens that, individually
or in the aggregate, would not have a Material Adverse Effect on the Company or
prevent or materially delay the consummation of the Merger. No filing or
registration with, or authorization, consent or approval of, any Governmental
Entity is required by or with respect to the Company or any of its Subsidiaries
in connection with the execution and delivery of this Agreement by the Company
or is necessary for the consummation of the Merger and the other transactions
contemplated by this Agreement, except (i) in connection, or in compliance, with
the provisions of the HSR Act, (ii) the filing of a Certificate of Merger with
the Secretary of State of Delaware in accordance with the DGCL, (iii) such
filings and consents as may be required under any environmental, health or
safety law or regulation pertaining to any notification, disclosure or required
approval triggered by the Merger, (iv) such filings, authorizations, orders and
approvals as may be required by state takeover laws (the "State Takeover
Approvals"), (v) such filings as may be required in connection with the taxes
described in Section 5.11 and such filings contemplated by Section 5.19, (vi)
such filings as may be required under foreign laws and (vii) such other
consents, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made would not, individually or in the
aggregate, have a Material Adverse Effect on the Company or prevent or
materially delay the consummation of the Merger.
Section 3.6 Company Financial Information. Set forth in item 3.6 of
the Company Letter is a copy of (a) the audited consolidated balance sheet of
the Company and its Subsidiaries as of March 31, 1997 and 1996 (the "Company
Balance Sheet") and (b) the audited consolidated statements of income,
stockholders' equity and cash flows of the Company and its Subsidiaries for the
fiscal years ended March 31, 1997 and 1996 (such statements of income, changes
in stockholder's equity and cash flows with the notes thereto, together with the
Company Balance Sheet, the "Company Financial Information"). The Company
Financial Information has been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis ("GAAP")
(except as may be noted therein), and present fairly, in all material respects,
the consolidated financial position of the Company and its Subsidiaries as of
March 31, 1997 and 1996, and the consolidated statements of income,
stockholder's equity and cash flows of the Company and its Subsidiaries for the
fiscal years ended March 31, 1997 and 1996, subject to the notes regarding the
matters reflected therein.
Section 3.7 Absence of Certain Changes or Events. Except as
disclosed in item 3.7 of the Company Letter, since March 31, 1997 (A) the
Company and its Subsidiaries have not incurred any material liability or
obligation (indirect, direct or contingent), or entered into any material oral
or written agreement or other transaction, that is not in the ordinary course of
business or that could reasonably be expected to result in a Material Adverse
Effect on the Company; (B) the Company and its Subsidiaries have not sustained
any loss or interference with their business or properties from fire, flood,
windstorm, accident or other calamity (whether or not covered by insurance) that
has had or that could reasonably be expected to have a Material Adverse Effect
on the Company; (C) there has been no material change in the indebtedness of the
Company and its Subsidiaries, no change in the capital stock of the Company
except for the issuance of shares of Company Common Stock pursuant to Company
Stock Options or the Warrants, and no dividend or distribution of any kind
declared, paid or made by the Company on
21
any class of its stock; (D) there has been no event causing a Material Adverse
Effect on the Company, nor any development that could, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect on the
Company; and (E) during the period from March 31, 1997 through the date of this
Agreement, except as disclosed in any item of the Company Letter neither the
Company nor any of its Subsidiaries has taken any action that, if taken during
the period from the date of this Agreement through the Effective Time, would
constitute a breach of Section 4.1.
Section 3.8 Permits and Compliance. Each of the Company and its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for the Company or any
of its Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Company Permits"), except where the
failure to have any of the Company Permits would not, individually or in the
aggregate, have a Material Adverse Effect on the Company or prevent or
materially delay the Merger, and, as of the date of this Agreement, no
suspension or cancellation of any of the Company Permits is pending or, to the
Knowledge of the Company (as hereinafter defined), threatened, except where the
suspension or cancellation of any of the Company Permits would not, individually
or in the aggregate, have a Material Adverse Effect on the Company or prevent or
materially delay the Merger. Neither the Company nor any of its Subsidiaries is
in violation of (A) its Restated Certificate of Incorporation, By-laws or other
comparable organizational documents, (B) any applicable law, ordinance,
administrative or governmental rule or regulation, or (C) any order, decree or
judgment of any Governmental Entity having jurisdiction over the Company or any
of its Subsidiaries, except, in the case of clauses (A), (B) and (C), for any
violations that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company. Except as set forth in item 3.8 of the Company
Letter, prior to the date of this Agreement, no event of default or event that,
but for the giving of notice or the lapse of time or both, would constitute an
event of default, exists or, upon the consummation by the Company of the
transactions contemplated by this Agreement, will exist under any indenture,
mortgage, loan agreement, note or other agreement or instrument for borrowed
money, any guarantee of any agreement or instrument for borrowed money or any
lease, contractual license or other agreement or instrument to which the Company
or any of its Subsidiaries is a party or by which the Company or any such
Subsidiary is bound or to which any of the properties, assets or operations of
the Company or any such Subsidiary is subject, other than any defaults that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company or prevent or materially delay the Merger. "Knowledge of the
Company" means the actual knowledge of the individuals identified in item 3.8 of
the Company Letter.
Section 3.9 Tax Matters. (a) Except as otherwise set forth in item
3.9(a) of the Company Letter and other than exceptions which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, (i) the Company and each of its Subsidiaries have filed all Tax
Returns required to be filed and have paid all Taxes shown to be due on such Tax
Returns; (ii) all Tax Returns filed by the Company and each of its Subsidiaries
are complete and accurate and disclose all Taxes required to be paid by the
Company and each of its Subsidiaries for the periods covered thereby; (iii) none
of the Company or any of its Subsidiaries has waived in writing or been
requested to waive in writing any statute of limitations in respect of Taxes
which waiver is currently in effect; (iv) the Tax Returns referred to in clause
(i) related to income or franchise Taxes have been
22
examined by the appropriate taxing authority or the period for assessment of the
Taxes in respect of which such Tax Returns were required to be filed has
expired; (v) there is no action, suit, investigation, audit, claim or assessment
pending or proposed or threatened with respect to Taxes of the Company or any of
its Subsidiaries; (vi) all deficiencies asserted or assessments made as a result
of any examination of the Tax Returns referred to in clause (i) have been paid
in full or reserved against on the books of the Company and its Subsidiaries;
(vii) all Taxes which the Company or any of its Subsidiaries are required by law
to withhold or to collect for payment have been duly withheld and collected, and
have been paid or accrued, reserved against and entered on the books of the
Company; (viii) none of the Company or any of its Subsidiaries has been a member
of any Company Group other than each Company Group of which it is a member as of
the date hereof; and (ix) during the two-year period prior to the Effective
Time, the Company did not make a distribution to which Section 355 of the Code
applies and no Subsidiary distributed stock of one Subsidiary to the Company or
another Subsidiary. For purposes of this Agreement, "Company Group" shall mean
any "affiliated group" (as defined in Section 1504(a) of the Code without regard
to the limitations contained in Section 1504(b) of the Code) that, at any time
on or before the Effective Date, includes or has included the Company or any of
its Subsidiaries or any predecessor of or successor to the Company or any of its
Subsidiaries (or another such predecessor or successor), or any other group of
corporations that, at any time on or before the Effective Date, files or has
filed Tax Returns on a combined, consolidated or unitary basis with the Company
or any of its Subsidiaries or any predecessor of or successor to the Company or
any of its Subsidiaries (or another such predecessor or successor).
(b) Except as set forth in item 3.9(b) of the Company Letter, no
payment or other benefit, and no acceleration of the vesting of any options,
payments or other benefits, will, as a direct or indirect result of the
transactions contemplated by this Agreement, be (or under Section 280G of the
Code and the Treasury Regulations thereunder be presumed to be) a "parachute
payment" to a "disqualified individual" (as those terms are defined in Section
280G of the Code and the Treasury Regulations thereunder), with respect to the
Company or any of its Subsidiaries without regard to whether such payment or
acceleration is reasonable compensation for personal services performed or to be
performed in the future. The approximate aggregate amount of "parachute
payments" related to the matters set forth in such item 3.9(b), assuming the
Closing occurs on October 31, 1997 and termination of all listed individuals
without cause on such date, is set forth in such item 3.9(b).
Section 3.10 Actions and Proceedings. Except as set forth in Item
3.10 of the Company Letter, there are no outstanding orders, judgments,
injunctions, awards or decrees of any Governmental Entity against or involving
the Company or any of its Subsidiaries, or against or involving any of the
present or former directors, officers, employees, consultants, agents or
stockholders of the Company or any of its Subsidiaries, as such, any of its or
their properties, assets or business or any Company Plan (as in Section 3.12(f)
defined) that, individually or in the aggregate, would have a Material Adverse
Effect on the Company or prevent or materially delay the consummation of the
Merger. As of the date of this Agreement, there are no actions, suits or claims
or legal, administrative or arbitrative proceedings or investigations pending
or, to the Knowledge of the Company, threatened against or involving the Company
or any of its Subsidiaries or any of its or their present or former directors,
officers, employees, consultants, agents or stockholders, as such, or any of its
or their properties, assets or business or any Company Plan that, individually
or in the aggregate, would have a Material Adverse Effect on the Company or
prevent or materially delay the
23
consummation of the Merger. As of the date hereof, there are no actions, suits,
labor disputes or other litigation, legal or administrative proceedings or
governmental investigations pending or, to the Knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries or any of
its or their present or former officers, directors, employees, consultants,
agents or stockholders, as such, or any of its or their properties, assets or
business relating to the transactions contemplated by this Agreement.
Section 3.11 Certain Agreements. (a) Item 3.10(a) of the Company
Letter sets forth a list of all of the following contracts, agreements, leases,
mortgages, indentures, notes or other obligations (collectively, "Contracts") to
which the Company or any of it Subsidiaries is a party or otherwise bound: (i)
material Contracts of partnership, joint venture or strategic alliance or with
stockholders or a significant business partner; (ii) Contracts containing
covenants of the Company or any of its Subsidiaries not to compete in any line
of business or with any person in any geographical area; (iii) Contracts
relating to any material acquisition or divestiture, consummated within the last
three years, of any operating business or assets or capital stock of any person;
(iv) Contracts relating to the borrowing of money or guarantee of any payment by
a third party in excess of $10 million; (v) confidentiality Contracts with
respect to information relating to the Company or any of its Subsidiaries (other
than such Contracts entered into in contemplation of a possible business
combination); (vi) any other Contracts pursuant to the terms of which there is
either a current or future obligation or right of the Company or any of its
Subsidiaries to make payment or incur obligations in excess of $5 million or
receive payment or value in excess of $5 million which can be canceled without
liability, premium or penalty only on ninety days or more notice; and (vii)
Contracts with the ten largest client accounts of the Company and its
Subsidiaries and any other Contract which is material (without regard to dollar
value) to the Company and its Subsidiaries taken as a whole (such Contracts
required to be listed in item 3.11(a) of the Company Letter being referred to
herein as the "Company Material Contracts").
(b) There have been delivered or made available to Parent true,
complete and correct copies of all Company Material Contracts. To the Knowledge
of the Company, all Company Material Contracts are valid and binding upon the
Company or one of its Subsidiaries, as the case may be, in accordance with their
terms. There exists no event of default by the Company or its Subsidiaries
under any of such Company Material Contracts or, to the Knowledge of the
Company, by any third party thereto, nor any event which, with notice or lapse
of time or both, would constitute an event of default by the Company or any of
its Subsidiaries thereunder, except in each case for any event of default that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company or prevent or materially delay the consummation of the Merger.
(c) Except as listed in item 3.11(c) of the Company Letter, neither
the Company nor any of its Subsidiaries is a party to any agreement or plan,
including any stock option plan, stock appreciation rights plan, restricted
stock plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement. No holder of any option to
purchase shares of Company Common Stock, or shares of Company Common Stock
granted in connection with the performance of services for the Company or its
Subsidiaries, is or will be entitled to receive cash from the Company or any
Subsidiary in lieu of or in exchange for such option
24
or shares as a result of the transactions contemplated by this Agreement
(subject to Section 5.8). Item 3.11(c) of the Company Letter sets forth the
estimated amount which would be payable to each of the top five highest paid
officers of the Company and its Subsidiaries in the United States under (i) any
employment, severance, continuity or similar agreement or (ii) any cancellation
and cash-out of Company Stock Options, in each case assuming the consummation of
the Merger and the termination without cause of such person's employment.
Section 3.12 Benefit Plans. (a) Item 3.12(a) of the Company Letter
contains a list of each Company Plan (as hereinafter defined). With respect to
each Company Plan, the Company has made, or will as soon as practicable after
the date hereof make, available to Parent a true and correct copy of (i) the
most recent annual report (Form 5500 and accompanying Schedules) filed with the
IRS for such plans required to file such reports, (ii) the plan document for
such Company Plan, including any amendments thereto, if such plan is in writing,
(iii) each trust agreement, insurance contract or administration agreement, if
any, relating to such Company Plan, (iv) the most recent summary plan
description for each Company Plan for which a summary plan description is
required, (v) the most recent actuarial report or valuation relating to a
Company Plan subject to Title IV of ERISA, (vi) the most recent determination
letter, if any, issued by the IRS with respect to any Company Plan intended to
be qualified under section 401(a) of the Code, (vii) any request for a
determination currently pending before the IRS and (viii) all correspondence
with the IRS, the Department of Labor or the Pension Benefit Guaranty
Corporation relating to any outstanding controversy or audit. Benefits under
all Company Plans are as represented, and subsequent to the date as of which
documents have been made available to Parent no such benefits have been
materially increased and neither the Company nor any Subsidiary of the Company
has entered into, adopted or amended (except as required to maintain the tax-
qualified status of any Company Plan intended to be qualified under Section
401(a) of the Code) any Company Plan, and does not have any obligation or
present intention to do so. (v) Each Company Plan is in substantial compliance
with ERISA, the Code and all other applicable statutes and governmental rules
and regulations, (w) no "reportable event" (within the meaning of Section 4043
of ERISA) has occurred with respect to any Company Plan subject to Title IV of
ERISA which could result in material liability to the Company or its ERISA
Affiliates, (x) neither the Company nor any of its ERISA Affiliates has
contributed, or been obligated to contribute, to a Company Multiemployer Plan
(as hereinafter defined) at any time or has instituted, or is currently
considering taking, any action to do so, (y) no action has been taken, or is
currently being considered, to terminate any Company Plan subject to Title IV of
ERISA, and (z) neither the Company nor any of its Subsidiaries has incurred any
material liability to the IRS with respect to any Company Plan, including,
without limitation, any liability imposed under Chapter 43 of the Code, and no
condition or circumstance has existed that would give rise to any such
liability. As of the date of the most recent actuarial report or valuation for
any Company Plan subject to Title IV of ERISA, the fair value of the assets of
each such plan are at least equal to the accumulated benefit obligation of such
plan, based on the actuarial methods, tables and assumptions set forth in such
report or valuation, and, to the Knowledge of the Company, there has been no
change since such date to cause such accumulated benefit obligation to exceed
the current fair value of such assets.
(b) With respect to the Company Plans, there are no funded benefit
obligations for which contributions have not been made to the extent required by
law or the terms of such plans, as the case may be, or, if not
25
made because such contributions are not yet due under law or the terms of such
plans, properly accrued in accordance with GAAP in the financial statements of
the Company and its Subsidiaries, and there are no unfunded benefit obligations
as of the date hereof which have not been accounted for in accordance with GAAP
in the financial statements of the Company or any of its Subsidiaries.
(c) With respect to the Company Plans, no event has occurred and, to
the Knowledge of the Company, there exists no condition or set of circumstances
in connection with which the Company or any of its Subsidiaries or ERISA
Affiliates would be subject to any liability under the terms of such Company
Plans that would have a Material Adverse Effect on the Company. Except as
listed on item 3.12(c) of the Company Letter, all Company Plans that are
intended to be qualified under Section 401(a) of the Code have been determined
by the IRS to be so qualified, or a timely application for such determination is
now pending or will be filed on a timely basis and, except as listed on item
3.12(c) of the Company Letter, to the Knowledge of the Company, there is no
reason why any Company Plan is not so qualified in operation. Neither the
Company nor any of its Subsidiaries has any liability or obligation under any
welfare plan to provide life insurance or medical benefits after termination of
employment to any employee or dependent other than as required by (i) Part 6 of
Title I of ERISA or as disclosed in Item 3.12(c) of the Company Letter or (ii)
the laws of a jurisdiction outside the United States.
(d) Item 3.12(d) of the Company Letter contains a list, as of the date
of this Agreement, of all (i) severance and employment agreements with senior
management of the Company and its Subsidiaries, (ii) severance programs and
policies of the Company with or relating to its employees and (iii) plans,
programs, agreements and other arrangements of the Company with or relating to
its employees which contain change of control or similar provisions. The
Company has provided to the Parent a true and complete copy of each of the
foregoing or, with respect to agreements with officers of Subsidiaries of the
Company, will provide such a copy as soon as practical after the date hereof.
(e) No asset of the Company or any of its Subsidiaries is subject to
any lien arising under ERISA or the Code on account of any Company Plan, and no
event has occurred and no condition or circumstance has existed that could give
rise to any such lien. Neither the Company nor any of its Subsidiaries has been
required to provide any security under Section 307 of ERISA or Section
401(a)(29) or 412(f) of the Code, and no event has occurred and no condition or
circumstance has existed that could give rise to any such requirement to provide
any such security.
(f) As used herein, (i) "Company Plan" means each employee benefit
plan (including, without limitation, any "employee benefit plan", as defined in
Section 3(3) of ERISA), and any material bonus, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, vacation, severance, death benefit, insurance or other
plan, arrangement or understanding (whether or not legally binding), in each
case maintained or contributed to for the benefit of employees of the Company or
any of its Subsidiaries or ERISA Affiliates, (ii) "Company Multiemployer Plan"
means a "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) to
which the Company or any of its ERISA Affiliates is or has been obligated to
contribute or otherwise with respect to which is subject to any liability, and
(iii) with respect to any person, "ERISA Affiliate" means any trade or business
(whether or not incorporated)
26
which is under common control or would be considered a single employer with such
person pursuant to Section 414(b), (c), (m) or (o) of the Code and the
regulations promulgated under those sections or pursuant to Section 4001(b) of
ERISA and the regulations promulgated thereunder.
Section 3.13 Compliance with Certain Laws. The properties, assets
and operations of the Company and its Subsidiaries are in compliance with all
applicable federal, state, local and foreign laws, rules and regulations,
orders, decrees, judgments, permits and licenses relating to Worker Safety Laws
and Environmental Laws, except for any violations that, individually or in the
aggregate, would not have a Material Adverse Effect on the Company or prevent or
materially delay the consummation of the Merger. With respect to such
properties, assets and operations, including any previously owned, leased or
operated properties, assets or operations, there are no past, present or
reasonably anticipated future events, conditions, circumstances, activities,
practices, incidents, actions or plans of the Company or any of its Subsidiaries
that may interfere with or prevent compliance or continued compliance with
applicable Worker Safety Laws and Environmental Laws, other than any such
interference or prevention as would not, individually or in the aggregate with
any such other interference or prevention, have a Material Adverse Effect on the
Company or prevent or materially delay the consummation of the Merger.
Section 3.14 Liabilities. Except as set forth in the Company
Financial Information or item 3.14 of the Company Letter, as of the date hereof,
the Company and its Subsidiaries have no liabilities, absolute or contingent,
other than liabilities that, individually or in the aggregate, would not have a
Material Adverse Effect on the Company.
Section 3.15 Labor Matters. Except as set forth in Item 3.15 of the
Company Letter, as of the date of this Agreement, neither the Company nor any of
its Subsidiaries is a party to any collective bargaining agreement or labor
contract in the United States. Neither the Company nor any of its Subsidiaries
has engaged in any unfair labor practice with respect to any persons employed by
or otherwise performing services primarily for the Company or any of its
Subsidiaries in the United States (the "Company Business Personnel"), and there
is no unfair labor practice complaint against the Company or any of its
Subsidiaries by the National Labor Relations Board or any comparable state
agency pending or threatened in writing with respect to the Company Business
Personnel, except where such unfair labor practice or complaint, individually or
in the aggregate, would not have a Material Adverse Effect on the Company.
There is no labor strike, dispute, slowdown or stoppage pending or, to the
Knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries that may interfere with the respective business activities of
the Company or any of its Subsidiaries, except where such dispute, strike or
work stoppage would not have a Material Adverse Effect on the Company.
Section 3.16 Intellectual Property. The Company and its Subsidiaries
have all Intellectual Property Rights as are necessary in connection with the
business of the Company and its Subsidiaries, taken as a whole, except where the
failure to have such Intellectual Property Rights, individually or in the
aggregate, would not have a Material Adverse Effect on the Company. Neither the
Company nor any of its Subsidiaries has infringed any Intellectual Property
Rights of any third party other than any infringements that, individually or in
the aggregate, would not have a Material Adverse Effect on the Company.
27
Section 3.17 Continuity of Business. To the Knowledge of the
Company, except as described in item 3.17 of the Company Letter, no client from
which the Company and its Subsidiaries received commission and fee income in the
fiscal year ended March 31, 1997 in excess of $40 million has given notice of
its intent to terminate, materially reduce or put up for review the provision of
services by the Company and its Subsidiaries or has indicated that it is
considering such action.
Section 3.18 Company Employees. To the Knowledge of the Company
except as described in item 3.18 of the Company Letter, since December 31, 1996
no employee or group of employees of the Company or any of its Subsidiaries who
is or are responsible for a business operation of the Company or any of its
Subsidiaries which is material to the Company and its Subsidiaries, taken as a
whole, has or have delivered any notice of termination or indicated that he or
she is or they are considering such an action.
Section 3.19 Information in Registration Statement. None of the
information supplied or to be supplied by the Company or any of its Subsidiaries
for the purpose of inclusion or incorporation by reference in the Registration
Statement or the Joint Proxy Statement will, at the time the Registration
Statement is filed with the SEC, at the time it becomes effective under the
Securities Act 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
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
Section 3.20 Opinion of Financial Advisor. The Company has received
the written opinion of Xxxxxxx Xxxxx & Co., dated the date hereof, to the effect
that, as of the date hereof, the Exchange Ratio is fair to the Company's
stockholders from a financial point of view, a copy of which opinion has been
delivered to Parent.
Section 3.21 State Takeover Statutes. The Board of Directors of the
Company has, to the extent such statutes are applicable, (a) taken all action
necessary to exempt Parent, its Subsidiaries and affiliates, the Merger, this
Agreement, the Company Stockholders' Agreement and the transactions contemplated
hereby and thereby from Section 203 of the DGCL or satisfy the requirements
thereof and (b) taken, or prior to the Effective Time will take, all actions
necessary to satisfy the provisions of Section 203 of the DGCL. To the
Knowledge of the Company, no other state takeover statutes governing the Company
are applicable to the Merger, the Company Stockholders' Agreement, this
Agreement and the transactions contemplated hereby and thereby.
Section 3.22 Required Vote of Company Stockholders. The affirmative
vote of the holders of a majority of the voting power of the outstanding shares
of Company Common Stock is required to adopt this Agreement. No other vote of
the stockholders of the Company is required by law, the Restated Certificate of
Incorporation or By-laws of the Company or otherwise in order for the Company to
consummate the Merger and the transactions contemplated hereby.
Section 3.23 Pooling of Interests. To the Knowledge of the Company,
neither the Company nor any of its Subsidiaries has taken any action or failed
to take any action which action or failure would (i) jeopardize the treatment of
the Merger as a pooling of interests for accounting purposes or
28
(ii) jeopardize the treatment of the Merger as a reorganization within the
meaning of Section 368(a) of the Code.
Section 3.24 Brokers. No broker, investment banker or other person,
other xxxx Xxxxxxx Xxxxx & Co. and Xxxxxxx & Hoenemeyer, Inc., the fees and
expenses of which will be paid by the Company (as reflected in agreements
between such firms and the Company, copies of which have been furnished to
Parent), is entitled to any broker's, finder's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
-----------------------------------------
Section 4.1 Conduct of Business by the Company Pending the Merger.
Except as expressly permitted by clauses (a) through (n) of this Section 4.1 and
except as contemplated by the Company Letter, during the period from the date of
this Agreement through the Effective Time, the Company shall, and shall cause
each of its Subsidiaries to, in all material respects carry on its business in
the ordinary course of its business as currently conducted and, to the extent
consistent therewith, use reasonable best efforts to keep available the services
of its current officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it to the end that
its goodwill and ongoing business shall be unimpaired at the Effective Time.
Without limiting the generality of the foregoing, except as otherwise expressly
contemplated by this Agreement and subject to Section 4.5 or as set forth in the
Company Letter (with specific reference to the applicable subsection below), the
Company shall not, and shall not permit any of its Subsidiaries to, without the
prior written consent of Parent:
(a) (i) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its capital
stock, or otherwise make any payments to its stockholders in their capacity as
such (other than dividends and other distributions by Subsidiaries), (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 substitution
for shares of its capital stock or (iii) purchase, redeem or otherwise acquire
any shares of capital stock of the Company or any Subsidiary or any other
securities thereof or any rights, warrants or options to acquire any such shares
or other securities other than in connection with the termination of the
Company's employees undertaken in the ordinary course of business and consistent
with past practices;
(b) issue, deliver, sell, pledge, dispose of or otherwise encumber any
shares of its capital stock, any other voting securities or equity equivalent or
any securities convertible into, or any rights, warrants or options to acquire,
any such shares of capital stock, voting securities, equity equivalent or
convertible securities, other than the issuance of shares of Class A Common
stock and Class B Common Stock pursuant to Company Stock Options outstanding on
the date of this Agreement in accordance with their current terms;
(c) amend its Restated Certificate of Incorporation or By-laws or
other comparable organizational documents;
29
(d) (A) acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of or equity in, or by any
other manner, any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any assets, other than transactions that are in the ordinary course of
business consistent with past practice and which involve an aggregate
consideration paid by the Company and its Subsidiaries (including the assumption
of debt and valuing any non-cash consideration at its fair market value) not in
excess of $5 million or (B) sell, lease or otherwise dispose of, or agree to
sell, lease or otherwise dispose of, any of its assets, other than transactions
that are in the ordinary course of business consistent with past practice and
which involve assets having an aggregate fair market value or book value not in
excess of $5 million;
(e) make any capital expenditures, other than capital expenditures not
in excess of $20,000,000 in the aggregate made in the ordinary course of
business consistent with past practice;
(f) incur any indebtedness for borrowed money, guarantee any such
indebtedness, issue or sell any debt securities, guarantee any debt securities
of others or make any loans, advances or capital contributions to, or other
investments in, any other person, other than (i) indebtedness, loans, advances,
capital contributions and investments between the Company and any of its wholly-
owned Subsidiaries or between any of such wholly-owned Subsidiaries and (ii)
borrowing or guarantees not in excess of $20 million in the aggregate incurred
in the ordinary course of business consistent with past practice;
(g) alter (through merger, liquidation, reorganization, restructuring
or in any other fashion) the corporate structure or ownership of the Company or
any Subsidiary;
(h) enter into or adopt any, or amend any existing, severance plan,
agreement or arrangement or enter into or amend any Company Plan or employment
or consulting agreement, other than employment agreements which each have an
future liability of not in excess of $1,000,000 or as required by law;
(i) except (A) as permitted under Section 4.1(h) or (B) to the extent
required by written employment agreements existing on the date of this
Agreement, (1) increase the compensation payable or to become payable to its
officers or employees, except, in the case of employees who are not officers,
for increases in the ordinary course of business consistent with past practice,
(2) grant any severance or termination pay except in the ordinary course of
business consistent with past practice or (3) establish, adopt, enter into, or
amend or take action to enhance or accelerate any rights or benefits under, any
labor, collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund, policy
or arrangement for the benefit of, any director, officer or employee, except, in
each case, as may be required to comply with applicable law;
(j) take any action, other than reasonable and usual actions in the
ordinary course of business consistent with past practice, with respect to
accounting policies or procedures (other than actions required to be taken by
generally accepted accounting principles);
30
(k) prepare or file any federal, state, local or foreign Tax Return
materially inconsistent with past practice or, on any such Tax Return, take any
position, make any election, or adopt any method that is materially inconsistent
with positions taken, elections made or methods used in preparing or filing
similar Tax Returns in prior periods;
(l) settle or compromise any material federal, state, local or foreign
income tax liability;
(m) violate or fail to perform any material obligation or duty imposed
upon it by any applicable federal, state or local law, rule, regulation,
guideline or ordinance which could be reasonably expected to have a Material
Adverse Effect on the Company or prevent or materially delay the Merger; or
(n) authorize, recommend, propose or announce an intention to do any
of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
The Company shall promptly advise Parent orally and in writing of any
change or event having, or which could reasonably be expected to have, a
Material Adverse Effect on the Company or which could prevent or materially
delay the consummation of the Merger.
Section 4.2 Conduct of Business by Parent Pending the Merger. Except
as expressly permitted by clauses (a) through (k) of this Section 4.2 and except
as contemplated by the Publicis Unwind Agreements or the Parent Letter, during
the period from the date of this Agreement through the Effective Time, Parent
shall, and shall cause each of its Subsidiaries to, in all material respects
carry on its business in the ordinary course of its business as currently
conducted and, to the extent consistent therewith, use reasonable best efforts
to keep available the services of its current officers and employees and
preserve its relationships with customers, suppliers and others having business
dealings with it to the end that its goodwill and ongoing business shall be
unimpaired at the Effective Time. Without limiting the generality of the
foregoing, and except as otherwise expressly contemplated by this Agreement or
as set forth in the Parent Letter (with specific reference to the applicable
subsection below), Parent shall not, and shall not permit any of its
Subsidiaries to, without the prior written consent of the Company:
(a) (i) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its capital
stock, or otherwise make any payments to its stockholders in their capacity as
such (other than (A) regular quarterly dividends of not more than $0.15 per
share of Parent Common Stock declared and paid on dates consistent with past
practice and (B) dividends and other distributions by Subsidiaries), (ii) other
than in the case of any Subsidiary, split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock or
(iii) purchase, redeem or otherwise acquire any shares of capital stock of
Parent or any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities (other than the repurchase of shares
of Parent Common Stock pursuant to any open market repurchase plan or in
connection with any acquisition in which such shares are used as consideration
therefor);
31
(b) issue, deliver, sell, pledge, dispose of or otherwise encumber any
shares of its capital stock, any other voting securities or equity equivalent or
any securities convertible into, or any rights, warrants or options to acquire,
any such shares of capital stock, voting securities, equity equivalent or
convertible securities, other than the issuance of shares of Parent Common stock
pursuant to Parent Stock Options outstanding on the date of this Agreement in
accordance with their current terms and other than in connection with an
acquisition undertaken pursuant to Paragraph (d) of this Section 4.2;
(c) amend its Restated Certificate of Incorporation or By-laws or
other comparable organizational documents;
(d) (A) acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of or equity in, or by any
other manner, any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any assets, other than transactions that are in the ordinary course of
business consistent with past practice and which involve an aggregate
consideration paid by Parent and its Subsidiaries (including the assumption of
debt and valuing any non-cash consideration at its fair market value) not in
excess of $5 million or (B) sell, lease or otherwise dispose of, or agree to
sell, lease or otherwise dispose of, any of its assets, other than transactions
that are in the ordinary course of business consistent with past practice and
which involve assets having an aggregate fair market value or book value not in
excess of $5 million;
(e) make any capital expenditures, other than capital expenditures not
in excess of $20,000,000 in the aggregate made in the ordinary course of
business consistent with past practice;
(f) incur any indebtedness for borrowed money, guarantee any such
indebtedness, issue or sell any debt securities, guarantee any debt securities
of others or make any loans, advances or capital contributions to, or other
investments in, any other person, other than (i) indebtedness, loans, advances,
capital contributions and investments between Parent and any of its wholly-owned
Subsidiaries or between any of such wholly-owned Subsidiaries and (ii) borrowing
or guarantees not in excess of $20 million in the aggregate incurred in the
ordinary course of business consistent with past practice;
(g) alter (through merger, liquidation, reorganization, restructuring
or in any other fashion) the corporate structure or ownership of Parent or any
Significant Subsidiary;
(h) enter into or adopt any, or amend any existing, severance plan,
agreement or arrangement or enter into or amend any Parent Plan or employment or
consulting agreement, other than employment agreements which each have a future
liability of not in excess of $1,000,000 or as required by law;
(i) except (A) as permitted under Section 4.2(h) or (B) to the extent
required by written employment agreements existing on the date of this
Agreement, (1) increase the compensation payable or to become payable to its
officers or employees, except, in the case of employees who are not officers,
for increases in the ordinary course of business consistent with past practice,
(2) grant any severance or termination pay except in the ordinary course of
business consistent with past practice or (3) establish, adopt, enter into, or
amend or take action to enhance or accelerate any rights or
32
benefits under, any labor, collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of, any director, officer or
employee, except, in each case, as may be required to comply with applicable
law;
(j) violate or fail to perform any material obligation or duty imposed
upon it by any applicable federal, state or local law, rule, regulation,
guideline or ordinance which could be reasonably expected to have a Material
Adverse Effect on Parent or prevent or materially delay the Merger; or
(k) authorize, recommend, propose or announce an intention to do any
of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
Parent shall promptly advise the Company orally and in writing of any
change or event having, or which could reasonably be expected to have, a
Material Adverse Effect on Parent and its Subsidiaries taken as a whole or which
could prevent or materially delay the consummation of the Merger.
Section 4.3 No Solicitation. (a) From and after the date hereof, the
Company will not, and will not permit any of its or its Subsidiaries' officers,
directors or employees, and the Company will use its reasonable best efforts to
cause all of its and its Subsidiaries' attorneys, financial advisors, agents and
other representatives not to, directly or indirectly, solicit, initiate or
knowingly encourage (including by way of furnishing information) any Company
Takeover Proposal (as hereinafter defined) or engage in or continue discussions
or negotiations relating thereto; provided, however, that the Company may engage
in discussions or negotiations with, or furnish information concerning the
Company and its business, properties or assets to, any third party which makes a
Company Takeover Proposal if the Board of Directors of the Company determines,
in its good faith judgment, that such third party may ultimately propose a
Superior Company Takeover Proposal (as hereinafter defined); provided, further,
that nothing in this Section 4.3(a) shall prevent the Company or its Board from
taking, and disclosing to the Company's stockholders, a position with regard to
any Company Takeover Proposal. The Company will promptly notify Parent of the
receipt of any Company Takeover Proposal, including the material terms and
conditions thereof and the identity of the person or group making such Company
Takeover Proposal, and will promptly notify Parent of any determination by the
Company's Board of Directors that a Superior Company Takeover Proposal may
ultimately be made. As used in this Agreement, (i) "Company Takeover Proposal"
shall mean any proposal or offer, other than a proposal or offer by Parent or
any of its Subsidiaries, for a tender or exchange offer, a merger, consolidation
or other business combination involving the Company or any of its Significant
Subsidiaries or any proposal to acquire in any manner a substantial equity
interest in, or a substantial portion of the assets of, the Company or any of
its Significant Subsidiaries and (ii) "Superior Company Takeover Proposal" shall
mean a bona fide proposal or offer made by a third party to acquire the Company
pursuant to an exchange offer, a merger, consolidation or other business
combination or a sale of all or substantially all of the assets of the Company
and its Subsidiaries in which the sole consideration to be received by the
stockholders of the Company (other than cash for fractional shares or other
consideration which is non-material in amount) is the common stock of a widely-
held public company which, immediately after the consummation of the
transaction, will own (directly or indirectly) all or
33
substantially all of the equity or assets of the Company on terms which a
majority of the members of the Board of Directors of the Company, having
received the advice of an independent financial advisor, determines in their
good faith reasonable judgment to be more favorable to the Company's
stockholders than the terms of the transactions contemplated hereby.
(b) From and after the date hereof, Parent will not, and will not
permit any of its or its Subsidiaries' officers, directors or employees, and
Parent will use its reasonable best efforts to cause all of its and its
Subsidiaries' attorneys, financial advisors, agents and other representatives
not to, directly or indirectly, solicit, initiate or knowingly encourage
(including by way of furnishing information) any Parent Takeover Proposal (as
hereinafter defined) or engage in or continue discussions or negotiations
relating thereto; provided, however, that Parent may engage in discussions or
negotiations with, or furnish information concerning Parent and its business,
properties or assets to, any third party which makes a Parent Takeover Proposal
if the Board of Directors of Parent determines, in its good faith judgment, that
such third party may ultimately propose a Superior Parent Takeover Proposal (as
hereinafter defined); provided, further, that nothing in this Section 4.3(b)
shall prevent Parent or its Board from taking, and disclosing to Parent's
stockholders, a position with regard to any Parent Takeover Proposal. Parent
will promptly notify the Company of the receipt of any Parent Takeover Proposal,
including the material terms and conditions thereof and the identity of the
person or group making such Takeover Proposal, and will promptly notify Parent
of any determination by Parent's Board of Directors that a Superior Parent
Takeover Proposal may ultimately be made. As used in this Agreement, (i) "Parent
Takeover Proposal" shall mean any proposal or offer, for a tender or exchange
offer, a merger, consolidation or other business combination involving Parent or
any of its Significant Subsidiaries or any proposal to acquire in any manner a
substantial equity interest in, or a substantial portion of the assets of,
Parent or any of its Significant Subsidiaries and (ii) "Superior Parent Takeover
Proposal" shall mean a bona fide proposal or offer made by a third party to
acquire Parent pursuant to an exchange offer, a merger, consolidation or other
business combination or a sale of all or substantially all of the assets of
Parent and its Subsidiaries in which the sole consideration to be received by
the stockholders of Parent (other than cash for fractional shares or other
consideration which is non-material in amount) is the common stock of a widely-
held public company which, immediately after the consummation of the
transaction, will own (directly or indirectly) all or substantially all of the
equity or assets of Parent on terms which a majority of the members of the Board
of Directors of Parent, having received the advice of an independent financial
advisor, determines in their good faith reasonable judgment to be more favorable
to Parent's stockholders than the terms of the transactions contemplated hereby.
Section 4.4 Third Party Standstill Agreements. (a) During the period
from the date of this Agreement through the Effective Time, the Company shall
not terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which the Company or any of its Subsidiaries is a party
(other than any involving Parent).
(b) During the period from the date of this Agreement through the
Effective Time, Parent shall not terminate, amend, modify or waive any provision
of any confidentiality or standstill agreement to which Parent or any of its
Subsidiaries is a party (other than any involving the Company).
Section 4.5 Pooling of Interests; Reorganization. During the period
from the date of this Agreement through the Effective Time, unless the
34
other party shall otherwise agree in writing, none of Parent, the Company or any
of their respective Subsidiaries shall (a) knowingly take or fail to take any
action which action or failure would jeopardize the treatment of the Merger as a
pooling of interests for accounting purposes or (b) knowingly take any action
which action would jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code or would cause
any of the representations and warranties set forth in the Company Tax
Certificate attached to the Company Letter or the Parent Tax Certificate
attached to the Parent Letter to be untrue or incorrect in any material respect.
Each of the parties hereto shall use reasonable best efforts to take, or cause
to be taken, all actions reasonably necessary in order that the Merger may be
accounted for as a pooling of interests in accordance with generally accepted
accounting principles.
Section 4.6 Other Actions. Except as expressly contemplated or
permitted by this Agreement or except as set forth in the Company Letter or the
Parent Letter, neither the Company nor Parent shall, nor shall they permit any
of their respective Subsidiaries to, take any action that would, or that could
reasonably be expected to, result in (i) any of its representations and
warranties of the Company set forth in this Agreement that are qualified as to
materiality becoming untrue, (ii) any of its representations and warranties that
are not so qualified becoming untrue in any material respect, or (iii) any of
the conditions to the Merger contained in Section 6.1, 6.2 or 6.3 not being
satisfied (subject to the Company's and Parent's right to take actions
specifically permitted by Sections 4.1 and 4.2, respectively).
ARTICLE V
ADDITIONAL AGREEMENTS
---------------------
Section 5.1 Stockholder Meetings. The Company and Parent each shall
call a meeting of its stockholders (respectively, the "Company Stockholder
Meeting" and the "Parent Stockholder Meeting" and, collectively, the
"Stockholder Meetings") to be held as promptly as practicable after the date
hereof for the purpose of considering the adoption of this Agreement (in the
case of the Company) and the Charter Amendment and the Share Issuance and the
election of directors as provided in Section 5.17 (in the case of Parent). The
Company and Parent will, through their respective Boards of Directors, recommend
to their respective stockholders approval of such matters and shall not withdraw
such recommendation; provided, however, that a Board of Directors shall not be
required to make, and shall be entitled to withdraw, such recommendation if such
Board determines, in its good faith judgment, having received the advice of
independent legal counsel, that the making of, or the failure to withdraw, such
recommendation would constitute a breach of such Board's fiduciary duties under
applicable law. The Company and Parent shall coordinate and cooperate with
respect to the timing of such meetings and shall use their reasonable best
efforts to hold such meetings on the same day.
Section 5.2 Proxy Statement; Filings; Other Actions. (a) As promptly
as practicable after the date hereof, Parent shall promptly prepare and file
with the SEC the Joint Proxy Statement and the Registration Statement, in which
the Joint Proxy Statement will be included as a prospectus. Parent shall use its
reasonable best efforts to have the Registration Statement declared effective
under the Securities Act as promptly as practicable after such filing. As
promptly as practicable after the Registration Statement shall have become
effective, each of Parent and the Company shall mail the Joint Proxy Statement
to its respective stockholders.
35
Parent shall also take any action (other than qualifying to do business in any
jurisdiction in which it is now not so qualified) required to be taken under any
applicable state securities laws in connection with the issuance of Parent
Common Stock in the Merger and upon the exercise of the Substitute Options (as
defined in Section 5.8), and the Company shall furnish all information
concerning the Company and the holders of Class A Common Stock and Class B
Common Stock as may be reasonably requested in connection with any such action,
including information relating to the number of shares of Parent Common Stock
required to be registered.
(b) Each party hereto agrees, subject to applicable laws relating to
the exchange of information, promptly to furnish the other parties hereto with
copies of written communications (and memoranda setting forth the substance of
all oral communications) received by such party, or any of its subsidiaries,
affiliates or associates (as such terms are defined in Rule 12b-2 under the
Exchange Act as in effect on the date hereof), from, or delivered by any of the
foregoing to, any Governmental Entity in respect of the transactions
contemplated hereby.
(c) Each of the Company and Parent will promptly, and in any event
within 10 days after execution and delivery of this Agreement, make all filings
or submissions as are required under the HSR Act. Each of the Company and Parent
will promptly furnish to the other such necessary information and reasonable
assistance as the other may request in connection with its preparation of any
filing or submissions which is necessary under the HSR Act. Without limiting the
generality of the foregoing, each of the Company and Parent will promptly notify
the other of the receipt and content of any inquiries or requests for additional
information made by any Governmental Entity in connection therewith and will
promptly (i) comply with any such inquiry or request and (ii) provide the other
with a description of the information provided to any Governmental Entity with
respect to any such inquiry or request. In addition, each of the Company and
Parent will keep the other apprised of the status of any such inquiry or
request. Each of the Company and Parent will use its reasonable best efforts to
obtain any clearance required under the HSR Act for the consummation of the
transactions contemplated hereby.
Section 5.3 Comfort Letters. (a) The Company shall use its reasonable
best efforts to cause to be delivered to Parent "comfort" letters of KPMG Peat
Marwick LLP, the Company's independent public accountants, dated the date on
which the Registration Statement shall become effective and as of the Effective
Time, and addressed to Parent and the Company, in form and substance reasonably
satisfactory to Parent and reasonably customary in scope and substance for
letters delivered by independent public accountants in connection with
transactions such as those contemplated by this Agreement.
(b) Parent shall use its reasonable best efforts to cause to be
delivered to the Company "comfort" letters of Xxxxxx Xxxxxxxx LLP, Parent's
independent public accountants, dated the date on which the Registration
Statement shall become effective and as of the Effective Time, and addressed to
the Company and Parent, in form and substance reasonably satisfactory to the
Company and reasonably customary in scope and substance for letters delivered by
independent public accountants in connection with transactions such as those
contemplated by this Agreement.
Section 5.4 Access to Information; Financial Reports. (a) Subject to
currently existing contractual and legal restrictions applicable to Parent or to
the Company or any of their Subsidiaries, each of Parent and the
36
Company shall, and shall cause each of its Subsidiaries to, afford to the
accountants, counsel, financial advisors and other representatives of the other
party hereto reasonable access to, and permit them to make such inspections as
they may reasonably require of, during normal business hours during the period
from the date of this Agreement through the Effective Time, all their respective
properties, books, Tax Returns, contracts, commitments and records (including,
without limitation, the work papers of independent accountants, if available and
subject to the consent of such independent accountants) and, during such period,
Parent and the Company shall, and shall cause each of its Subsidiaries to,
furnish promptly to the other (i) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of federal or state securities laws and (ii) all other information
concerning its business, properties and personnel as the other may reasonably
request. No investigation pursuant to this Section 5.4 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
(b) The Company shall, without cost to Parent, deliver to Parent the
following financial information (such information being herein referred to as
"Supplemental Financial Information"): (i) within 45 days after each fiscal
quarter ending after the date hereof and prior to the Effective Time (other than
the last fiscal quarter of any fiscal year), the unaudited consolidated balance
sheet of the Company and its Subsidiaries as of the end of such quarter and the
unaudited consolidated statements of income, stockholders' equity and cash flows
of the Company and its Subsidiaries for such quarter, (ii) within 90 days after
each fiscal year ending after the date hereof and prior to the Effective Time,
the unaudited consolidated balance sheet of the Company and its Subsidiaries as
of the end of such year and the unaudited consolidated statements of income,
stockholders' equity and cash flows of the Company and its Subsidiaries for such
year, in each case prepared in accordance with GAAP (except as may be noted
therein), and (iii) promptly upon the reasonable request by Parent, such
additional financial information as may be required in connection with any
filing by Parent pursuant to the requirements of federal or state securities
laws; and such Supplemental Financial Information delivered to Parent shall
present fairly, in all material respects, the consolidated financial position of
the Company and its Subsidiaries for the period covered, subject to the notes
regarding the matters reflected therein.
(c) All information obtained by Parent or the Company pursuant to this
Section 5.4 (a) and (b) shall be kept confidential in accordance with each of
the Confidentiality Agreements, dated April 1, 1997 between Parent and the
Company.
(d) Parent shall, without cost to the Company, deliver to the Company
any filing made by Parent to the SEC including any Form 10-Q, 8-K or 10-K prior
to, if practicable, or, in any event, not later than the day after the date of
such filing with the SEC.
Section 5.5 Compliance with the Securities Act. (a) Within 30 days
following the date of this Agreement, the Company shall deliver to Parent a list
(reasonably satisfactory to counsel for Parent) identifying all persons who, at
the time of the Company Stockholder Meeting, in the Company's reasonable
judgment may be deemed to be "affiliates" of the Company as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act (the "Rule 145
Affiliates"). The Company shall use its reasonable best efforts to cause each
person who is identified as a Rule 145 Affiliate in such
37
list to deliver to Parent not less than 30 days prior to the Effective Time a
written agreement in substantially the form of Exhibit 5.5(a) hereto, executed
by such person.
(b) Within 30 days following the date of this Agreement, Parent shall
deliver to the Company a list (reasonably satisfactory to counsel for the
Company) identifying those persons who may be, at the time of the Parent
Stockholder Meeting, in Parent's reasonable judgment, may be deemed to be
affiliates of Parent under applicable SEC accounting releases with respect to
pooling of interests accounting treatment. Parent shall use its reasonable best
efforts to enter into a written agreement, not less than 30 days prior to the
Effective Time, in substantially the form of Exhibit 5.5(b) hereto with each of
such persons.
Section 5.6 Stock Exchange Listings. Parent shall use its reasonable
best efforts to list on the NYSE, upon official notice of issuance, the shares
of Parent Common Stock to be issued in connection with the Merger and upon
exercise of the Substitute Options.
Section 5.7 Fees and Expenses. (a) Except as provided in this Section
5.7 and in Section 5.11, whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby including, without limitation, the fees and disbursements of
counsel, financial advisors and accountants, shall be paid by the party
incurring such costs and expenses, except that all printing expenses and SEC
filing fees shall be divided equally between Parent and the Company.
(b) The Company shall pay, or cause to be paid, in same day funds, to
Parent $15 million (the "Company Termination Fee") upon demand if: (i) this
Agreement is terminated by the Company pursuant to Section 7.1(d) or by Parent
or the Company pursuant to Section 7.1(f) or 7.1(i) and within six months
following any such termination a Third Party Company Acquisition Event (as
hereinafter defined) occurs; (ii) Parent or the Company terminates this
Agreement pursuant to Section 7.1(h); or (iii) this Agreement is terminated and
prior thereto a Third Party Company Acquisition Event occurred.
A "Third Party Company Acquisition Event" means any of the following
events: (A) any person, corporation, partnership or other entity or group (such
person, corporation, partnership or other entity or group being referred to
hereinafter, singularly or collectively, as a "Person"), other than Parent or
its Subsidiaries, acquires or becomes the beneficial owner of 30% or more of the
outstanding shares of the Company Common Stock; (B) any new group is formed
which, at the time of formation, beneficially owns 30% or more of the
outstanding shares of the Company Common Stock (other than a group which
includes or may reasonably be deemed to include Parent or any of its
Subsidiaries); (C) the Company enters into an agreement providing for a merger
or other business combination involving the Company or the acquisition of a
substantial interest in, or a substantial portion of the assets, business or
operations of, the Company and its Subsidiaries (other than the transactions
contemplated by this Agreement); or (D) any Person (other than Parent or its
Subsidiaries) is granted any option or right, conditional or otherwise, to
acquire or otherwise become the beneficial owner of shares of the Company Common
Stock that results or would result in such Person being the beneficial owner of
30% or more of the outstanding shares of the Company Common Stock. For purposes
of this Section 5.7, the terms "group" and "beneficial owner" shall be defined
by reference to Section 13(d) of the Exchange Act.
38
(c) Parent shall pay, or cause to be paid, in same day funds, to the
Company $15 million (the "Parent Termination Fee") upon demand if: (i) this
Agreement is terminated by Parent pursuant to Section 7.1(d) or by Parent or the
Company pursuant to 7.1(g) and within six months following any such termination
a Third Party Parent Acquisition Event (as hereinafter defined) occurs; (ii)
Parent or the Company terminates this Agreement pursuant to Section 7.1(j); or
(iii) this Agreement is terminated and prior thereto a Third Party Parent
Acquisition Event occurred.
A "Third Party Parent Acquisition Event" means any of the following
events: (A) any Person, other than the Company or its Subsidiaries, acquires or
becomes the beneficial owner of 30% or more of the outstanding shares of Parent
Common Stock; (B) any new group is formed which, at the time of formation,
beneficially owns 30% or more of the outstanding shares of Parent Common Stock
(other than a group which includes or may reasonably be deemed to include the
Company or any of its Subsidiaries); (C) Parent enters into an agreement
providing for a merger or other business combination involving Parent or the
acquisition of a substantial interest in, or a substantial portion of the
assets, business or operations of, Parent and its Subsidiaries (other than the
transactions contemplated by this Agreement); or (D) any Person (other than the
Company or its Subsidiaries) is granted any option or right, conditional or
otherwise, to acquire or otherwise become the beneficial owner of shares of the
Parent Common Stock that results or would result in such Person being the
beneficial owner of 30% or more of the outstanding shares of Parent Common
Stock.
Section 5.8 Company Stock Options. Not later than the Effective Time,
each Company Stock Option which is outstanding immediately prior to the
Effective Time pursuant to the Company's stock option plans in effect on the
date hereof (the "Stock Plans") shall be assumed by Parent and become and
represent an option to purchase the number of shares of Parent Common Stock (a
"Substitute Option") (decreased to the nearest full share) determined by
multiplying (i) the number of shares of Company Common Stock subject to such
Company Stock Option immediately prior to the Effective Time by (ii) the
Exchange Ratio, which options shall have an exercise price per share of Parent
Common Stock (rounded up to the nearest tenth of a cent) equal to the exercise
price per share of Company Common Stock immediately prior to the Effective Time
divided by the Exchange Ratio. Parent shall pay cash to holders of Company Stock
Options in lieu of issuing fractional shares of Parent Common Stock upon the
exercise of Substitute Options for shares of Parent Common Stock, unless in the
judgment of Parent such payment would adversely affect the ability to account
for the Merger under the pooling of interests method. After the Effective Time,
except as provided above in this Section 5.8, each Substitute Option shall be
exercisable upon the same terms and conditions as were applicable under the
related Company Stock Option immediately prior to the Effective Time. This
Section 5.8 shall be subject to any contrary provision in the applicable Stock
Plan or in the option agreement respecting the Company Stock Options outstanding
thereunder, but the Company agrees to use its reasonable best efforts to obtain
any necessary consents of holders of the Company Stock Options to effect this
Section 5.8 and to obtain any necessary consents of holders of Warrants to
effect Section 1.5(d). The Company agrees that it will not grant any stock
appreciation rights or limited stock appreciation rights and will not permit
cash payments to holders of Company Stock Options in lieu of the substitution
therefor of Substitute Options, as described in this Section 5.8. Parent agrees
that it shall take all action necessary, on or prior to the Effective Time, to
authorize and reserve a number of shares of Parent Common Stock sufficient for
issuance upon exercise of the Substitute Options as contemplated by this Section
5.8.
39
Section 5.9 Reasonable Best Efforts. (a) Upon the terms and subject to
the conditions set forth in this Agreement, each of the parties agrees to use
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including, but not limited to: (i)
the obtaining of all necessary actions or non-actions, waivers, consents and
approvals from all Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental Entities) and the
taking of all reasonable steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by, any Governmental Entity
(including those in connection with the HSR Act and State Takeover Approvals),
(ii) the obtaining of all necessary consents, approvals or waivers from third
parties, (iii) the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Agreement or the consummation of
the transactions contemplated hereby or thereby, including seeking to have any
stay or temporary restraining order entered by any court or other Governmental
Entity vacated or reversed, and (iv) the execution and delivery of any
additional instruments necessary to consummate the transactions contemplated by
this Agreement.
(b) Notwithstanding anything to the contrary contained in this
Agreement, (i) the Company shall not be obligated to use its reasonable best
efforts or to take any action pursuant to this Section 5.9 if the Board of
Directors of the Company shall determine, in its good faith judgment, having
received the advice of independent outside legal counsel to the Company, that
such action would constitute a breach of such Board's fiduciary duties under
applicable law, and (ii) in connection with any filing or submission required or
action to be taken by Parent, the Company or any of its respective Subsidiaries
to consummate the Merger or the other transactions contemplated in this
Agreement, the Company shall not, without Parent's prior consent, and Parent
shall not, without the Company's prior consent, commit to any divestiture of
assets or businesses of the Company and its Subsidiaries if such divested assets
and/or businesses are material to the assets or profitability of the Company or
the Parent and their Subsidiaries taken as a whole, and neither Parent nor the
Company nor any of their Subsidiaries shall be required to divest any assets or
business of Parent or its Subsidiaries or the Company or its Subsidiaries if
such divested assets and/or businesses are material to the assets or
profitability of Parent or its Subsidiaries taken as a whole or the Company and
its Subsidiaries taken as a whole, respectively, or hold separate or otherwise
take or commit to take any action that materially limits its freedom of action
with respect to the Company or any such assets or businesses.
Section 5.10 Public Announcements. Parent and the Company will not
issue any press release with respect to the transactions contemplated by this
Agreement or otherwise issue any public statements with respect to such
transactions without prior consultation with the other party, except as may be
required by applicable law or by obligations pursuant to any listing agreement
with any national securities exchange.
Section 5.11 Real Estate Transfer and Gains Tax. Parent and the
Company agree that either the Surviving Corporation or the Company will pay any
state or local tax which is attributable to the transfer of the beneficial
ownership of the Company's or its Subsidiaries' real property, if any
40
(collectively, the "Transfer Taxes"), and any penalties or interest with respect
to the Transfer Taxes, payable in connection with the consummation of the
Merger. The Company agrees to cooperate with Parent in the filing of any returns
with respect to the Transfer Taxes, including supplying in a timely manner a
complete list of all real property interests held by the Company and its
Subsidiaries and any information with respect to such property that is
reasonably necessary to complete such returns. The portion of the consideration
allocable to the real property of the Company and its Subsidiaries shall be
agreed to between Parent and the Company. The stockholders of the Company shall
be deemed to have agreed to be bound by the allocation established pursuant to
this Section 5.11 in the preparation of any return with respect to the Transfer
Taxes.
Section 5.12 State Takeover Laws. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation shall become applicable to the transactions contemplated hereby,
Parent and the Company and their respective Boards of Directors shall use their
reasonable best efforts to grant such approvals and take such actions as are
necessary so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
minimize the effects of any such statute or regulation on the transactions
contemplated hereby.
Section 5.13 Indemnification; Directors and Officers Insurance. (a)
From and after the Effective Time, Parent agrees to cause the Surviving
Corporation to exculpate, indemnify and hold harmless all past and present
officers and directors of the Company and its Subsidiaries (the "Indemnified
Parties") to the same extent such persons are currently exculpated and
indemnified by the Company pursuant to the Company's Restated Certificate of
Incorporation and By-laws for acts or omissions occurring at or prior to the
Effective Time. Parent shall cause the Surviving Corporation to provide, for an
aggregate period of not less than six years from the Effective Time, the
Company's current directors and officers an insurance and indemnification policy
that provides coverage for events occurring prior to the Effective Time (the
"D&O Insurance") that is no less favorable than the Company's existing policy
or, if substantially equivalent insurance coverage is unavailable, the best
available coverage; provided, however, that the Surviving Corporation shall not
be required to pay an annual premium for the D&O Insurance in excess of 175
percent of the last annual premium paid prior to the date hereof, but in such
case shall purchase as much coverage as possible for such amount.
(b) Any Indemnified Party wishing to claim indemnification under
Section 5.13(a), upon learning of any claim, action, suit, proceeding or
investigation subject to indemnification thereunder, shall promptly notify the
Surviving Corporation thereof. An Indemnified Party may select counsel to
represent him or her in connection with any of the foregoing, which counsel
shall be reasonably acceptable to the Surviving Corporation, and the Surviving
Corporation will cooperate in the defense of any such matter; provided, however,
that the Surviving Corporation shall not be liable for any settlement effected
without its written consent; and provided, further, that the Surviving
Corporation shall not be obligated to pay the fees and disbursements of more
than one counsel for all Indemnified Parties in any single matter except to the
extent that, in the opinion of counsel for the Indemnified Parties, two or more
of such Indemnified Parties have conflicting interests in the outcome of such
matter. The Surviving Corporation shall not have any obligation hereunder to an
Indemnified Party if and when a court of competent jurisdiction shall ultimately
determine, and such determination shall have
41
become final, that the indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law.
Section 5.14 Notification of Certain Matters. Parent shall give prompt
notice to the Company, and the Company shall give prompt notice to Parent, of:
(i) the occurrence, or non-occurrence, of any event the occurrence, or non-
occurrence, of which it is aware and which would be reasonably likely to cause
(A) any representation or warranty contained in this Agreement that is not
qualified as to materiality to be untrue or inaccurate in any material respect,
(B) any representation or warranty contained in this Agreement that is qualified
as to materiality to be untrue or inaccurate in any respect, or (C) any
covenant, condition or agreement contained in this Agreement not to be complied
with or satisfied; and (ii) any failure of Parent or the Company, 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 the delivery
of any notice pursuant to this Section 5.14 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
Section 5.15 Employee Benefit Plans. (a) Parent agrees that no later
than January 1, 1999, a new program of employee benefits that is generally
applicable on identical terms and conditions to all similarly situated Company
Employees and Parent Employees (as defined below) will be adopted by the Board
of Directors of Parent (or a committee thereof) and become effective. For the
period commencing on the Effective Time and continuing until the date such a new
program is effective, Parent will, or will cause its Subsidiaries, including,
without limitation, the Surviving Corporation, to, honor and continue to
maintain and contribute to all Parent Benefit Plans and all Company Plans, in
accordance with the respective terms and conditions of such plans in effect on
the date hereof (and any amendments to, or termination of, any Parent Benefit
Plan approved or authorized by the Board of Directors of Parent or any committee
thereof prior to the date hereof and any amendment thereafter required to
maintain the tax-qualified status of any Parent Benefit Plan or Company Plan
intended to have such status), except (i) that to the extent that any Company
Plan refers to Company Stock, such reference shall, after the Effective Time, be
changed to Parent Stock, adjusted to the extent appropriate to reflect the
Exchange Ratio, or (ii) to the extent that Parent in good faith after
consultation with counsel determines to do so would be inconsistent with the
Employee Retirement Income Security Act of 1974, as amended, or other applicable
law. For purposes of this Section 5.15, Parent Employee shall include any
individual who at the Effective Time is employed by and on the active payroll of
Parent or any of its Subsidiaries and Company Employee shall mean any individual
who at the Effective Time is employed by and on the active payroll of the
Company or any of its Subsidiaries. An individual who is not on the active
payroll of Parent, the Company or their Subsidiaries, as the case may be, on
account of any approved or legally required leave of absence shall become a
Parent Employee or Company Employee, as the case may be, upon his or her return
to active employment pursuant to the terms of such leave. Notwithstanding the
foregoing, nothing in this Section 5.15(a) shall entitle any Parent Employee or
Company Employee to any minimum amount of bonus or other incentive compensation
(including stock option grants) pursuant to any Parent Benefit Plan or Company
Plan applicable to executives, key employees or other senior management for any
period after the Effective Time.
Notwithstanding anything herein to the contrary, except as otherwise
required by law or as is necessary for the Bozell, Jacobs, Xxxxxx & Xxxxxxxx,
Inc. Profit Sharing and Savings Plan (the "Company Profit Sharing
42
Plan") or the Bozell Inc. Stock Bonus Plan (the "Company Stock Bonus Plan") to
satisfy the qualification requirements of Section 401 of the Code, neither
Parent nor any Subsidiary shall take any action, including, but not limited to,
amending, merging or otherwise altering the Company Profit Sharing Plan or the
Company Stock Bonus Plan, which allows the reallocation of any or all of the
assets of the Company Stock Fund (as such term is currently defined in the
Company Profit Sharing Plan) or the Company Stock Bonus Plan from the account of
any Current Company Plan Participant (as hereinafter defined) to the account of
any individual who is not a Current Company Plan Participant, other than at the
election of the Current Company Plan Participant. For purposes of the preceding
sentence, the term "Current Company Plan Participant" means an individual who
immediately prior to the Effective Time either (i) is a participant in the
Company Profit Sharing Plan who has, as of such time, an account balance
invested in the Company Stock Fund, or (ii) is a participant in the Company
Stock Bonus Plan.
(b) With respect to benefits payable or provided to former employees
of the Company or any Subsidiary of the Company who have retired or otherwise
terminated service before the Effective Time, neither Parent nor any Subsidiary
of Parent (including, without limitation, the Surviving Corporation) shall take
or cause to be taken after the Effective Time any action to reduce or adversely
affect such benefits, including, without limitation, retiree health, medical and
life insurance benefits, from the level and terms on which any such benefits are
provided to such former employees of the Company or its Subsidiaries on the date
hereof except to the extent that the Company or its Subsidiaries had the
authority to do so on the date hereof, and any such action taken applies
generally in an identical manner to all similarly situated former employees of
the Company, Parent and any of their Subsidiaries then eligible to receive such
or similar benefits.
(c) For purposes of eligibility to participate and vesting, and
eligibility for and accrual of benefits under all Parent Benefit Plans (except,
with respect to accrual of benefits under any Parent Benefit Plan that is a
defined benefit pension plan) that may become applicable to any Company
Employee, all service of any Company Employee with the Company or any
Subsidiaries of the Company (or a predecessor of any thereof) prior to the
Effective Time shall, after the Effective Time, be treated as service with the
Surviving Corporation, the Parent or their Subsidiaries (as applicable), to the
same extent that service with the Company or any of its Subsidiaries prior to
the Effective Time is taken into account under the Company Plans. With respect
to participation of Company Employees and their dependents in Parent Benefit
Plans, Parent and its Subsidiaries shall, or shall cause the applicable Parent
Benefit Plans to (x) waive any waiting periods or affiliation periods and any
pre-existing condition and actively-at-work exclusions (or other similar
limitations on participation) otherwise applicable after the Effective Time to
Company Employees or their dependents, (y) waive any evidence of insurability
requirements and (z) provide that all claims and expenses of Company Employees
and their dependents during any plan year within which the Effective Time occurs
shall be taken into account for purposes of satisfying applicable deductible,
coinsurance and maximum out-of-pocket provisions (and like adjustments or
limitations on coverage) under such plans.
Section 5.16 Management of Parent. Effective as of the Effective Time,
Xxxxxxx X. Xxxxxxxx shall serve as a non-executive Chairman of the Board of
Parent, Xxxxx Xxxxx shall serve as Chief Executive Officer of Parent and Xxxxxxx
X. Xxxxxxx, Xx. shall serve as President of Parent. The chief executive officers
of Parent's FCB Advertising Entities (as hereinafter
43
defined) and the Company's Bozell Worldwide Subsidiary shall be J. Xxxxxxx Xxxx
and Xxxxx X. Xxxx, respectively, and both of such chief executive officers shall
report to Xxxxx Xxxxx. The chief executive officers of the Diversified Companies
(as hereinafter defined) shall report to Xxxxxxx X. Xxxxxxx, Xx. The "FCB
Advertising Entities" shall mean FCB/Xxxxx Xxxx Partners, Xxxxx Cone & Xxxxxxx
Advertising, Inc., Xxxxx Cone & Xxxxxxx, Inc., FCB Healthcare, FCB
International, FCB Japan, Inc., Xxxxxxx Group and other related Xxxxx Cone &
Xxxxxxx agency entities. The "Diversified Companies" shall mean Parent's and the
Company's direct Subsidiaries other than the FCB Advertising Entities and Bozell
Worldwide, and shall include, without limitation, Xxxxx Xxxxx, Temerlin XxXxxxx,
Bozell Xxxxxx Xxxxxx Group, XxXxxxxxx Xxxxxx, Bozell Wellness Worldwide, TN
Technologies, Xxxxxxxxx & Company, Xxxxxxx & Partners, Borders, Xxxxxx and
Xxxxxxxxx and Market Growth Resources and the separate media buying companies of
Parent and the Company. The chief executive officers of any direct Subsidiaries
acquired after the date hereof shall have reporting relationships as determined
by the Board of Parent. Compensation and other matters for each of Xxxxx Xxxxx
and Xxxxxxx X. Xxxxxxx, Xx. shall be as set forth in the Agreements entered into
as of the date hereof (but effective as of the Effective Time) between Parent
and each of Xxxxx Xxxxx and Xxxxxxx X. Xxxxxxx, Xx., forms of which are attached
hereto as Exhibits C and D, respectively. Xxxxx Xxxxx and Xxxxxxx X. Xxxxxxx,
Xx. shall be responsible for presenting to the Board of Directors of Parent no
later than February 28, 1999, a plan of management succession for each of their
respective positions within Parent. Compensation and other matters for Xxxxxxx
X. Xxxxxxxx shall be as set forth in the Agreement attached hereto as Exhibit E.
Section 5.17 Board of Directors of Parent and Committees Thereof. At
the Effective Time, by reason of their election at the Parent Stockholders
Meeting provided for in Section 5.1, the Board of Directors of Parent shall be
comprised of 12 members as follows: six directors selected by Parent board
(Xxxxx Xxxxx, J. Xxxxxxx Xxxx and four current non-employee directors of Parent
other than the Publicis Designee (as defined)); five directors selected by the
Company board (Xxxxxxx X. Xxxxxxx, Xx., Xxx-Xxxxxx Xxxxxxxxx and Xxxxx X. Xxxx
and two non-employees); and only for so long as Publicis shall be entitled to
cause its designee to serve as a director on the Board of Parent under the
Publicis Unwind Agreements (the "Publicis Designee"), the Publicis Designee
shall be a twelfth director. The initial composition of the committees of the
Board of Directors of Parent following the Effective Time shall be as described
on Schedule 2.
Section 5.18 Certain Litigation. The Company and Parent shall not
settle any litigation commenced after the date hereof against the Company,
Parent or any of other directors by any stockholder of either party relating to
the Merger or this Agreement without the prior written consent of the other
party (which shall not be unreasonably withheld).
Section 5.19 FIRPTA Certificate. The Company shall deliver to Parent,
not more than 20 days prior to the Effective Time, a statement in accordance
with Treas. Reg. (S)(S) 1.1445-2(c) (3) and 1.897-2(h) certifying that the
Company is not, and has not been during the past five years, a "United States
real property holding corporation" for purposes of Sections 897 and 1445 of the
Code, and Parent shall have no actual knowledge that such statement is false or
receive a notice that the statement is false pursuant to Treas. Reg. (S) 1.1445-
4. In addition, the Company shall have delivered to Parent at the Effective Time
the notification to the Internal Revenue Service, in accordance with the
requirements pursuant to Treas. Reg. (S) 1.897-2(h)(2), of delivery of the
statement referred to in the preceding sentence, signed by
44
a responsible corporate officer of the Company. The Company acknowledges that
Parent may cause the Company to file such notification with the Internal Revenue
Service on or after the Effective Time.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
----------------------------------
Section 6.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. This Agreement shall have been duly approved
by the requisite vote of stockholders of the Company in accordance with
applicable law and the Restated Certificate of Incorporation and By-laws of the
Company, and the Charter Amendment, the Share Issuance and the election of
directors shall have been duly approved by the requisite vote of the
stockholders of Parent in accordance with applicable rules of the NYSE,
applicable law and the Restated Certificate of Incorporation and By-laws of
Parent.
(b) Stock Exchange Listings. The Parent Common Stock issuable in the
Merger and pursuant to Substitute Options shall have been authorized for listing
on the NYSE, subject to official notice of issuance.
(c) HSR and Other Approvals. (i) The waiting period (and any extension
thereof) applicable to the consummation of the Merger under the HSR Act shall
have expired or been terminated.
(ii) All authorizations, consents, orders, declarations or approvals
of, or filings with, or terminations or expirations of waiting periods imposed
by, any Governmental Entity, which the failure to obtain, make or occur would
have the effect of making the Merger or any of the transactions contemplated
hereby illegal or would have a Material Adverse Effect on Parent (assuming the
Merger had taken place), shall have been obtained, shall have been made or shall
have occurred.
(d) Registration Statement. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act. No
stop order suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceedings for that purpose shall have been
initiated or, to the Knowledge of Parent or the Company, threatened by the SEC.
All necessary state securities or blue sky authorizations shall have been
received.
(e) No Order. No court or other Governmental Entity having
jurisdiction over the Company or Parent, or any of their respective
Subsidiaries, shall (after the date of this Agreement) have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is then in effect and has the effect of making the Merger or any of the
transactions contemplated hereby illegal.
(f) Accounting. Each of Parent and the Company shall have received at
the Effective Time an opinion of Xxxxxx Xxxxxxxx LLP, in form and substance
reasonably satisfactory to Parent and the Company, that the Merger will qualify
for pooling of interests accounting treatment under Accounting
45
Principles Board Opinion No. 16 if closed and consummated in accordance with
this Agreement. Each of Parent and the Company shall have delivered all
affiliate letters from their respective affiliates to the extent reasonably
necessary to protect the pooling of interests accounting treatment of the
Merger.
Section 6.2 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties. Each
of Parent and Sub shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed on or prior to
the Effective Time, each of the representations and warranties of Parent and Sub
contained in this Agreement that is qualified by materiality shall be true and
correct on and as of the Effective Time as if made on and as of such date (other
than representations and warranties which address matters only as of a certain
date which shall be true and correct as of such certain date) and each of the
representations and warranties that is not so qualified shall be true and
correct in all material respects on and as of the Effective Time as if made on
and as of such date (other than representations and warranties which address
matters only as of a certain date which shall be true and correct in all
material respects as of such certain date), in each case except as contemplated
or permitted by this Agreement, and the Company shall have received certificates
signed on behalf of each of Parent and Sub by its Chief Executive Officer and
its Chief Financial Officer to such effect.
(b) Tax Opinion. The Company shall have received an opinion of White &
Case, in form and substance reasonably satisfactory to the Company, dated the
Effective Time, substantially to the effect that for federal income tax
purposes:
(i) the Merger will constitute a "reorganization" within the meaning
of Section 368(a) of the Code, and the Company, Sub and Parent will each be a
party to that reorganization within the meaning of Section 368(b) of the Code;
(ii) no gain or loss will be recognized by Parent or the Company as a
result of the Merger;
(iii) no gain or loss will be recognized by the stockholders of the
Company upon the conversion of their shares of Company Common Stock into shares
of Parent Common Stock pursuant to the Merger, except with respect to cash, if
any, received in lieu of fractional shares of Parent Common Stock;
(iv) the aggregate tax basis of the shares of Parent Common Stock
received in exchange for shares of Company Common Stock pursuant to the Merger
(including a fractional share of Parent Common Stock for which cash is paid)
will be the same as the aggregate tax basis of such shares of Company Common
Stock;
(v) the holding period for shares of Parent Common Stock received in
exchange for shares of Company Common Stock pursuant to the Merger will include
the holder's holding period for such shares of Company Common Stock, provided
such shares of Company Common Stock were held as capital assets by the holder at
the Effective Time; and
46
(vi) a stockholder of the Company who receives cash in lieu of a fractional
share of Parent Common Stock will recognize gain or loss equal to the
difference, if any, between such stockholder's basis in the fractional share
(determined under clause (iv) above) and the amount of cash received.
In rendering such opinion, White & Case may rely upon, among other things, the
representations contained herein, representations from Parent substantially
similar to the representations in the Parent Tax Certificate attached to the
Parent Letter, representations from the Company substantially similar to the
representations in the Company Tax Certificate attached to the Company Letter
and representations from certain stockholders of the Company. This condition
precedent shall be satisfied even if such opinion does not express an opinion as
to the tax consequences of a conversion in the Merger of Company Common Stock
that is received upon the exercise of Warrants prior to the Effective Time in
contemplation of the Merger.
(c) Consent Under Agreements. Parent shall have obtained the consent or
approval of each person that is not a Governmental Entity whose consent or
approval shall be required in connection with the transactions contemplated
hereby under any loan or credit agreement, note, mortgage, indenture, lease or
other agreement or instrument, except as to which the failure to obtain such
consents and approvals would not, in the reasonable opinion of the Company,
individually or in the aggregate, have a Material Adverse Effect on Parent or
upon the consummation of the transactions contemplated in this Agreement.
(d) Material Adverse Effect. Since the date of this Agreement, there shall
not have been any events, changes or developments that, individually or in the
aggregate, would have a Material Adverse Effect on Parent, other than (i)
general advertising industry conditions and (ii) matters described in the Parent
Letter. The Company shall have received a certificate of the Chief Executive
Officer and the Chief Financial Officer of Parent to such effect.
(e) Litigation. There shall not be pending any suit, action or proceeding
before any Governmental Entity as a result of this Agreement or any of the
transactions contemplated herein which would have a Material Adverse Effect on
Parent (assuming the Merger had taken place).
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the
Merger. The obligations of Parent and Sub to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties. The Company
shall have performed in all material respects each of its agreements contained
in this Agreement required to be performed on or prior to the Effective Time,
each of the representations and warranties of the Company contained in this
Agreement that is qualified by materiality shall be true and correct on and as
of the Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as of a certain date
which shall be true and correct as of such certain date) and each of the
representations and warranties that is not so qualified shall be true and
correct in all material respects on and as of the Effective Time as if made on
and as of such date (other than representations and warranties which address
matters only as of a certain date which shall be true and correct in all
material respects as of such certain date), in each case except as contemplated
or permitted by this Agreement, and Parent shall have received a
47
certificate signed on behalf of the Company by its Chief Executive Officer and
its Chief Financial Officer to such effect.
(b) Tax Opinion. Parent shall have received an opinion of Sidley & Austin,
in form and substance reasonably satisfactory to Parent, dated the Effective
Time, substantially to the effect that for federal income tax purposes:
(i) the Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code, and the Company, Sub and Parent will each be a party
to that reorganization within the meaning of Section 368(b) of the Code;
(ii) no gain or loss will be recognized by Parent or the Company as a
result of the Merger;
(iii) no gain or loss will be recognized by the stockholders of the Company
upon the conversion of their shares of Company Common Stock into shares of
Parent Common Stock pursuant to the Merger, except with respect to cash, if any,
received in lieu of fractional shares of Parent Common Stock;
(iv) the aggregate tax basis of the shares of Parent Common Stock received
in exchange for shares of Company Common Stock pursuant to the Merger (including
a fractional share of Parent Common Stock for which cash is paid) will be the
same as the aggregate tax basis of such shares of Company Common Stock;
(v) the holding period for shares of Parent Common Stock received in
exchange for shares of Company Common Stock pursuant to the Merger will include
the holder's holding period for such shares of Company Common Stock, provided
such shares of Company Common Stock were held as capital assets by the holder at
the Effective Time; and
(vi) a stockholder of the Company who receives cash in lieu of a fractional
share of Parent Common Stock will recognize gain or loss equal to the
difference, if any, between such stockholder's basis in the fractional share
(determined under clause (iv) above) and the amount of cash received.
In rendering such opinion, Sidley & Austin may rely upon, among other things,
representations contained herein, representations from Parent substantially
similar to the representations in the Parent Tax Certificate attached to the
Parent Letter, representations from the Company substantially similar to the
representations in the Company Tax Certificate attached to the Company Letter,
and representations from certain stockholders of the Company. This condition
precedent shall be satisfied even if such opinion does not express an opinion as
to the tax consequences of a conversion in the Merger of Company Common Stock
that is received upon the exercise of Warrants prior to the Effective Time in
contemplation of the Merger.
(c) Consents Under Agreements. The Company shall have obtained the consent
or approval of each person that is not a Governmental Entity whose consent or
approval shall be required in connection with the transactions contemplated
hereby under any loan or credit agreement, note, mortgage, indenture, lease or
other agreement or instrument, except as to which the failure to obtain such
consents and approvals would not, in the reasonable opinion of Parent,
individually or in the aggregate, have a Material Adverse Effect on the Company
or upon the consummation of the transactions contemplated in this Agreement.
48
(d) Material Adverse Effect. Since the date of this Agreement, there shall
not have been any events, changes or developments that, individually or in the
aggregate, would have a Material Adverse Effect on the Company, other than (i)
general advertising industry conditions and (ii) matters described in the
Company Letter. Parent shall have received a certificate of the Chief Executive
Officer and the Chief Financial Officer of the Company to such effect.
(e) Litigation. There shall not be pending any suit, action or proceeding
before any Governmental Entity as a result of this Agreement or any of the
transactions contemplated herein which would have a Material Adverse Effect on
Parent (assuming the Merger had taken place).
(f) FIRPTA Certificates. Parent shall have received from the Company the
statement and notification referred to in, and in accordance with the provisions
of, Section 5.19.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
Section 7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after any approval of the matters
presented in connection with the Merger by the stockholders of the Company or
Parent:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the other party shall have failed to
comply in any material respect with any of its covenants or agreements contained
in this Agreement required to be complied with prior to the date of such
termination, which failure to comply has not been cured within 10 business days
following receipt by such other party of written notice of such failure to
comply;
(c) by either Parent or the Company if there has been (i) a breach by the
other party (in the case of Parent, including any material breach by Sub) of any
representation or warranty that is not qualified as to materiality which has the
effect of making such representation or warranty not true and correct in all
material respects or (ii) a breach by the other party (in the case of Parent,
including any material breach by Sub) of any representation or warranty that is
qualified as to materiality which has the effect of making such representation
or warranty not true and correct, in each case which breach has not been cured
within 10 business days following receipt by the breaching party of written
notice of the breach;
(d) by either Parent or the Company if the Merger has not been effected on
or prior to the close of business on December 31, 1997; provided, however, that
the right to terminate this Agreement pursuant to this Section 7.1(d) shall not
be available to any party whose failure to fulfill any of its obligations
contained in this Agreement has been the cause of, or resulted in, the failure
of the Merger to have occurred on or prior to the aforesaid date;
(e) by either Parent or the Company if any Governmental Entity shall have
issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the transactions
49
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and nonappealable; provided, however, that Parent shall,
if necessary to prevent any such issuance or the taking of such action, offer to
accept an order to divest such of the Company's or Parent's assets and
businesses as may be necessary to forestall such injunction or order and to hold
separate such assets and business pending such divestiture, but only if the
amount of such assets and businesses is not material to the assets or
profitability of the Company and its Subsidiaries taken as a whole or Parent and
its Subsidiaries taken as a whole, respectively;
(f) by either Parent or the Company if the stockholders of the Company do
not adopt this Agreement at the Company Stockholder Meeting or at any
adjournment or postponement thereof;
(g) by either Parent or the Company if the stockholders of Parent do not
approve the Charter Amendment and the Share Issuance and the election of
directors at the Parent Stockholder Meeting or at any adjournment or
postponement thereof;
(h) by either Parent or the Company if (i) the Board of Directors of the
Company reasonably determines that a Company Takeover Proposal constitutes a
Superior Company Takeover Proposal; provided, however, that the Company may not
terminate this Agreement pursuant to this Section 7.1(h)(i) unless and until
five business days have elapsed following delivery to Parent of a written notice
of such determination by the Board of Directors of the Company; or (ii) a tender
offer or exchange offer for 30% or more of the outstanding shares of Company
Common Stock is commenced, and the Board of Directors of the Company fails
within ten business days following such commencement to recommend against
acceptance of such tender offer or exchange offer by its stockholders (including
by taking no position with respect to the acceptance of such tender offer or
exchange offer by its stockholders); provided, however, that the Company may not
terminate this Agreement pursuant to clause (i) or (ii) of this Section 7.1(h)
unless it is in full compliance with its obligations under Section 4.3(a) and
5.1 and, further, unless simultaneously with such termination the Company pays
to Parent the amount specified under Section 5.7(b); and provided, further, that
any termination by Parent pursuant to clause (i) or (ii) of this Section 7.1(h)
shall in no way constitute an admission that the Company complied with the
provisions of Section 4.3(a) or any other provisions hereof;
(i) by either Parent or the Company if the Board of Directors of the
Company shall not have recommended, or shall have resolved not to recommend, or
shall have modified or withdrawn its recommendation of the Merger or
determination that the Merger is fair to and in the best interest of the Company
and its stockholders, or shall have resolved to do so; or
(j) by either Parent or the Company if (i) the Board of Directors of Parent
reasonably determines that a Parent Takeover Proposal constitutes a Superior
Parent Takeover Proposal; provided however, that Parent may not terminate this
Agreement pursuant to this Section 7.1(j)(i) unless and until five business days
have elapsed following delivery to the Company of a written notice of such
determination by the board of Directors of Parent; or (ii) a tender offer or
exchange offer for 30% or more of the outstanding shares of Parent is commenced
and the Board of Directors of Parent fails within ten business days following
such commencement to recommend against acceptance of such tender offer or
exchange offer by its stockholders (including by taking no position with respect
to the acceptance of such tender offer or exchange offer by its stockholders);
provided, however, that Parent
50
may not terminate this Agreement pursuant to clause (i) or (ii) of this Section
7.1(j) unless it is in full compliance with its obligations under Section 4.3(b)
and 5.1 and, further unless simultaneously with such termination Parent pays to
the Company the amount specified under Section 5.7(c); and provided, further,
that any termination by the Company pursuant to clause (i) or (ii) of this
Section 7.1(j) shall in no way constitute an admission that Parent complied with
the provisions of Section 4.3(b) or any other provisions hereof.
The right of any party hereto to terminate this Agreement pursuant to this
Section 7.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
Section 7.2 Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company, as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of the Company, Parent, Sub or their respective officers or
directors (except for Sections 5.4(c), 5.7 and 5.10 and this Section 7.2, which
shall survive the termination); provided, however, that nothing contained in
this Section 7.2 shall relieve any party hereto from any liability for any
breach hereof.
Section 7.3 Amendment. This Agreement may be amended by the parties hereto,
by or pursuant to action taken by their respective Boards of Directors, at any
time before or after approval of the matters presented in connection with the
Merger by the stockholders of Parent and the Company, but, after any such
approval, no amendment shall be made which by law requires further approval by
such stockholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
Section 7.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein which may legally be waived. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of those rights.
ARTICLE VIII
GENERAL PROVISIONS
------------------
Section 8.1 Non-Survival of Representations and Warranties. The
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement (other than representations made in connection with
the opinions described in Sections 6.2(b) and 6.3(b), which shall terminate five
years after the Effective Time) shall terminate at the Effective Time.
51
Section 8.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given when delivered personally, one day after
being delivered to an overnight courier or when telecopied (with a confirmatory
copy sent by overnight courier) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
True North Communications Inc.
000 Xxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Chief Executive Officer
Facsimile No.: 312/440-6615
with copies to:
Attention: Xxxxxxxx X. Xxxxxxxxxx
General Counsel
Facsimile No.: 312/425-6354
and
Xxxxxx X. Xxxx, Esq.
Sidley & Austin
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Facsimile No.: 312/853-7036
(b) if to the Company, to
Bozell, Jacobs, Xxxxxx & Xxxxxxxx, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Executive Officer
Facsimile No.: 212/727-5420
with copy to:
Xxxxx Xxxxx, Esq.
White & Case
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Section 8.3 Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
Section 8.4 Counterparts. This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
52
Section 8.5 Entire Agreement; No Third-Party Beneficiaries. This Agreement,
except as provided in Section 5.4(c), constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof. This Agreement, except
for the provisions of Section 5.13, is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
Section 8.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 8.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties.
Section 8.8 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
Section 8.9 Enforcement of this Agreement. 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 wording or were
otherwise breached. It is accordingly agreed that the parties hereto 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, such remedy being in addition to
any other remedy to which any party is entitled at law or in equity.
Section 8.10 Obligations of Subsidiaries. Whenever this Agreement requires
any Subsidiary of Parent (including Sub) or of the Company to take any action,
such requirement shall be deemed to include an understanding on the part of
Parent or the Company, as the case may be, to cause such Subsidiary to take such
action.
53
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized all as of
the date first written above.
TRUE NORTH COMMUNICATIONS INC.
By: /s/ Xxxxx Xxxxx
-----------------------
Name:
Title:
Attest:
--------------------
Name:
Title:
CHEROKEE ACQUISITION CORPORATION
By: /s/ Xxxxx Xxxxx
-----------------------
Name:
Title:
Attest:
--------------------
Name:
Title:
BOZELL, JACOBS, XXXXXX & XXXXXXXX, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------
Name:
Title:
Attest:
--------------------
Name:
Title:
54
