1
EXHIBIT 2.7
SHARE PURCHASE AGREEMENT
dated as of the 10th day of March, 1997
by and among
VESTCOM INTERNATIONAL, INC.
504087 N.B. INC.
LIRPACO INC.
and
the STOCKHOLDERS named herein
2
TABLE OF CONTENTS
1. THE ACQUISITION.......................................................... 6
1.1 Purchase and Sale of Purchased Shares.............................. 6
2. CONSIDERATION FOR TRANSFER............................................... 7
2.1 Purchase Price for the Purchased Shares............................ 7
2.2 Aggregate Consideration............................................ 7
2.3 Price Adjustment................................................... 8
2.4 Payment............................................................ 10
2.5 Concurrent Subscription to Multiple Voting Share................... 10
2.6 Capitalization of NEWCO............................................ 11
2.7 Rights and obligations of VESTCOM and holders of Dividend Access
Shares............................................................. 11
2.8 Certain Information With Respect to the Capital Stock of the
COMPANY and VESTCOM................................................ 23
2.9 Section 85 Elections............................................... 24
3. CLOSING.................................................................. 24
3.1 Actions taken at Closing........................................... 24
3.2 Actions taken on Consummation Date................................. 24
4. DELIVERY OF SHARES....................................................... 25
4.1 Deliveries at Closing.............................................. 25
4.2 Escrow............................................................. 25
4.3 Deliveries at Consummation Date.................................... 26
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE STOCKHOLDERS......................................................... 26
(A) Representations and Warranties of the COMPANY and the
STOCKHOLDERS....................................................... 26
5.1 Due Organization................................................... 27
5.2 Authorization...................................................... 27
5.3 Capital of the COMPANY............................................. 27
5.4 Transactions in Capital Stock...................................... 28
5.5 No Bonus Shares.................................................... 28
5.6 Subsidiaries....................................................... 28
5.7 Predecessor Status................................................. 29
5.8 Spin-off by the COMPANY............................................ 29
5.9 Financial Statements; Adjustments to Consideration................. 29
5.10 Liabilities and Obligations........................................ 30
5.11 Accounts and Notes Receivable...................................... 31
5.12 Permits and Intangibles............................................ 31
5.13 Environmental Compliance........................................... 33
5.14 Immovable and Movable Property..................................... 35
5.15 Significant Customers; Material Contracts and Commitments.......... 36
5.16 Title to Immovable Property........................................ 37
3
5.18 Compensation; Employment Agreements; No Collective Bargaining
Agreement.......................................................... 38
5.19 Employee Plans..................................................... 39
5.20 Notification Matters............................................... 42
5.21 Conformity with Law; Litigation.................................... 42
5.22 Taxes.............................................................. 43
5.23 No Violations...................................................... 45
5.24 Government Contracts............................................... 45
5.25 Absence of Changes................................................. 46
5.26 Deposit Accounts; Powers of Attorney............................... 47
5.27 Validity of Obligations............................................ 47
5.28 Relations with Governments and Other Payments...................... 48
5.29 Transactions with Directors, Officers and Affiliates............... 48
5.30 Paid-up Capital.................................................... 49
5.31 Location; Place of Business........................................ 49
5.32 No Broker.......................................................... 49
5.33 Stand Alone........................................................ 50
5.34 Assets and Liabilities............................................. 50
5.35 Disclosure......................................................... 50
(B) Representations and Warranties of STOCKHOLDERS..................... 51
5.36 Authority; Ownership............................................... 51
5.37 Pre-emptive Rights................................................. 51
5.38 Residence.......................................................... 51
5.39 No Broker.......................................................... 51
6. REPRESENTATIONS OF VESTCOM and NEWCO..................................... 52
6.1 Due Organization................................................... 52
6.2 VESTCOM Stock...................................................... 52
6.3 Validity of Obligations............................................ 53
6.4 Authorization...................................................... 53
6.5 No Conflicts....................................................... 53
6.6 Capitalization of VESTCOM and Ownership of VESTCOM Stock........... 54
6.7 No Side Agreements................................................. 55
6.8 Subsidiaries....................................................... 55
6.9 Business; Real Property; Material Agreements; Financial
Information........................................................ 55
6.10 Conformity with Law................................................ 56
6.11 No Violations...................................................... 56
6.12 NEWCO Stock; Incorporation of NEWCO................................ 57
6.13 Expenses; Intercorporate Indebtedness.............................. 57
6.14 No Broker.......................................................... 58
6.15 Taxes.............................................................. 58
6.16 Notification Matters............................................... 62
7. COVENANTS PRIOR TO CLOSING............................................... 62
7.1 Access and Cooperation; Due Diligence.............................. 62
7.2 Conduct of Business Pending Closing................................ 64
7.3 Prohibited Activities.............................................. 64
4
7.4 No Shop............................................................ 66
7.5 Notice to Bargaining Agents........................................ 66
7.6 Notification of Certain Matters.................................... 67
7.7 Amendment of Schedules............................................. 67
7.8 Cooperation in Preparation of Registration Statement............... 68
7.9 Examination of Final Financial Statement........................... 68
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS AND THE
COMPANY.................................................................. 69
8.1 Representations and Warranties; Performance of
Obligations........................................................ 69
8.2 Satisfaction....................................................... 70
8.3 No Litigation...................................................... 70
8.4 Opinion of Counsel................................................. 70
8.5 Registration Statement............................................. 71
8.6 Consents and Approvals............................................. 71
8.7 Good Standing Certificates......................................... 71
8.8 No Material Adverse Change......................................... 71
8.9 Employment Agreements.............................................. 71
8.10 Support Agreement.................................................. 72
8.11 Multiple Voting Share.............................................. 72
8.12 Secretary's Certificate............................................ 72
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VESTCOM AND NEWCO................. 72
9.1 Representations and Warranties; Performance of
Obligations........................................................ 72
9.2 No Litigation...................................................... 73
9.3 Examination of Final Financial Statements.......................... 73
9.4 No Material Adverse Effect......................................... 73
9.5 STOCKHOLDERS' Release.............................................. 73
9.6 Satisfaction....................................................... 74
9.7 Termination of Related Party Agreements............................ 74
9.8 Opinion of Counsel................................................. 74
9.9 Consents and Approvals............................................. 74
9.10 Good Standing Certificates......................................... 75
9.11 Registration Statement............................................. 75
9.12 Employment Agreements.............................................. 75
9.13 Repayment of Indebtedness.......................................... 75
9.14 Insurance.......................................................... 75
9.15 Voting Trust Agreement............................................. 75
9.16 Secretary's Certificate............................................ 75
9.17 FIRPTA Certificate................................................. 76
10. COVENANTS OF VESTCOM, THE COMPANY AND THE STOCKHOLDERS AFTER
CLOSING................................................................. 76
10.1 Disclosure......................................................... 76
10.2 Preparation and Filing of Tax Returns; Record Retention............ 76
5
10.3 Preservation of Employee Benefit Plans............................. 78
10.4 Release from Guarantees............................................ 78
11. INDEMNIFICATION......................................................... 79
11.1 General Indemnification by the STOCKHOLDERS........................ 79
11.2 Indemnification by VESTCOM......................................... 80
11.3 Third Person Claims................................................ 81
11.4 Limitations on Indemnification..................................... 83
11.5 Retained Liabilities............................................... 84
11.6 No Recourse by STOCKHOLDERS........................................ 84
12. TERMINATION OF AGREEMENT................................................ 85
12.1 Termination........................................................ 85
12.2 Termination Upon Purchase Price Reduction.......................... 86
12.3 Liabilities in Event of Termination................................ 86
13. NON-COMPETITION......................................................... 87
13.1 Prohibited Activities.............................................. 87
13.2 Damages............................................................ 88
13.3 Reasonable Restraint............................................... 89
13.4 Severability; Reformation.......................................... 89
13.5 Independent Covenant............................................... 90
13.6 Materiality........................................................ 90
14. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.............................. 90
14.1 STOCKHOLDERS....................................................... 90
14.2 VESTCOM and NEWCO.................................................. 91
14.3 Damages............................................................ 92
14.4 Survival........................................................... 92
15. TRANSFER RESTRICTIONS................................................... 92
15.1 Transfer Restrictions.............................................. 92
15.2 Statutory Hold Period.............................................. 94
16. FEDERAL SECURITIES ACT REPRESENTATIONS.................................. 94
16.1 No Registration.................................................... 94
16.2 Compliance with Law................................................ 94
16.3 Economic Risk; Sophistication...................................... 94
16.4 Market Standoff.................................................... 95
16.5 Registration Rights................................................ 95
17. GENERAL................................................................. 95
17.1 Cooperation........................................................ 96
17.2 Successors and Assigns............................................. 96
17.3 Entire Agreement................................................... 96
17.4 Counterparts....................................................... 97
17.5 Expenses........................................................... 97
6
17.6 Notices............................................................ 98
17.7 Governing Law...................................................... 99
17.8 Survival of Representations and Warranties......................... 99
17.9 Exercise of Rights and Remedies.................................... 99
17.10 Time............................................................... 100
17.11 Reformation and Severability....................................... 100
17.12 Remedies Cumulative................................................ 100
17.13 Captions........................................................... 100
17.14 Currency........................................................... 100
17.15 Third Party Beneficiaries.......................................... 101
SCHEDULES AND ANNEXES
Annex I Capital Stock and Stock Ownership of the COMPANY
Annex II Consideration to Stockholders
Annex III Form of Voting Trust Agreement
Annex IV Dividend Access Share Provisions
Annex V Form of Support Agreement
Annex VI Multiple Voting Share Provisions
Annex VII Stockholders and Stock Ownership of VESTCOM
Annex VIII Form of Opinion of Xxxxxxxxxx, Sandler, Kohl, Xxxxxx & Xxxxxx,
P.C.
Annex IX Form of Employment Agreement
Annex X Form of Opinion of Counsel to the COMPANY and STOCKHOLDERS
Schedule 2.6 Board of Directors of NEWCO
Schedule 2.8(i) Authorized capital of COMPANY
Schedule 5.1 Qualifications to Do Business
Schedule 5.3 Exceptions re Capital Stock of COMPANY
Schedule 5.4 Transactions in Capital Stock; Options & Warrants to
Acquire Capital Stock
Schedule 5.5 Stock Issued Pursuant to Awards, Grants and Bonuses
Schedule 5.6 Subsidiaries; Capitalization of Subsidiaries
Schedule 5.7 Names of Predecessor Companies
Schedule 5.8 Sales or Spin-offs of Significant Assets
Schedule 5.9 Initial Financial Statements
Schedule 5.10 Significant Liabilities and Obligations
Schedule 5.11 Accounts and Notes Receivable
Schedule 5.12(a) Licenses, Franchises, Permits and other Governmental
Authorizations
Schedule 5.12(b) Intellectual Property
Schedule 5.13 Environmental Compliance
Schedule 5.14 Immovable and Real Property, Significant Movable and
Personal Property and Leases
Schedule 5.15 Significant Customers and Material Contracts
Schedule 5.16 Immovable and Real Property and Title Reports and Policies
Schedule 5.17 Insurance Policies and Claims
Schedule 5.18 Officers, Directors and Key Employees, Employment
Agreements; Compensation
7
Schedule 5.19 Employee Benefit Plans
Schedule 5.21 Violations of Law, Regulations or Orders; Litigation
Schedule 5.22 Tax Returns and Examinations; Federal, State, Local and
Foreign Income Tax Returns Filed; Aggregate Tax Losses
Schedule 5.23 Violations of Charter Documents and Material Defaults
Schedule 5.24 Governmental Contracts Subject to Price Redetermination or
Renegotiation
Schedule 5.25 Changes Since Balance Sheet Date
Schedule 5.26 Deposit Accounts; Powers of Attorney
Schedule 5.29 Transactions with Directors or Officers
Schedule 5.31 Location; Place of Business
Schedule 5.32 Broker
Schedule 5.36 Encumbrances on the COMPANY Stock
Schedule 6.1 Certificate of Incorporation and By-laws of VESTCOM
Schedule 6.11 VESTCOM Agreements
Schedule 6.15 Tax Returns Filed
Schedule 7.2 Exceptions to Conducting Business in the Ordinary Course
Between Date of Agreement and Consummation Date
Schedule 7.3 Prohibited Activities
Schedule 7.9 Final Financial Statements
Schedule 8.9 Individuals to Receive Employment Agreements
Schedule 9.7 Termination of Related Party Agreements
Schedule 11.5 Retained Liabilities
Schedule 13.1 Exceptions to Prohibited Activities
8
SHARE PURCHASE AGREEMENT
THIS AGREEMENT (the "AGREEMENT") is made as of the ____ day of
March, 1997, by and among VESTCOM INTERNATIONAL, INC., a New Jersey corporation
("VESTCOM"), 504087 N.B. INC., a New Brunswick company ("NEWCO"), LIRPACO INC.,
a Canadian corporation (the "COMPANY"), and XXXXXX XXXXX, XXXXXXX XXXXX and
XXXXXX APRIL (the "STOCKHOLDERS").
WHEREAS, NEWCO is a company duly organized and existing under the
laws of the Province of New Brunswick, having been incorporated on February 24,
1997, solely for the purpose of completing the transactions set forth herein,
and is a wholly-owned subsidiary of VESTCOM, a corporation organized and
existing under the laws of the State of New Jersey;
WHEREAS, the STOCKHOLDERS own all the issued and outstanding shares
in the capital of the COMPANY;
WHEREAS, the COMPANY owns all of the issued and outstanding shares
in the capital of COS INFORMATION INC., a Canadian Corporation ("COS");
WHEREAS, NEWCO desires to purchase on the Closing Date (as
hereinafter defined) all of the shares in the capital of the COMPANY which are
issued and outstanding on the Closing Date as hereinafter provided (the shares
of the COMPANY to be so purchased being hereinafter referred to as the
"PURCHASED SHARES");
WHEREAS, each STOCKHOLDER desires to sell to NEWCO all of the
Purchased Shares owned beneficially and of record by such STOCKHOLDER as
hereinafter provided, such transaction sometimes being herein called the
"ACQUISITION";
WHEREAS, VESTCOM is entering into other separate agreements, each of
which is entitled "Agreement and Plan of Reorganization", with each of Computer
Output Systems, Inc., Comvestrix Corp., Xxxxxx County Direct Mail Services, Inc.
and its affiliates, Electronic Imaging Services, Inc., Image Printing Systems,
Inc. and Mystic Graphic Systems, Inc. (the "OTHER AGREEMENTS") in order to
acquire by way of merger additional companies engaged in the creation,
9
distribution and archiving of high-volume computer-generated documents for
business clients and related services (which companies, together with the
COMPANY are collectively referred to herein as the "FOUNDING COMPANIES");
WHEREAS, this Agreement, the Other Agreements and the IPO of VESTCOM
Stock (as hereinafter defined) constitute the "VESTCOM PLAN OF ORGANIZATION";
WHEREAS, in consideration of the Founding Companies (other than the
COMPANY) entering into the Other Agreements, the STOCKHOLDERS and the Board of
Directors of the COMPANY have approved this Agreement as part of the VESTCOM
Plan of Organization in order to transfer the capital stock of the COMPANY to
NEWCO;
WHEREAS, unless the context otherwise indicates, capitalized terms
used in this Agreement, including the Schedules and Annexes hereto, and not
otherwise defined shall have the following meanings:
"ACQUIRED PARTIES" has the meaning set forth in Section 5.22.
"ACQUISITION" has the meaning set forth in the preamble to this Agreement.
"ADJUSTED EARNOUT SHARES" has the meaning set forth in Section 2.3.
"AFFILIATE" and "AFFILIATES" have the meaning set forth in Section 5.8.
"BALANCE SHEET DATE" has the meaning set forth in Section 5.9.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day when
banks are not open for business in New Jersey.
"CANADIAN PLANS" has the meaning set forth in Section 5.19.
"CHARTER DOCUMENTS" shall mean the Articles of Incorporation, as amended
of the COMPANY, COS and the COMPANY'S other Subsidiaries, if any, and the
By-laws of the COMPANY, COS and the COMPANY'S other Subsidiaries, if any.
"CLAIM AMOUNT" has the meaning set forth in Section 11.3.
"CLOSING" has the meaning set forth in Section 3.
"CLOSING DATE" has the meaning set forth in Section 3.
"CODE" has the meaning set forth in Section 2.7.4.
-2-
10
"COMPANY" has the meaning set forth in the preamble to this Agreement.
"COMPANY FINANCIAL STATEMENT" has the meaning set forth in Section 5.9.
"COMPANY'S SUBSIDIARIES" means all of the subsidiaries of the COMPANY
including COS.
"COMPANY STOCK" has the meaning set forth in Section 2.8.
"CONSUMMATION DATE" has the meaning set forth in Section 3.
"COS" has the meaning set forth in the preamble to this Agreement.
"CURRENT MARKET PRICE" means, in respect of a share of VESTCOM Stock on
any date, the Canadian Dollar Equivalent of the average of the closing
prices of the VESTCOM Stock on the Nasdaq National Market System on each
of the thirty (30) consecutive trading days ending five (5) trading days
before such date, or, if the VESTCOM Stock is not then quoted on the
Nasdaq National Market System, on such other stock exchange or automated
quotation system on which the VESTCOM Stock is listed or quoted, as the
case may be, as may be selected by the Board of Directors of NEWCO for
such purpose; provided, however, that if there is no public distribution
or trading activity of VESTCOM Stock during such period, then the Current
Market Price of a share of VESTCOM Stock shall be determined by the Board
of Directors of NEWCO based upon the advice of such qualified independent
financial advisors as the Board of Directors of NEWCO may deem to be
appropriate, and provided further that any such selection, opinion or
determination by the Board of Directors of NEWCO shall be conclusive and
binding. If the VESTCOM Stock is quoted on more than one recognized stock
exchange in the United States, then the Current Market Price shall be the
average of the closing prices on each such exchange determined as provided
above.
"DIVIDEND ACCESS SHARES" has the meaning set forth in Section 2.6.
"DIVIDEND ACCESS SHARE PROVISIONS" has the meaning set forth in Section
2.6.
"ENVIRONMENTAL CLAIMS" has the meaning set forth in Section 5.13.
"ENVIRONMENTAL LAW" has the meaning set forth in Section 5.13.
"ESCROW AGENT" has the meaning set forth in Section 4.2.
-3-
11
"EXPIRATION DATE" has the meaning set forth in Section 5.
"FOUNDING COMPANIES" has the meaning set forth in the preamble to this
Agreement.
"INDEMNIFICATION THRESHOLD" has the meaning set forth in Section 11.4.
"INDEMNIFIED PARTY" has the meaning set forth in Section 11.3.
"INDEMNIFYING PARTY" has the meaning set forth in Section 11.3.
"INTELLECTUAL PROPERTY" has the meaning set forth in Section 5.12.
"IPO" means the initial public offering of VESTCOM Stock pursuant to the
Registration Statement.
"IPO PRICE" means the initial public offering price for the VESTCOM Stock.
"LIENS" shall mean (i) all hypothecs, mortgages, pledges, privileges,
liens, security interests, transfers of property in stock, charges,
servitudes, easements, reserves, leases, occupation rights, encroachments,
restrictive covenants, title defects and other encumbrances or rights of
others of any nature howsoever arising and (ii) all actions, claims or
demands of any nature whatsoever or howsoever arising; and "LIEN" shall
mean any one of them;
"LIQUIDATION CALL PURCHASE PRICE" has the meaning set forth in Section
2.7.1.1.
"LIQUIDATION CALL RIGHT" has the meaning set forth in Section 2.7.1.1.
"LIQUIDATION DATE" has the meaning set forth in the Dividend Access Share
Provisions.
"MATERIAL ADVERSE EFFECT" has the meaning set forth in Section 5.1.
"MATERIAL CONTRACTS" has the meaning set forth in Section 5.15.
"MULTIPLE VOTING SHARE" has the meaning set forth in Section 2.8.
"MULTIPLE VOTING SHARE PROVISIONS" has the meaning set forth in Section
2.8.
"NEWCO" has the meaning set forth in the preamble to this Agreement.
"NBCA" has the meaning set forth in Section 2.7.1.3.
"PERMITTED ENCUMBRANCES" shall mean (i) Liens for Taxes, assessments or
governmental charges not yet due and payable; (ii) title defects or
irregularities which are of a minor nature and in the aggregate do not
impair the value of any immovable or real property or the use of such
immovable or real property for the purpose for which it is held.
-4-
12
"PRICING DATE" shall mean the date on which the public offering price per
share of VESTCOM Stock in the IPO is determined by VESTCOM and the
Underwriters.
"PROHIBITED ACTIVITIES" has the meaning set forth in Section 13.1.
"PROPRIETARY RIGHTS" has the meaning set forth in Section 5.12.
"PURCHASE PRICE" has the meaning set forth in Section 2.1.
"PURCHASED SHARES" has the meaning set forth in the preamble to this
Agreement.
"PUT CLOSING DATE" has the meaning set forth in Section 2.7.5.2.
"PUT EXERCISE DATE" has the meaning set forth in Section 2.7.5.2.
"PUT PURCHASE PRICE" has the meaning set forth in Section 2.7.5.1.
"PUT RIGHT" has the meaning set forth in Section 2.7.5.1.
"PUT TRIGGER EVENT" has the meaning set forth in Section 2.7.5.4.
"REDEMPTION CALL PURCHASE PRICE" has the meaning set forth in Section
2.7.2.1.
"REDEMPTION CALL RIGHT" has the meaning set forth in Section 2.7.2.1.
"REGISTRATION STATEMENT" has the meaning set forth in Section 8.5.
"REGULATED SUBSTANCE" has the meaning set forth in Section 5.13.
"RELEASES" has the meaning set forth in Section 5.13.
"RELEVANT GROUP" has the meaning set forth in Section 5.22.
"RETURNS" has the meaning set forth in Section 5.22.
"RETRACTION CALL PURCHASE PRICE" has the meaning set forth in Section
2.7.3.1.
"RETRACTION CALL RIGHT" has the meaning set forth in Section 2.7.3.1.
"RIGHT OF RETRACTION" has the meaning set forth in Section 2.6.
"SEC" shall mean the Securities and Exchange Commission.
"SUBSCRIPTION TO MULTIPLE VOTING SHARE" has the meaning set forth in
Section 2.5.1.
"SUPPORT AGREEMENT" has the meaning set forth in paragraph 2.7.7.
"STOCKHOLDERS" has the meaning set forth in the preamble to this
Agreement.
"TAX" or "TAXES" has the meaning set forth in Section 5.22.
"TAX LOSSES" has the meaning set forth in Section 6.15.
-5-
13
"TAXING AUTHORITY" has the meaning set forth in Section 5.22.
"THIRD PERSON" has the meaning set forth in Section 11.3.
"TERRITORY" has the meaning set forth in Section 13.1.
"UNDERWRITERS" shall mean the prospective underwriters in the IPO as
identified in the Registration Statement.
"VESTCOM" has the meaning set forth in the preamble to this Agreement.
"VESTCOM CHARTER DOCUMENTS" has the meaning set forth in Section 6.11.
"VESTCOM MATERIAL ADVERSE EFFECT" has the meaning set forth in Section
6.1.
"VESTCOM MATERIAL DOCUMENTS" has the meaning set forth in Section 6.11.
"VESTCOM RELEVANT GROUP" has the meaning set forth in Section 6.15.
"VESTCOM STOCK" has the meaning set forth in Section 2.8
"VOTING TERMINATION DATE" has the meaning set forth in Section 2.7.6.
"VOTING TRUST AGREEMENT" has the meaning set forth in Section 2.5.3.
"1933 ACT" shall mean the Securities Act of 1993, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE ACQUISITION
1.1. PURCHASE AND SALE OF PURCHASED SHARES. On the terms, provisions and
conditions set forth herein, and in reliance upon the warranties and
representations contained herein, NEWCO shall purchase, and the STOCKHOLDERS
shall sell, transfer and assign to NEWCO on the Closing Date, all of the
Purchased Shares, free and clear of all Liens.
-6-
14
2. CONSIDERATION FOR TRANSFER
2.1. PURCHASE PRICE FOR THE PURCHASED SHARES. The aggregate purchase price
for the Purchased Shares (the "PURCHASE PRICE") is equal to the amount of the
aggregate consideration identified in Section 2.2 (the "AGGREGATE
CONSIDERATION").
2.2. AGGREGATE CONSIDERATION. The Aggregate Consideration shall be as
follows:
(a) an aggregate cash amount of $1,036,000.00 with the amount to
each STOCKHOLDER as set forth in Part A of Annex II;
(b) plus a number of Dividend Access Shares to each STOCKHOLDER as
set forth in Part A of Annex II;
(c) plus, subject to adjustment in accordance with Section 2.3, an
aggregate number of 137,307 Dividend Access Shares divided
among the following STOCKHOLDERS as set forth below:
NAME NUMBER PROPORTION
---- ------ ----------
Xxxxxx Xxxxx 73,075 53.22%
Xxxxxxx Xxxxx 64,232 46.78%
The parties recognize that the number of Dividend Access Shares
referred to in Subsection 2.2(c) is based on the Canada/U.S.
exchange rate being 1 Cdn. $ = 0.85 U.S. $.
The parties recognize and agree that, due to the fact that the
Dividend Access Shares and the Adjusted Earnout Shares and the
shares of VESTCOM Stock exchangeable therefor will not be registered
stock, and due to the restrictions in Articles 15 and 16 of this
Agreement, the shares of VESTCOM Stock to be received by the
STOCKHOLDERS upon exchange of their Dividend Access Shares and
Adjusted Earnout Shares will have a fair market value significantly
less than the initial public offering price per share.
-7-
15
2.3. PRICE ADJUSTMENT. On or before March 31, 1998, VESTCOM's independent
public accountants ("VIPA") shall determine the net income before financial
expenses and taxes of COS ("EBIT") for the twelve (12) month period ending on
December 31, 1997 (the "1997 YEAR"), to be computed in accordance with generally
accepted accounting principles consistent with that of the financial statements
prepared by the auditors of COS, Xxxxxxx Leebosh April, for the twelve (12)
month period ended July 31, 1996, except that:
(a) any and all amounts relating to the preparation of
financial statements for the year end created by the
change of control that will occur upon the Consummation
Date, will be excluded;
(b) for the period from January 1, 1997 until the
Consummation Date, an adjustment shall be made
reflecting reduced salary costs and other adjustments as
if COS was owned by VESTCOM during such period;
(c) no interest will be charged to COS for the 1997 Year
except for interest on any equipment capital purchase
made after January 1, 1997;
(d) all management and administrative charges of VESTCOM to
COS and corporate overhead expenses allocated to COS by
VESTCOM will be excluded from the calculation of EBIT
unless otherwise mutually agreed upon in advance, except
to the extent VESTCOM has assumed an expense
historically incurred by COS. With respect to NEWCO,
only the direct expenses required to maintain NEWCO as a
corporation may be charged back to COS for the purpose
of calculation of EBIT; and
(e) prior to the consummation of any acquisition by COS,
VESTCOM and the STOCKHOLDERS will negotiate in good
faith with respect to the effect of such transaction on
EBIT.
-8-
16
VIPA shall notify the STOCKHOLDERS, VESTCOM and NEWCO as soon as
practicable after its determination of EBIT in accordance with the
foregoing (the date of such notification being the "DETERMINATION DATE").
The Aggregate Consideration identified in Subsection 2.2(c) shall be
adjusted so as to equal the number of Dividend Access Shares calculated in
accordance with the following formula (such number, if any, being the
"ADJUSTED EARNOUT SHARES"):
(A) the lesser of (i) $350,000 Cdn. and (ii) the amount, if any, by which
EBIT exceeds $750,000 Cdn., multiplied by (B) six (6), then multiplied by
(C) the Adjusted Conversion Rate (as defined below), which amount is then
divided by (D) $13 U.S., and rounded to the lowest whole share.
For purposes of this Section 2.3, Adjusted Conversion Rate shall mean the
lesser of (i) a Canada/US exchange rate of 1 Cdn.$/0.85 U.S.$ and (ii) the
exchange rate in effect on the Determination Date based on a conversion of
Canadian dollars into U.S. dollars as reported in the Wall Street Journal
under "Currency Trading; Exchange Rates" for the previous business day or,
in the event such exchange rate is not available, such exchange rate on
such date as may be deemed by the Board of Directors of VESTCOM to be
appropriate for such purpose.
Notwithstanding any other provision contained in this Agreement, the
number of Adjusted Earnout Shares shall in no event be greater than
137,307.
The Adjusted Earnout Shares shall be allocated and issued to the
STOCKHOLDERS in accordance with the proportions set forth in Section
2.2(c). NEWCO shall adjust the number of Adjusted Earnout Shares otherwise
issuable pursuant to the terms of this Section 2.3 to eliminate any
fractions based on the rounding of shares to the lowest whole number.
NEWCO shall deliver to the STOCKHOLDERS in accordance with the foregoing,
as soon as
-9-
17
practicable after the Determination Date, share certificates registered in
the name of such holder for the number of Dividend Access Shares to which
he or she is entitled.
All determinations by VIPA hereunder, including, but not limited to,
determinations as to the number of Adjusted Earnout Shares to be issued to
the STOCKHOLDERS, shall be final and binding, absent manifest error.
2.4. PAYMENT. The Purchase Price shall be paid, subject to the terms and
conditions hereof, to the STOCKHOLDERS as follows:
(a) as to the portion of the Aggregate Consideration identified in
Subsections 2.2(a) and 2.2(b), on the Consummation Date; and,
(b) as to the portion of the Aggregate Consideration identified in
Subsection 2.2(c) as adjusted pursuant to Section 2.3, in
accordance with the terms of Section 2.3.
2.5. CONCURRENT SUBSCRIPTION TO MULTIPLE VOTING SHARE.
2.5.1. On Closing, the STOCKHOLDERS shall jointly subscribe to one
(1) Multiple Voting Share of VESTCOM (the "SUBSCRIPTION TO MULTIPLE
VOTING SHARE") at a subscription price equal to $1 per share and
VESTCOM hereby agrees to accept such subscription;
2.5.2. Payment for, issuance and delivery of the Multiple Voting
Share to be subscribed to and accepted pursuant to Section 2.4.1
shall occur on the Consummation Date;
2.5.3. On Closing, the STOCKHOLDERS agree to enter into a voting
trust agreement governing the exercise of the voting rights
attaching to the Multiple Voting Share (the "VOTING TRUST
AGREEMENT") in the form annexed hereto as Annex III and immediately
transfer the Multiple Voting Share referred to in Section 2.5.1 to
the trustee appointed under the Voting Trust Agreement after receipt
thereof on the
-10-
18
Consummation Date; the STOCKHOLDERS acknowledge and agree that the
certificate representing the Multiple Voting Share shall be issued
in the name of and delivered to the said trustee as provided herein.
2.6. CAPITALIZATION OF NEWCO. The Articles of incorporation of NEWCO shall
provide for authorized capital consisting of (i) a class of voting common shares
(all of the issued and outstanding shares of which shall initially be held by
VESTCOM) and (ii) a class of non-voting preferred shares (the "DIVIDEND ACCESS
SHARES") having the rights, privileges, restrictions and conditions set forth in
Annex IV (the "DIVIDEND ACCESS SHARE PROVISIONS"), each share of which shall (A)
entitle the holder thereof to dividend rights equal to the per share dividend
rights of VESTCOM Stock, (B) subject to the Liquidation Call Right, entitle the
holder on liquidation of NEWCO to receive in exchange for each Dividend Access
Share one (1) share of VESTCOM Stock as provided in Section 2.7.1.1, (C) subject
to the Retraction Call Right, entitle the holder, at his election at any time
and from time to time for a period commencing on the Consummation Date and
ending on the fifth (5th) anniversary of the Consummation Date, upon thirty (30)
days' written notice given by such holder to NEWCO, to require NEWCO to redeem
any or all Dividend Access Shares and to exchange the same, on a share for share
basis, for shares of VESTCOM Stock (the "RIGHT OF RETRACTION") and (D) subject
to the Redemption Call Right, entitle NEWCO to redeem on the "AUTOMATIC
REDEMPTION DATE", as defined in the Dividend Access Share Provisions, the
outstanding Dividend Access Shares. The board of directors of NEWCO shall
consist of the persons listed on Schedule 2.6.
2.7. RIGHTS AND OBLIGATIONS OF VESTCOM AND HOLDERS OF DIVIDEND ACCESS
SHARES.
2.7.1. VESTCOM LIQUIDATION CALL RIGHTS
2.7.1.1 VESTCOM shall have the overriding right (the
"LIQUIDATION CALL RIGHT"), in the event of and notwithstanding
the proposed liquidation, dissolution or winding-up of NEWCO
pursuant to Article 5 of the Dividend Access Share Provisions,
to purchase all but not less than all of the Dividend Access
Shares held by each such holder on payment by VESTCOM of an
-11-
19
amount per Dividend Access Share equal to (a) the Current
Market Price of a share of VESTCOM Stock on the last Business
Day prior to the "LIQUIDATION DATE" (as defined in Section 5.1
of the Dividend Access Share Provisions), which shall be
satisfied in full by causing to be delivered to such holder
one (1) share of VESTCOM Stock, plus (b) an additional amount
equivalent to the full amount of all declared and unpaid
dividends on such Dividend Access Share and all dividends
declared on VESTCOM Stock which have not been declared on such
Dividend Access Share in accordance with Section 3.1 of the
Dividend Access Share Provisions (collectively the
"LIQUIDATION CALL PURCHASE PRICE"), provided that if the
record date for any such declared and unpaid dividends occurs
on or after the Liquidation Date, the Liquidation Call
Purchase Price shall not include such additional amount
equivalent to such dividends. In the event of the exercise of
the Liquidation Call Right by VESTCOM, each holder shall be
obligated to sell all the Dividend Access Shares held by the
holder to VESTCOM on the Liquidation Date on payment by
VESTCOM to the holder of the Liquidation Call Purchase Price
for each such Dividend Access Share;
2.7.1.2 To exercise the Liquidation Call Right, VESTCOM must
notify NEWCO and the STOCKHOLDERS of VESTCOM's intention to
exercise such right at least twenty (20) days before the
Liquidation Date in the case of a voluntary liquidation,
dissolution or winding up of NEWCO and at least five (5)
Business Days before the Liquidation Date in the case of an
involuntary liquidation, dissolution or winding up of NEWCO.
NEWCO or an authorized agent will notify the holders of
Dividend Access Shares as to whether or not VESTCOM has
exercised the Liquidation Call Right forthwith after the
expiry of the period during which the same may be exercised by
VESTCOM. If VESTCOM exercises the Liquidation Call Right, on
the Liquidation Date,
-12-
20
VESTCOM will purchase and the holders will sell all of the
Dividend Access Shares then outstanding for a price per
Dividend Access Share equal to the Liquidation Call Purchase
Price.
2.7.1.3 For the purposes of completing the purchase of the
Dividend Access Shares pursuant to the Liquidation Call Right,
VESTCOM shall deposit with NEWCO or an authorized agent, prior
to the Liquidation Date, certificates representing the
aggregate number of shares of VESTCOM Stock deliverable by
VESTCOM in payment of the Liquidation Call Purchase Price and
a cheque or cheques in the amount of the remaining portion, if
any, of the total Liquidation Call Purchase Price. Provided
that the total Liquidation Call Purchase Price has been so
deposited with NEWCO or an authorized agent, on and after the
Liquidation Date the rights of each holder of Dividend Access
Shares will be limited to receiving such holder's
proportionate part of the total Liquidation Call Purchase
Price payable by VESTCOM upon presentation and surrender by
the holder of certificates representing the Dividend Access
Shares held by such holder and the holder shall on and after
the Liquidation Date be considered and deemed for all purposes
to be the holder of the shares of VESTCOM Stock delivered to
it. Upon surrender to NEWCO or an authorized agent of a
certificate or certificates representing Dividend Access
Shares, together with such other documents and instruments as
may be required to effect a transfer of Dividend Access Shares
under the New Brunswick Companies Act ("NBCA") and the by-laws
of NEWCO and such additional documents and instruments as
NEWCO or the authorized agent may reasonably require, the
holder of such surrendered certificate or certificates shall
be entitled to receive in exchange therefor, and NEWCO or the
authorized agent on behalf of VESTCOM shall deliver to such
holder, certificates representing the shares of VESTCOM Stock
to which the holder is entitled and
-13-
21
a cheque or cheques of VESTCOM payable at par and in U.S.
dollars at any branch of the bankers of VESTCOM or of NEWCO in
Canada in payment of the remaining portion, if any, of the
total Liquidation Call Purchase Price. If VESTCOM does not
exercise the Liquidation Call Right in the manner described
above, on the Liquidation Date the holders of the Dividend
Access Shares will be entitled to receive in exchange therefor
the liquidation price otherwise payable by NEWCO in connection
with the liquidation, dissolution or winding-up of NEWCO
pursuant to Article 5 of the Dividend Access Share Provisions.
2.7.2. VESTCOM REDEMPTION CALL RIGHT
2.7.2.1 VESTCOM shall have the overriding right (the
"REDEMPTION CALL RIGHT"), in the event of and notwithstanding
the proposed redemption of Dividend Access Shares by NEWCO
pursuant to Article 7 of the Dividend Access Share Provisions,
to purchase from all but not less than all of the holders of
Dividend Access Shares to be redeemed on the "AUTOMATIC
REDEMPTION DATE" (as defined in Section 1.1 of the Dividend
Access Share Provisions) all but not less than all of the
Dividend Access Shares held by each such holder that are
otherwise to be redeemed on payment by VESTCOM to the holder
of an amount per such Dividend Access Share equal to (a) the
Current Market Price of a share of VESTCOM Stock on the last
Business Day prior to the Automatic Redemption Date which
shall be satisfied in full by causing to be delivered to such
holder one (1) share of VESTCOM Stock plus (b) an additional
amount equivalent to the full amount of all declared and
unpaid dividends on such Dividend Access Share and all
dividends declared on VESTCOM Stock that have not been
declared on such Dividend Access Share in accordance with
Section 3.1 of the Dividend Access Share Provisions
(collectively the "REDEMPTION CALL PURCHASE PRICE"), provided
that if the
-14-
22
record date for any such declared and unpaid dividends occurs
on or after the Automatic Redemption Date, the Redemption Call
Purchase Price shall not include such additional amount
equivalent to such dividends. In the event of the exercise of
the Redemption Call Right by VESTCOM, each holder shall be
obligated to sell all the Dividend Access Shares held by the
holder and otherwise to be redeemed to VESTCOM on the
Automatic Redemption Date on payment by VESTCOM to the holder
of the Redemption Call Purchase Price for each such Dividend
Access Share.
2.7.2.2 To exercise the Redemption Call Right, VESTCOM must
notify NEWCO and the STOCKHOLDERS of VESTCOM's intention to
exercise such right at least fifteen (15) days before the
Automatic Redemption Date. NEWCO or an authorized agent will
notify the holders of the Dividend Access Shares as to whether
or not VESTCOM has exercised the Redemption Call Right
forthwith after the expiry of the period during which the same
may be exercised by VESTCOM. If VESTCOM exercises the
Redemption Call Right, on the Automatic Redemption Date
VESTCOM will purchase and the holders will sell all of the
Dividend Access Shares to be otherwise redeemed for a price
per Dividend Access Share equal to the Redemption Call
Purchase Price.
2.7.2.3 For the purposes of completing the purchase of
Dividend Access Shares pursuant to the Redemption Call Right,
VESTCOM shall deposit with NEWCO or an authorized agent prior
to the Automatic Redemption Date, certificates representing
the aggregate number of shares of VESTCOM Stock deliverable by
VESTCOM in payment of the Redemption Call Purchase Price and a
cheque or cheques in the amount of the remaining portion, if
any, of the total Redemption Call Purchase Price. Provided
that the total Redemption Call Purchase Price has been so
deposited with NEWCO or an authorized agent, on
-15-
23
and after the Automatic Redemption Date the rights of each
holder of Dividend Access Shares so purchased will be limited
to receiving such holder's proportionate part of the
Redemption Call Purchase Price payable by VESTCOM upon
presentation and surrender by the holder of certificates
representing the Dividend Access Shares purchased by VESTCOM
from such holder and the holder shall on and after the
Automatic Redemption Date be considered and deemed for all
purposes (including for purposes of dividend entitlement, if
any) to be the holder of the shares of VESTCOM Stock delivered
to such holder. Upon surrender to NEWCO or an authorized agent
of a certificate or certificates representing Dividend Access
Shares, together with such other documents and instruments as
may be required to effect a transfer of Dividend Access Shares
under the NBCA and the by-laws of NEWCO and such additional
documents and instruments as NEWCO or the authorized agent may
reasonably require, the holder of such surrendered certificate
or certificates shall be entitled to receive in exchange
therefor, and NEWCO or the authorized agent on behalf of
VESTCOM shall deliver to such holder, certificates
representing the shares of VESTCOM Stock to which the holder
is entitled and a cheque or cheques of VESTCOM payable at par
and in U.S. dollars at any branch of the bankers of VESTCOM or
of NEWCO in Canada in payment of the remaining portion, if
any, of the total Redemption Call Purchase Price. If VESTCOM
does not exercise the Redemption Call Right in the manner
described above, on the Automatic Redemption Date, the holders
of the Dividend Access Shares will be entitled to receive in
exchange therefor the redemption price otherwise payable by
NEWCO in connection with the redemption of Dividend Access
Shares pursuant to Article 7 of the Dividend Access Share
Provisions.
2.7.3. VESTCOM RETRACTION CALL RIGHT
-16-
24
2.7.3.1 VESTCOM shall have the overriding right (the
"RETRACTION CALL RIGHT"), notwithstanding the proposed
retraction of Dividend Access Shares by a STOCKHOLDER pursuant
to Article 6 of the Dividend Access Share Provisions, to
purchase from the holder having exercised the right to cause
NEWCO to redeem on the "RETRACTION Date" (as defined in
Section 6.1 of the Dividend Access Share Provisions) all but
not less than all of the Dividend Access Shares held by each
such holder that are otherwise to be redeemed on payment by
VESTCOM to the holder of an amount per such Dividend Access
Share equal to (a) the Current Market Price of a share of
VESTCOM Stock on the last Business Day prior to the Retraction
Date which shall be satisfied in full by causing to be
delivered to such holder one (1) share of VESTCOM Stock plus
(b) an additional amount equivalent to the full amount of all
declared and unpaid dividends on such Dividend Access Share
and all dividends declared on VESTCOM Stock that have not been
declared on such Dividend Access Share in accordance with
Section 3.1 of the Dividend Access Share Provisions
(collectively the "RETRACTION CALL PURCHASE PRICE"), provided
that if the record date for any such declared and unpaid
dividends occurs on or after the Retraction Date, the
Retraction Call Purchase Price shall not include such
additional amount equivalent to such dividends. In the event
of the exercise of the Retraction Call Right by VESTCOM, each
holder shall be obligated to sell all the Dividend Access
Shares held by the holder and otherwise to be redeemed to
VESTCOM on the Retraction Date on payment by VESTCOM to the
holder of the Retraction Call Purchase Price for each such
Dividend Access Share.
2.7.3.2 Upon receipt by NEWCO of a "Retraction Request" (as
defined in Section 6.1 of the Dividend Access Share
Provisions), NEWCO shall immediately notify VESTCOM thereof.
To exercise the Retraction Call Right,
-17-
25
VESTCOM must notify NEWCO and the relevant STOCKHOLDER of
VESTCOM's intention to exercise such right within ten (10)
Business Days of notification by NEWCO to VESTCOM of the
receipt by NEWCO of a Retraction Request. NEWCO or an
authorized agent will notify the holders of the Dividend
Access Shares as to whether or not VESTCOM has exercised the
Retraction Call Right forthwith after the expiry of the period
during which the same may be exercised by VESTCOM. If VESTCOM
exercises the Retraction Call Right, on the Retraction Date
VESTCOM will purchase and the holders will sell all of the
Dividend Access Shares to be otherwise redeemed for a price
per Dividend Access Share equal to the Retraction Call
Purchase Price.
2.7.3.3 For the purposes of completing the purchase of
Dividend Access Shares pursuant to the Retraction Call Right,
VESTCOM shall deposit with NEWCO or an authorized agent prior
to the Retraction Date, certificates representing the
aggregate number of shares of VESTCOM Stock deliverable by
VESTCOM in payment of the Retraction Call Purchase Price and a
cheque or cheques in the amount of the remaining portion, if
any, of the total Retraction Call Purchase Price. Provided
that the total Retraction Call Purchase Price has been so
deposited with NEWCO or an authorized agent, on and after the
Retraction Date the rights of each holder of Dividend Access
Shares so purchased will be limited to receiving such holder's
proportionate part of the Retraction Call Purchase Price
payable by VESTCOM upon presentation and surrender by the
holder of certificates representing the Dividend Access Shares
purchased by VESTCOM from such holder and the holder shall on
and after the Retraction Date be considered and deemed for all
purposes (including for purposes of dividend entitlement, if
any) to be the holder of the shares of VESTCOM Stock delivered
to such holder. Upon surrender to NEWCO or an
-18-
26
authorized agent of a certificate or certificates representing
Dividend Access Shares, together with such other documents and
instruments as may be required to effect a transfer of
Dividend Access Shares under the NBCA and the by-laws of NEWCO
and such additional documents and instruments as NEWCO or the
authorized agent may reasonably require, the holder of such
surrendered certificate or certificates shall be entitled to
receive in exchange therefor, and NEWCO or the authorized
agent on behalf of VESTCOM shall deliver to such holder,
certificates representing the shares of VESTCOM Stock to which
the holder is entitled and a cheque or cheques of VESTCOM
payable at par and in U.S. dollars at any branch of the
bankers of VESTCOM or of NEWCO in Canada in payment of the
remaining portion, if any, of the total Retraction Call
Purchase Price. If VESTCOM does not exercise the Retraction
Call Right in the manner described above, on the Retraction
Date, the holders of the Dividend Access Shares will be
entitled to receive in exchange therefor the retraction price
otherwise payable by NEWCO in connection with the retraction
of Dividend Access Shares pursuant to Article 6 of the
Dividend Access Share Provisions.
2.7.4. WITHHOLDING RIGHTS. VESTCOM and NEWCO shall be entitled to
deduct and withhold from the consideration otherwise payable to any
holder of Dividend Access Shares, including any dividend payments in
respect of the Dividend Access Shares, such amount as VESTCOM or
NEWCO is required to deduct and withhold with respect to such
payment under the United States Internal Revenue Code of 1986, as
amended (the "CODE"), the Income Tax Act (Canada), as amended, or
any provision of state, federal, provincial, local or foreign tax
law. To the extent that amounts are so withheld, such withheld
amounts shall be treated for all purposes hereof as having been paid
to the holder of Dividend Access Shares in respect of which such
deduction and withholding was made, provided that such withheld
amounts are actually remitted to
-19-
27
the appropriate taxing authority. To the extent that the amount so
required or permitted to be deducted or withheld from any payment to
a holder exceeds the cash portion of the consideration otherwise
payable to the holder, VESTCOM and NEWCO, upon at least ten (10)
days prior written notice to such holder, are hereby authorized to
sell or otherwise dispose of at fair market value such portion of
such non-cash consideration otherwise payable to the holder as is
necessary to provide sufficient funds to VESTCOM or NEWCO, as the
case may be, in order to enable it to comply with such deduction or
withholding requirement and VESTCOM or NEWCO, as the case may be,
shall give an accounting to the holder with respect thereof and any
balance of such proceeds of sale.
2.7.5. STOCKHOLDER PUT RIGHT.
2.7.5.1 Each STOCKHOLDER holding Dividend Access Shares shall
have the right (the "PUT RIGHT"), in the event of and
notwithstanding the occurrence of a Put Trigger Event to
require VESTCOM to purchase all but not less than all of the
Dividend Access Shares held by each such holder on payment by
VESTCOM of an amount per Dividend Access Share equal to (a)
the Current Market Price of a share of VESTCOM Stock on the
last Business Day prior to the Put Closing Date, which shall
be satisfied in full by causing to be delivered to such holder
one (1) share of VESTCOM Stock, plus (b) an additional amount
equivalent to the full amount of all dividends declared and
unpaid on such Dividend Access Share and all dividends
declared on VESTCOM Stock which have not been declared on such
Dividend Access Share in accordance with the Dividend Access
Share Provisions (collectively the "PUT PURCHASE PRICE"),
provided that if the record date for any such declared and
unpaid dividends occurs on or after the last Business Day
prior to the Put Closing Date, the Put Purchase Price shall
not include such additional amount equivalent to such
dividends. In the event of the exercise of the Put Right by a
-20-
28
STOCKHOLDER, VESTCOM shall be obliged to purchase all the
Dividend Access Shares held by the holder.
2.7.5.2 To exercise the Put Right, a holder of Dividend Access
Shares must notify VESTCOM of such holder's intention to
exercise such right no later than ten (10) Business Days after
the occurrence of a Put Trigger Event (the "PUT EXERCISE
DATE"). If a holder exercises the Put Right, VESTCOM will
purchase and such holder will sell all of the Dividend Access
Shares then held by such holder for a price per Dividend
Access Share equal to the Put Purchase Price. The closing of
the transaction resulting from the exercise of a Put Right
shall occur on the 10th Business Day following the Put
Exercise Date (the "PUT CLOSING Date").
2.7.5.3 For the purposes of completing the purchase of the
Dividend Access Shares pursuant to the Put Right, VESTCOM
shall deposit with NEWCO or an authorized agent, prior to the
Put Closing Date, certificates representing the aggregate
number of shares of VESTCOM Stock deliverable by VESTCOM in
payment of the Put Purchase Price and a cheque or cheques in
the amount of the remaining portion, if any, of the total Put
Purchase Price. Provided that the total Put Purchase Price has
been so deposited with NEWCO or an authorized agent, on and
after the Put Closing Date the rights of each holder of
Dividend Access Shares will be limited to receiving such
holder's proportionate part of the total Put Purchase Price
payable by VESTCOM upon presentation and surrender by the
holder of certificates representing the Dividend Access Shares
held by such holder and the holder shall on and after the Put
Closing Date be considered and deemed for all purposes to be
the holder of the shares of VESTCOM Stock delivered to it.
Upon surrender to NEWCO or an authorized agent of a
certificate or certificates representing Dividend Access
Shares, together with such other documents and instruments as
may be
-21-
29
required to effect a transfer of Dividend Access Shares under
the NBCA and the by-laws of NEWCO and such additional
documents and instruments as NEWCO or the authorized agent may
reasonably require, the holder of such surrendered certificate
or certificates shall be entitled to receive in exchange
therefor, and NEWCO or the authorized agent on behalf of
VESTCOM shall deliver to such holder, certificates
representing the shares of VESTCOM Stock to which the holder
is entitled and a cheque or cheques of VESTCOM payable at par
and in U.S. dollars at any branch of the bankers of VESTCOM or
of NEWCO in Canada in payment of the remaining portion, if
any, of the total Put Purchase Price.
2.7.5.4 For purposes of this Section 2.7.5, "PUT TRIGGER
EVENT" shall mean:
(a) the insolvency or bankruptcy of NEWCO or the making by
NEWCO of an assignment for the benefit of creditors or the
making by NEWCO of a proposal pursuant to any bankruptcy or
debtor relief legislation for the benefit of its creditors or
the filing by NEWCO of a notice of intention to file a
proposal or the making or authorization by NEWCO of any
bankruptcy proceeding, petition or application to any tribunal
for the appointment of a receiver or trustee for its or for
any substantial part of its property;
(b) the insolvency or bankruptcy of VESTCOM or the making by
VESTCOM of an assignment for the benefit of creditors or the
making by VESTCOM of a proposal pursuant to any bankruptcy or
debtor relief legislation for the benefit of its creditors or
the filing by VESTCOM of a notice of intention to file a
proposal or the making or authorization by VESTCOM of any
bankruptcy proceeding, petition or application to any tribunal
for the appointment of a receiver or trustee for its or for
any substantial part of its property; or
-22-
30
(c) the failure by NEWCO to pay dividends otherwise payable on
Dividend Access Shares if such failure is not cured within ten
(10) Business Days of a written request therefor.
2.7.6. AUTOMATIC REDEMPTION OF MULTIPLE VOTING SHARE. VESTCOM shall,
on the date on which the STOCKHOLDERS cease to hold Dividend Access
Shares, (the "VOTING TERMINATION DATE"), redeem the Multiple Voting
Share held by the trustee appointed under the Voting Trust Agreement
for and on behalf of the STOCKHOLDERS for an amount equal to $1, the
whole as provided in the Multiple Voting Share Provisions, each
STOCKHOLDER hereby irrevocably consenting to such redemption of the
Multiple Voting Share held on its behalf. VESTCOM agrees not to
redeem the Multiple Voting Share held for the benefit of the
STOCKHOLDERS under the Voting Trust Agreement prior to the
occurrence of a Voting Termination Date.
2.7.7. SUPPORT AGREEMENT. VESTCOM agrees to enter into a support
agreement on Closing with NEWCO (the "SUPPORT AGREEMENT") in the
form annexed hereto as Annex V.
2.8. CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY
AND VESTCOM. The respective designation and number of outstanding shares and
voting rights of each class of outstanding capital stock of the COMPANY and
VESTCOM as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized capital of the
COMPANY is as set forth on Schedule 2.8(i) hereto, which share capital is
collectively referred to as the "COMPANY STOCK"; and
(ii) immediately prior to the Consummation Date, the authorized
capital stock of VESTCOM will consist of 20,000,000 shares of common
stock, no par value (the "VESTCOM STOCK"), of which the number of issued
and outstanding shares will be set forth
-23-
31
in the Registration Statement referred to in Section 8.6, 3,000,000 shares
of preferred stock, issuable in series, of which there will be a first
series created comprising one share of redeemable non-participating
Multiple Voting Stock (the "MULTIPLE VOTING SHARE"), no par value, having
the rights, privileges, restrictions and conditions set forth in Annex VI
(the "MULTIPLE VOTING SHARE PROVISIONS"), such share entitling the holder
of record thereof to a number of votes at meetings of holders of VESTCOM
Stock (or in any other circumstance where holders of VESTCOM Stock are
authorized to vote their shares) equal to the number of Dividend Access
Shares outstanding from time to time that are held by such holder, the
only one (1) issued and outstanding share of which to be held by the
trustee appointed under the Voting Trust Agreement for and on behalf of
each of the STOCKHOLDERS.
2.9. SECTION 85 ELECTIONS. NEWCO and the STOCKHOLDERS agree to jointly
elect in prescribed form and within the prescribed time elections under
subsection 85(1) of the Income Tax Act (Canada) and relevant provisions of any
applicable provincial legislation at the respective amounts selected by each
STOCKHOLDER to be the proceeds of disposition and the cost of the Purchased
Shares sold hereunder.
3. CLOSING.
3.1. ACTIONS TAKEN AT CLOSING. On the Pricing Date, the parties shall take
all actions necessary to effect the Acquisition (hereinafter referred to as the
"CLOSING") provided that such actions shall not include those described in
Sections 3.2 and 4.2 which shall only occur on the Consummation Date, but shall
include the execution of all the agreements contemplated by this Agreement,
including the Voting Trust Agreement and the Support Agreement as well as those
actions described in Section 4.1. The Closing shall take place at the offices of
Xxxxxxxxxx, Sandler, Kohl, Xxxxxx & Xxxxxx, P.C., 00 Xxxxxxxxxx Xxxxxx,
Xxxxxxxx, Xxx Xxxxxx 00000. The date on which the Closing shall occur shall be
referred to as the "CLOSING DATE".
3.2. ACTIONS TAKEN ON CONSUMMATION DATE. The date on which (i) the closing
with respect to the IPO occurs and (ii) the Acquisition is effected shall be
referred to as the
-24-
32
"CONSUMMATION DATE". On the Consummation Date, all transactions contemplated by
this Agreement, including those described in Section 4.2, shall occur and be
deemed to be completed. During the period from the Closing Date to the
Consummation Date, this Agreement may only be terminated by the parties if the
underwriting agreement in respect of the IPO is terminated pursuant to the terms
of such agreement or pursuant to the provisions of Section 12 hereof. This
Agreement shall in any event terminate if the Consummation Date has not occurred
within 15 Business Days of the Closing Date, in which event, notwithstanding any
other provisions of this Agreement, the Acquisition shall be deemed for all
purposes to have been abandoned and of no effect and all further obligations of
the parties hereto under this Agreement (other than pursuant to Section 7.1(d),
14, and 17.5, which shall continue in full force) shall terminate without
further liability. Time is of the essence.
4. DELIVERY OF SHARES.
4.1. DELIVERIES AT CLOSING
4.1.1. DELIVERIES BY STOCKHOLDERS. On the Closing Date, the
STOCKHOLDERS shall deliver to NEWCO certificates representing the
Purchased Shares, duly endorsed for transfer in favor of NEWCO.
4.1.2. SUBSCRIPTION TO MULTIPLE VOTING SHARE. On the Closing Date,
the STOCKHOLDERS shall deliver to VESTCOM a duly executed letter of
subscription giving effect to the Subscription to Multiple Voting
Share together with a cheque in payment of one dollar, being the
subscription price therefor.
4.2. ESCROW
All deliveries to be made by the parties at Closing pursuant to the
provisions of this Agreement shall be made in escrow to the law firm of
Xxxxxxxxxx, Sandler, Kohl, Xxxxxx & Xxxxxx (the "ESCROW AGENT") and be dealt
with and released on the Consummation Date in accordance with the provisions of
the closing memoranda to be executed at Closing unless this Agreement is
terminated in accordance with Section 12, in which case such deliveries shall be
dealt with and returned to the parties in accordance with the provisions of the
said closing memoranda. The parties agree that the
-25-
33
Escrow Agent shall not incur any liability whatsoever in connection with its
acting as agent under this Section 4.2 except in cases of fraud or willful
misconduct.
4.3. DELIVERIES AT CONSUMMATION DATE
4.3.1. DELIVERIES BY NEWCO. On the Consummation Date, NEWCO shall
deliver to each STOCKHOLDER a certified cheque or bank draft and
certificates representing Dividend Access Shares, the whole in
amounts and as provided at Section 2.2.
4.3.2. DELIVERIES BY VESTCOM. On the Consummation Date, VESTCOM
shall deliver to the trustee appointed under the Voting Trust
Agreement a certificate representing one (1) Multiple Voting Share.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS.
(A) REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS
Each of the COMPANY and the STOCKHOLDERS solidarily (without benefit of
division or discussion) represent and warrant that all of the following
representations and warranties in this Section 5(A) are true at the date of this
Agreement and, subject to Section 7.7 hereof, shall be true at the Closing Date
and the Consummation Date and that such representations and warranties shall
survive until the date which is the end of the eighth (8th) full fiscal quarter
of VESTCOM after the Consummation Date (which date is hereinafter called the
"EXPIRATION DATE"), except that (i) the representations and warranties set forth
in Section 5.22 hereof shall survive until such time as the limitations period
has run for all tax periods ended on or prior to the Consummation Date, which
shall be deemed to be the Expiration Date for Section 5.22 (ii) the
representations and warranties in Sections 5.32 through 5.34 and Sections 5.36
through 5.39 shall survive until the tenth (10th) anniversary of the
Consummation Date, which shall be deemed to be the Expiration Date for Sections
5.32 through 5.34 and Sections 5.36 through 5.39 and (iii) solely for purposes
of Section 11.1(iii) hereof, and solely to the extent that in connection with
the IPO, VESTCOM actually incurs liability under the 1933 Act, the 1934 Act, or
any other federal or state securities laws, the representations and warranties
set forth herein shall survive until the expiration of any applicable
-26-
34
statute of limitation period. For purposes of this Section 5, the term the
"COMPANY" shall mean and refer to the COMPANY and COS and each of their
subsidiaries, if any.
5.1. DUE ORGANIZATION. The COMPANY is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, and is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted except
(i) as disclosed on Schedule 5.1 or (ii) where the failure to be so authorized
or qualified would not have a material adverse effect on the business,
operations, properties, assets or condition (financial or otherwise), of the
COMPANY taken as a whole (a "MATERIAL ADVERSE EFFECT"). Schedule 5.1 contains a
list of all jurisdictions in which the COMPANY is authorized or qualified to do
business. True, complete and correct copies of the Certificate of Incorporation
(as of the date hereof, certified by the Secretary or Assistant Secretary of the
COMPANY and, on or prior to Closing, by the appropriate governmental authority
of the jurisdiction of incorporation of the COMPANY) and By-laws (certified by
the Secretary or Assistant Secretary of the COMPANY), each as amended, of the
COMPANY (in the case of those certified by the Secretary or Assistant Secretary
of the COMPANY) are all attached hereto as Schedule 5.1 (and, in the case of
those certified by the appropriate governmental authority, shall be delivered to
VESTCOM at Closing). Except as set forth on Schedule 5.1, the minute books of
the COMPANY, as heretofore made available to VESTCOM, are true, correct and
complete in all material respects.
5.2. AUTHORIZATION. (i) The representatives of the COMPANY executing
this Agreement have the authority to enter into and bind the COMPANY to the
terms of this Agreement and (ii) the COMPANY has the corporate power and
authority to enter into this Agreement and the Acquisition.
5.3. CAPITAL OF THE COMPANY. The authorized share capital of the COMPANY
is as set forth on Schedule 2.8(i). The Purchased Shares represent all of the
issued and outstanding shares of the share capital of LIRPACO INC. and are owned
beneficially and of record by the STOCKHOLDERS and in the amounts set forth in
Annex I and further, except as set forth on
-27-
35
Schedule 5.3, are owned free and clear of all Liens. All of the issued and
outstanding shares in the share capital of the COMPANY have been duly authorized
and validly issued, are fully paid and non-assessable, and further, such shares
were offered, issued, sold and delivered by the COMPANY in compliance with all
applicable laws concerning the issuance of securities. None of such shares were
issued in violation of the pre-emptive rights of any past or present shareholder
of the COMPANY.
5.4. TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4,
the COMPANY has not acquired any COMPANY Stock (including any stock of any of
the COMPANY'S Subsidiaries) since January 1, 1992. Except as set forth in
Schedule 5.4, no option, warrant, call, conversion right or commitment of any
kind exists which obligates the COMPANY to issue any of its authorized but
unissued capital stock. Except as set forth on Schedule 5.4, the COMPANY has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof. Except as set forth on Schedule 5.4.
there has been no transaction changing the equity ownership of the COMPANY in
contemplation of the transactions described in this Agreement.
5.5. NO BONUS SHARES. Except as set forth in Schedule 5.5, during the
period commencing on the third year prior to the Balance Sheet Date through the
date hereof, none of the shares of COMPANY Stock was issued for less than the
fair market value thereof at the time of issuance or was issued in exchange for
consideration other than cash.
5.6. SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each of
LIRPACO INC.'s Subsidiaries and sets forth the number and class of the
authorized share capital of each of LIRPACO INC.'s Subsidiaries and the number
of shares of each of LIRPACO INC.'s Subsidiaries which are issued and
outstanding, all of which shares (except as set forth on Schedule 5.6) are
owned, beneficially and of record, by LIRPACO INC., free and clear of all Liens.
All of the issued and outstanding shares in the share capital of the
Subsidiaries have been duly authorized and validly issued, are fully paid and
non-assessable, and further, such shares were offered, issued, sold and
delivered by each Subsidiary in compliance with all applicable laws concerning
the issuance of securities. None of
-28-
36
such shares were issued in violation of the pre-emptive rights of any past
shareholder of a Subsidiary. Except as set forth in Schedule 5.6, the COMPANY
does not presently own, of record or beneficially, or control, directly or
indirectly, any capital stock, securities convertible into capital stock or any
other equity interest in any corporation, association or business entity nor is
the COMPANY, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity.
5.7. PREDECESSOR STATUS. Set forth in Schedule 5.7 is a listing of all
names of all predecessor companies of the COMPANY for the past five years,
including the names of any entities from whom the COMPANY previously acquired
material assets. Except as disclosed in Schedule 5.7, the COMPANY has not been a
subsidiary or division of another corporation.
5.8. SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of the COMPANY or
any other person or entity that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the COMPANY ("AFFILIATES") other than in the ordinary course of business within
the preceding two years.
5.9. FINANCIAL STATEMENTS; ADJUSTMENTS TO CONSIDERATION. (a) Attached
hereto as Schedule 5.9 are copies of the following financial statements of each
of LIRPACO INC. and COS (the "COMPANY FINANCIAL Statements"): Balance Sheets as
of July 31, 1996 and 1995 as well as for the five (5) month period ended
December 31, 1996 and Statements of Income, Cash Flow and Retained Earnings for
each of the years in the three-year period ended July 31, 1996 and for the five
(5) month period ended December 31, 1996 (December 31, 1996 being hereinafter
referred to as the "BALANCE SHEET Date"). Such Financial Statements have been
prepared in accordance with Canadian generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as
noted). Except as set forth on Schedule 5.9, such Balance Sheets as of December
31, 1996 and 1995 present fairly the financial position of each of LIRPACO INC.
and COS as of the dates indicated thereon, and such Statements of Income, and
Cash Flows and Retained Earnings present fairly the results of their respective
operations for the periods indicated thereon.
-29-
37
(b) The STOCKHOLDERS acknowledge and agree that the consideration to be
paid for the Purchased Shares as indicated in Annex II was based upon the
COMPANY's earnings before taxes, subject to certain adjustments. All such
adjustments represent either historic expenses of the COMPANY which will not be
incurred after the Consummation Date or other items affecting income which will
not occur after the Consummation Date.
5.10. LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to VESTCOM a
complete and accurate list set forth on Schedule 5.10, of all liabilities of the
COMPANY of any kind, character and description, whether accrued, absolute,
secured or unsecured, contingent or otherwise (i) which are reflected on the
balance sheet of the COMPANY at the Balance Sheet Date, (ii) exceeding $10,000
which are not reflected on the balance sheet as of the Balance Sheet Date, and
(iii) which were incurred after the Balance Sheet Date and were incurred other
than in the ordinary course of the COMPANY'S business or which exceed $10,000
(indicating which ones were incurred other than in the ordinary course of
business). Except as set forth on Schedule 5.10, each liability of the COMPANY
was incurred by the COMPANY in the ordinary course of its business. Except as
set forth on Schedule 5.10 or in the notes to the COMPANY Financial Statements,
the COMPANY, as of the date hereof, has no term or funded debt to banks or
Affiliates. Schedule 5.10 also indicates all personal guarantees of the
STOCKHOLDERS on the COMPANY's debt. The COMPANY also has delivered to VESTCOM on
Schedule 5.10, in the case of those liabilities which are contingent, a
reasonable estimate of the maximum amount which may be payable. For each such
contingent liability, the COMPANY has provided to VESTCOM the following
information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought;
and
(c) name of claimant and all other parties to the claim,
suit or proceeding, if any;
-30-
38
(ii) the name of each court or agency before which such claim, suit
or proceeding is pending, if any;
(iii) the date such claim, suit or proceeding was instituted; and
(iv) a reasonable best estimate by the COMPANY of the maximum
amount, if any, which is likely to become payable with respect
to each such liability. If no estimate is provided, the
COMPANY'S reasonable estimate shall for purposes of this
Agreement be deemed to be zero.
5.11. ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to VESTCOM
an accurate list set forth on Schedule 5.11, of the accounts and notes
receivable of the COMPANY, as of December 31, 1996 (or such later date as is
requested by VESTCOM hereafter), including any such amounts which are not
reflected in the balance sheet as of the Balance Sheet Date, and including
receivables from and advances to employees and the STOCKHOLDERS. The COMPANY, on
Schedule 5.11, has provided VESTCOM with an accurate list of all receivables
obtained subsequent to the Balance Sheet Date up to the most current practical
date. The COMPANY provided VESTCOM with an aging of all accounts and notes
receivable as of the Balance Sheet Date showing amounts due in 30 day aging
categories. Except to the extent reflected on Schedule 5.11, such accounts and
notes are fully collectible in the ordinary course of business in the amount
shown on Schedule 5.11, net of reserves reflected in the balance sheet as of the
Balance Sheet Date and were originated in the ordinary course of business.
5.12. PERMITS AND INTANGIBLES. (a) The Company has delivered to VESTCOM an
accurate list set forth on Schedule 5.12(a), of all material licenses,
franchises, permits and other governmental authorizations including permits,
registrations (including motor vehicle registrations and current registrations),
fuel permits, licenses, franchises, certificates and other related licenses
owned or held by the COMPANY, copies of which have been provided to VESTCOM, if
requested. The licenses, franchises, permits and other governmental
authorizations listed on Schedule 5.12(a) are valid, and neither the COMPANY nor
any of the COMPANY'S Subsidiaries has received any notice that any
-31-
39
governmental authority intends to cancel, terminate or not renew any such
license, franchise, permit or other governmental authorization. The COMPANY
holds all licenses, franchises, permits and other government authorizations, the
absence of which would have a Material Adverse Effect. The COMPANY has conducted
and is conducting its business in compliance with the requirements, standards,
criteria and conditions set forth in applicable permits, licenses, orders,
approvals, variances, rules and regulations and is not in violation of any of
the foregoing, except where such non-compliance or violation would not have a
Material Adverse Effect. Except as specifically provided in Schedule 5.12(a),
the transactions contemplated by this Agreement will not result in a default
under or a breach or violation of, or adversely affect the rights and benefits
afforded to the COMPANY by, any such licenses, franchises, permits or government
authorizations.
(b) The COMPANY'S material patents, patent registrations, patent
applications, trademarks, service marks, trademark and service xxxx
registrations and applications therefor, copyrights, copyright registrations,
copyright applications, trade names and corporate names (the "INTELLECTUAL
PROPERTY") are listed in Schedule 5.12(b). Except as disclosed in Schedule
5.12(b), (i) the COMPANY owns and possesses all right, title and interest in the
Intellectual Property and permits, licenses or other agreements to or from third
parties regarding the Intellectual Property and (ii) the COMPANY owns and
possesses all right, title and interest in its technology, inventions, computer
software and programs, data and documentation (including electronic media),
product drawings, trade secrets, know-how, customer lists, processes, other
intellectual property and proprietary information or rights; and permits,
licenses or other agreements to or from third parties regarding the foregoing
(collectively with the Intellectual Property, the "PROPRIETARY RIGHTS"). The
transactions contemplated by this Agreement will have no Material Adverse Effect
on the COMPANY'S right, title and interest in the Proprietary Rights.
(c) To the knowledge of the COMPANY, no claim by any third party
contesting the validity, enforceability, use or ownership of any Proprietary
Right has been made, is currently pending or is threatened. The COMPANY has not
received any notice of, nor is it aware of any fact which indicates a likelihood
of, any infringement or misappropriation by, or conflict with, any third party
with respect to
-32-
40
any of the Proprietary Rights. The COMPANY has not, to its knowledge, infringed,
misappropriated or otherwise conflicted with any rights of any third parties,
nor is the COMPANY aware of any infringement, misappropriation or conflict which
will occur as a result of the continued operation of the businesses of the
COMPANY as now conducted.
5.13. ENVIRONMENTAL COMPLIANCE. (a) To the COMPANY's knowledge, the
COMPANY is in compliance with all applicable Environmental Laws except where
non-compliance with applicable Environmental Laws would not have a Material
Adverse Effect. Except as set forth in Schedule 5.13, the COMPANY has not
received notice that it is in violation of, nor has it been subject to any
Environmental Claim pursuant to applicable Environmental Laws either now or any
time during the past three years that individually or in the aggregate would
have a Material Adverse Effect.
(b) Except those set forth on Schedule 5.13, there are no facts or
circumstances that the COMPANY reasonably believes could form the basis of any
Environmental Claim against the COMPANY that individually or in the aggregate
would have a Material Adverse Effect.
(c) The COMPANY has all material permits, approvals, authorizations,
licenses and consents under applicable Environmental Laws to operate lawfully
the businesses which it currently conducts. More specifically, but without
limitation, the COMPANY hereby represents and confirms that it does not require
a Certificate of Authorization with respect to the collection, storage and
disposal of the liquid and solid wastes generated by its production activities
nor a permit from the Montreal Urban Community pursuant to applicable
regulations or by-laws relating to wastewater discharges.
(d) None of the real property currently owned, used and/or occupied by the
COMPANY is currently being used and, to the STOCKHOLDERS' or the COMPANY'S
knowledge without investigation, has ever been used to generate, manufacture,
transport, treat, store, handle, dispose of or transfer Regulated Substances,
except as listed in Schedule 5.13 and, except for quantities used or stored at
such property in compliance with applicable Environmental Laws and required in
connection with the normal operations and maintenance of such property; and, to
the STOCKHOLDERS' or
-33-
41
COMPANY's knowledge, there have been no Releases at, from, in or on, any
property ever owned or operated by the COMPANY, except as permitted by
applicable Environmental Laws.
(e) Promptly upon learning thereof, the COMPANY will advise VESTCOM of
any facts or circumstances known to the COMPANY that it reasonably believes
could form the basis of any Environmental Claim against the COMPANY that
individually or in the aggregate would have a Material Adverse Effect. There
has been no written communication during the past three years between the
COMPANY and any federal, provincial, state or local environmental agency.
(f) For purposes of this Agreement,
(i) "REGULATED SUBSTANCE" includes any substance, whether waste,
liquid, gaseous or solid matter, fuel, micro-organism, ray, odor,
radiation, energy, vector, plasma and organic or inorganic matter,
which is or is deemed to be, alone or in any combination, hazardous,
hazardous waste, toxic, a pollutant, a deleterious substance, a
contaminant or a source of pollution or contamination under any
applicable Environmental Law, whether or not such substance is
defined as hazardous under the applicable Environmental Laws.
(ii) "ENVIRONMENTAL LAW" means any and all applicable Canadian
federal, provincial, municipal or local statute, law, rule,
regulation, ordinance, code, civil law or rule of common law
(together in this subsection 5.13 (f) (ii) referred to as "Laws")
pertaining to the environment, health and safety matters or
conditions, Regulated Substances, pollution or protection of the
environment, including, without limitation, Laws relating to (1) on
site or off-site contamination; (2) occupational health and safety;
(3) chemical substances or products, (4) Release of pollutants,
contaminants, chemicals or other industrial, toxic or radioactive
substances or Regulated Substances into the environment; (5) the
manufacture, processing, distribution, use, treatment, storage,
transport, packaging, labelling, sale, recycling, disposal,
destruction, incineration, burial, advertising, display or handling
of Regulated Substances; and (6)
-34-
42
any preventive measures, remedial actions and notifications in
connection with the foregoing.
(iii) "ENVIRONMENTAL CLAIMS" means administrative, regulatory or
judicial actions, suits, demands, demand letters, orders, claims,
liens, notices of non-compliance or violation, investigations or
proceedings relating in any way to any applicable Environmental Law
or any permit, authorization, approval or license issued under any
such Environmental Law (hereafter "Claims"), including (a) Claims by
governmental or regulatory authorities for enforcement, cleanup,
removal, response, remedial or other actions or damages pursuant to
any applicable Environmental Laws, and (b) Claims by any third party
seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Regulated
Substances or arising from alleged injury or threat or injury to
health, safety or the environment.
(iv) "RELEASES" means releases, spills, leaks, pumps, pours,
emittances, discharges, injections, escapes, leaches, disposals or
dumps.
5.14. IMMOVABLE AND MOVABLE PROPERTY. The COMPANY has delivered to VESTCOM
an accurate list set forth on Schedule 5.14, of all immovable and real property,
all personal and movable property included (or that will be included) in
"depreciable plant, property and equipment" on the balance sheet of the COMPANY
and all other personal and movable property of the COMPANY with a value in
excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the
Balance Sheet Date. The COMPANY has delivered to VESTCOM true, complete and
correct copies of leases for immovables and real properties on which are
situated buildings, warehouses, workshops, garages and other structures used in
the operation of the businesses of the COMPANY and leases for equipment
(including computer equipment) in excess of $40,000 and including an indication
as to which assets are currently owned, or were formerly owned, by STOCKHOLDERS
or business or personal affiliates of the COMPANY or STOCKHOLDERS. Schedule 5.14
also contains the name and address of each tenant or subtenant to which the
COMPANY has let or sublet an owned or leased
-35-
43
building or any part thereof, the date and the expiration date of each such
lease or sublease. All leases set forth on Schedule 5.14 are in full force and
effect and constitute valid and binding agreements on the COMPANY, and to the
best knowledge of the COMPANY, constitute valid and binding agreements on the
other parties thereto (and their successors thereto) in accordance with their
respective terms. Except as shown on Schedule 5.14, all of the trucks and other
material machinery and equipment of the COMPANY listed on Schedule 5.14 are in
good working order and condition, ordinary wear and tear excepted. All fixed
assets used by the COMPANY that are material to the operation of its businesses
are either owned by the COMPANY or leased under an agreement indicated on
Schedule 5.14. Except as set forth on Schedule 5.14 and except for liens
described in Section 7.3(vi), there are no Liens against the COMPANY'S immovable
or real and movable or personal properties.
(b) The COMPANY also has indicated on Schedule 5.14 a summary description
of all plans or projects involving the opening of new operations, expansion of
any existing operations or the acquisition of any immovables and real property
or existing business, with respect to which management of the COMPANY has made
any expenditure in the two-year period prior to the date of this Agreement in
excess of $10,000, or which if pursued by the COMPANY would require additional
expenditures of capital in excess of $10,000.
5.15. SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. The
COMPANY has delivered to VESTCOM an accurate list, which is set forth on
Schedule 5.15, of (i) all significant customers (i.e. those customers and
persons or entities affiliated with those customers, representing 5% or more of
the COMPANY'S revenues for the 12 months ended on the Balance Sheet Date, or who
have paid to the COMPANY $250,000 or more over any four consecutive fiscal
quarters in the three years ended on the Balance Sheet Date and (ii) all
material contracts, commitments and similar agreements to which the COMPANY is a
party or by which it or any of its properties are bound, including, but not
limited to, contracts with significant customers, joint venture or partnership
agreements, contracts with any labor organizations, loan agreements, indemnity
or guaranty
-36-
44
agreements, hypothecs, bonds, mortgages, options to purchase land, liens,
pledges or other security agreements, contracts restricting the COMPANY from
doing business in any areas or in any way limiting competition, contracts which
call for aggregate payments by the COMPANY in excess of $100,000 and which are
not terminable without cost or liability on notice of 45 days or less, contracts
requiring the COMPANY to perform services for others over a period in excess of
90 days from the date of such contract and all commitments to enter into any
such contracts, leases or obligations ("MATERIAL CONTRACTS") (a) as of the
Balance Sheet Date and (b) entered into since the Balance Sheet Date, and in
each case has delivered true, complete and correct copies of such agreements to
VESTCOM. Except to the extent set forth on Schedule 5.15, (i) none of the
COMPANY'S significant customers has canceled or substantially reduced or, to the
knowledge of the COMPANY, are currently attempting or threatening to cancel or
substantially reduce utilization of the services provided by the COMPANY and
(ii) the COMPANY has complied with all material commitments and obligations
pertaining to any Material Contract, and is not in default under any Material
Contract and agreement and no notice of default has been received.
5.16. TITLE TO IMMOVABLE PROPERTY. The COMPANY is the sole and
unconditional owner of, and has a good and marketable title to, all of its
immovables and real property described in Schedule 5.16, free and clear of any
and all Liens other than Permitted Encumbrances. Schedule 5.14 lists all such
immovables and real property, and Schedule 5.16 contains, without limitation,
true, complete and correct copies of all title reports and title insurance
policies received or owned by the COMPANY.
5.17. INSURANCE. The COMPANY has delivered to VESTCOM an accurate list set
forth on Schedule 5.17, as of the Balance Sheet Date of all insurance policies
carried by the COMPANY and has delivered to VESTCOM an accurate list (attached
to Schedule 5.17) of all insurance claims received for the past three (3) policy
years. Also attached to Schedule 5.17 are true, complete and correct copies of
all policies currently in effect. Such insurance policies evidence all of the
insurance that the COMPANY is required to carry pursuant to all of its contracts
and other agreements and
-37-
45
pursuant to applicable law. Such insurance policies are currently in full force
and effect and shall remain in full force and effect through the Consummation
Date. No insurance carried by the COMPANY has ever been canceled and the COMPANY
has never been denied coverage.
5.18. COMPENSATION; EMPLOYMENT AGREEMENTS; NO COLLECTIVE BARGAINING
AGREEMENT.
(a) The COMPANY has delivered to VESTCOM an accurate list set forth on
Schedule 5.18, showing all officers, directors and employees of the COMPANY,
listing their salary, seniority, age, position and length of service, as well as
all employment agreements or other written agreements or arrangements including,
without limitation, any confidentiality, non-competition, severance, termination
or golden parachute agreements with such officers, directors and key employees
and the rate of compensation (and the portions thereof attributable to salary,
bonus and other compensation, respectively) of each of such persons as of (i)
the Balance Sheet Date and (ii) the date hereof. The COMPANY has provided to
VESTCOM true, complete and correct copies of any employment agreements,
confidentiality agreements, non-competition agreements, severance, termination
or golden parachute agreements or other written agreements or arrangements for
persons listed on Schedule 5.18. Since the Balance Sheet Date there have been no
increases in the compensation payable or any special bonuses to any officer,
director or key employee, except as listed on Schedule 5.18.
(b) Except as set forth in Schedule 5.18, the COMPANY has not been the
subject of any election in respect of union representation of employees and are
not bound by or subject to (and none of its respective assets or properties is
bound by or subject to) any arrangement with any labor union. Except as set
forth on Schedule 5.18, no employees of the COMPANY are represented by any labor
union or covered by any collective bargaining agreement and no campaign to
establish such representation has ever occurred or is in progress. There is no
pending or, to the COMPANY's knowledge, threatened labor dispute involving the
COMPANY and any group of its employees, no pending grievances or arbitration
proceedings nor has the COMPANY experienced any labor
-38-
46
interruptions over the past three years and the COMPANY considers its
relationship with employees to be good.
(c) Except as set forth on Schedule 5.18, there are no written employment
contracts with any employees, nor any employee manuals which in any way promise
continued employment, nor any other oral or written guarantees of continued
employment.
5.19. EMPLOYEE PLANS.
(a) Schedule 5.19 lists all the employee benefit, health, welfare,
supplemental unemployment benefit, bonus, severance, pension, profit
sharing, deferred compensation, stock compensation, stock purchase,
retirement, hospitalization insurance, medical, dental, legal,
disability and similar plans or arrangements or practices relating
to the employees or former employees of the COMPANY which are
currently maintained or were maintained at any time in the last four
years (the "CANADIAN PLANS").
(b) All of the Canadian Plans are and have been established,
registered, qualified, invested and administered, in all respects,
in accordance with all laws, regulations, orders or other
legislative, administrative or judicial promulgations applicable to
the Canadian Plans ("APPLICABLE EMPLOYEE BENEFIT LAWS"). No fact or
circumstance exists that could adversely affect the tax-exempt
status of any Canadian Plan.
(c) All obligations regarding the Canadian Plans have been
satisfied, there are no outstanding defaults or violations by any
party to any Canadian Plan and no taxes, penalties or fees are owing
or exigible under any of the Canadian Plans.
(d) The COMPANY may unilaterally amend or terminate, in whole or in
part, each Canadian Plan and take contribution holidays under or
withdraw surplus from each Canadian Plan, subject only to approvals
required by Applicable Employee Benefit Laws.
-39-
47
(e) No Canadian Plan, nor any related trust or other funding medium
thereunder, is, to the knowledge of the COMPANY, subject to any
pending investigation, examination or other proceeding, action or
claim initiated by any governmental agency or instrumentality, or by
any other party (other than routine claims for benefits), and there
exists no state of facts which after notice or lapse of time or both
could reasonably be expected to give rise to any such investigation,
examination or other proceeding, action or claim or to affect the
registration of any Canadian Plan required to be registered.
(f) All contributions or premiums required to be made by the COMPANY
under the terms of each Canadian Plan or by Applicable Employee
Benefit Laws have been made in a timely fashion in accordance with
Applicable Employee Benefit Laws and the terms of the Canadian
Plans, and the COMPANY does not have any liability (other than
liabilities accruing after the Closing Date) with respect to any of
the Canadian Plans. Contributions or premiums will be paid by the
COMPANY on an accrual basis for the period up to the Closing Date
even though not otherwise required to be made until a later date.
(g) No amendments have been made to any Canadian Plan since June 30,
1993, no improvements to any Canadian Plan have been promised and no
amendments or improvements to any Canadian Plan will be made or
promised prior to the Closing Date.
(h) There have been no improper withdrawals, applications or
transfers of assets from any Canadian Plan or the trusts or other
funding media relating thereto, and neither the COMPANY, nor any of
its agents, has been in breach of any fiduciary obligation with
respect to the administration of the Canadian Plans or the trusts of
other funding media relating thereto.
-40-
48
(i) Subject to approvals under Applicable Employee Benefit Laws, the
COMPANY may merge or consolidate any Canadian Plan or the assets
transferred from any Canadian Plan with any other arrangement, plan
or fund.
(j) The COMPANY has furnished to VESTCOM and NEWCO true, correct and
complete copies of all the Canadian Plans, attached in Schedule
5.19, as amended as of the date hereof together with all related
documentation including, without limitation, funding agreements,
actuarial reports, funding and financial information returns and
statements, all professional opinions (whether or not internally
prepared) with respect to each Canadian Plan, all material internal
memoranda concerning the Canadian Plans, copies of material
correspondence with all regulatory authorities with respect to each
Canadian Plan and plan summaries, booklets and personnel manuals. No
material changes have occurred to the Canadian Plans or are expected
to occur which would affect the actuarial reports or financial
statements required to be provided to VESTCOM and NEWCO pursuant to
this provision.
(k) Each Canadian Plan which is a funded plan is fully funded as of
the Closing Date on both a going concern and a solvency basis
pursuant to the actuarial assumptions and methodology utilized in
the most recent actuarial valuation therefor.
(l) None of the Canadian Plans enjoys any special tax status under
Applicable Employee Benefit Laws, nor have any advance tax rulings
been sought or received in respect of the Canadian Plans.
(m) All employee data necessary to administer each Canadian Plan has
been provided by the COMPANY to VESTCOM and NEWCO, is listed in
Schedule 5.19 and is true and correct as of the date of this
Agreement.
(n) No insurance policy or any other contract or agreement affecting
any Canadian Plan requires or permits a retroactive increase in
contributions, premiums or payments due thereunder. The level of
insurance reserves under each insured Canadian Plan is reasonable
and sufficient to provide for all incurred but unreported claims.
-41-
49
(o) Except as disclosed in Schedule 5.19, none of the Canadian Plans
provides benefits to retired employees or to the beneficiaries or
dependents of retires employees.
5.20. NOTIFICATION MATTERS. Each STOCKHOLDER, together with all entities
that he or she "controls" and that are "controlled" by him or her have less than
$10 million in total assets as of the last regularly prepared balance sheet
which consolidated him or her and all of such entities. Accordingly, to the best
of the COMPANY's and the STOCKHOLDER's knowledge, no filing or approval is
required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR ACT") in order to consummate the transactions contemplated by
this Agreement.
For purposes of this Section 5.20 and Section 6.16 only, "control"
means: (i) owning 50% or more of the stock eligible to vote for directors, or
(ii) in the case of an entity that does not have stock that votes to elect
directors, having the right to (A) receive 50% or more of the profits, (B) 50%
or more of the assets upon liquidation, or (C) designate 50% or more of the
directors or persons exercising similar functions.
5.21. CONFORMITY WITH LAW; LITIGATION. (a) Except to the extent set forth
on Schedule 5.21, the COMPANY is not in violation of any law or regulation or
any order of any court or federal, provincial, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over any of them which would have a Material Adverse Effect.
The COMPANY has conducted and is conducting its business in compliance with the
requirements, standards and conditions set forth in applicable federal,
provincial, state and local statutes, ordinances, orders, approvals, variances,
rules and regulations and is not in violation of any of the foregoing which
would have a Material Adverse Effect.
(b) Except to the extent set forth in Schedule 5.10 or Schedule 5.21, the
COMPANY is not a party to any litigation and there are no claims, actions, suits
or proceedings, pending or, to the knowledge of the COMPANY, threatened, against
or affecting the COMPANY, at law or in equity, or before or by any federal,
provincial, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over any of them
which would have a
-42-
50
Material Adverse Effect, and no notice of any such claim, action, suit or
proceeding, whether pending or threatened, has been received. The COMPANY is not
subject to any existing judgments which would have a Material Adverse Effect, or
which could adversely affect the COMPANY'S or the STOCKHOLDERS' ability to
effectuate the transactions contemplated hereby; nor has the COMPANY received
any written inquiry from any agency of the federal, provincial or any state or
local government about the transactions contemplated herein, or about any
violation or possible violation of any law, regulation or ordinance affecting
its business.
5.22. TAXES. Except as set forth in Schedule 5.22,
(a) All Returns required to have been filed by or with respect
to the COMPANY and any affiliated, combined, consolidated, unitary or similar
group of which the COMPANY is or was a member (a "RELEVANT GROUP") with any
Taxing Authority have been duly filed, and each such Return correctly and
completely reflects the income, franchise or other Tax liability and all other
information required to be reported thereon. All Taxes (whether or not shown on
any Return) owed by the COMPANY and any member of a Relevant Group
(collectively, the "ACQUIRED PARTIES") have been paid if due, or provision has
been made for the payment thereof, if not yet due. The provisions for Taxes due
by the COMPANY and its Subsidiaries (as opposed to any reserve for deferred
Taxes established to reflect timing differences between book and Tax income) in
the COMPANY Financial Statements are sufficient for all unpaid Taxes, being
current Taxes, not yet due and payable, of such Acquired Party. No Acquired
Party is a party to any current agreement extending the time within which to
file any Return. No claim has ever been made by any Taxing Authority in a
jurisdiction in which an Acquired Party does not file Returns that it is or may
be subject to taxation by that jurisdiction. No Acquired Party has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to any Tax assessment or deficiency. No Acquired Party has filed
any objection which remains outstanding with respect to any assessment or
reassessment of Taxes.
(b) Each Acquired Party has withheld and paid all Taxes required to
have been adequately and properly withheld and paid in connection with amounts
paid or owing to any employee,
-43-
51
creditor, independent contractor or other third party. No Acquired Party expects
any Taxing Authority to assess any additional Taxes against or in respect of it
for any past period except as may have been accrued and reflected as a reserve
in the COMPANY Financial Statements. There is no dispute or claim concerning any
Tax liability of any Acquired Party either (i) claimed or raised by any Taxing
Authority or (ii) otherwise known to any Acquired Party. No issues have been
raised in any examination by any Taxing Authority with respect to any Acquired
Party which, by application of similar principles, reasonably could be expected
to result in a proposed deficiency for any other period not so examined.
Schedule 5.22 attached hereto lists all federal, state, local and foreign income
Tax Returns filed by or with respect to any Acquired Party for all taxable
periods ended on or after January 1, 1992, indicates those Returns, if any, that
have been audited, and indicates those Returns that currently are the subject of
audit. Each Acquired Party has delivered to NEWCO complete and correct copies of
all federal, state, local and foreign income Tax Returns filed by, and all Tax
examination reports and statements of deficiencies assessed against or agreed to
by, such Acquired Party since January 1, 1992. No Acquired Party has received
any refund of Taxes to which it is not entitled.
(c) No Acquired Party is a party to any Tax allocation or sharing
agreement.
(d) No Acquired Party has received any written ruling of a Taxing
Authority related to Taxes or entered into any written and legally binding
agreement with a Taxing Authority relating to Taxes.
(e) COS is a registrant within the meaning of Part IX of the Excise
Tax Act (Canada) and Chapter VIII of An Act Respecting the Quebec Sales Tax and
its registration numbers are as follows:
Federal: 101166163 Rp RC RT
Quebec: 0000000000 TQ0001, RS0013-33-4777-9
(f) For purposes of this Agreement, the following definitions shall
apply:
"RETURNS" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
-44-
52
"TAX" or "TAXES" means all United States or Canadian federal,
provincial, state, local or foreign net or gross income, gross receipts, net
proceeds, sales, use, ad valorem, value added, franchise, bank shares,
withholding, payroll, employment, excise, property, deed, stamp, alternative or
add-on minimum, environmental or other taxes, assessments, duties, fees, levies
or other governmental charges of any nature whatever, whether disputed or not,
together with any interest, penalties, additions to tax or additional amounts
with respect thereto.
"TAXING AUTHORITY" means any governmental agency, board, bureau,
body, department or authority of any United States or Canadian federal,
provincial, state or local jurisdiction or any foreign jurisdiction, having or
purporting to exercise jurisdiction with respect to any Tax.
5.23. NO VIOLATIONS. Neither the COMPANY nor, to the knowledge of the
COMPANY, any other party thereto is (i) in violation of any Charter Document or
(ii) in default under any Material Contract or material lease, instrument,
agreement, license, or permit to which it is a party or by which its properties
are bound (collectively, the "MATERIAL DOCUMENTS"); and, except as set forth in
the Schedules and documents attached to this Agreement, (a) the rights and
benefits of the COMPANY under the Material Documents will not be materially and
adversely affected by the transactions contemplated hereby and (b) the execution
of this Agreement and the performance of the obligations hereunder and the
consummation of the transactions contemplated hereby will not result in any
material violation or breach or constitute a material default under, any of the
terms or provisions of the Material Documents or the Charter Documents. Except
as set forth on Schedule 5.23, none of the Material Documents requires notice
to, or the consent or approval of, any governmental agency or other third party
to any of the transactions contemplated hereby to remain in full force and
effect or give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit.
5.24. GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.24, the
COMPANY is not now a party to any governmental contracts subject to unilateral
price re-determination or renegotiation by the party other than the COMPANY.
-45-
53
5.25. ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set
forth on Schedule 5.25 there has not been with respect to the COMPANY:
(i) any event or circumstance (either singly or in the aggregate)
which would constitute a Material Adverse Effect;
(ii) any change in its authorized capital, or in its securities
outstanding, or any change in its ownership interests or any grant of any
options, warrants, calls, conversion rights or commitments;
(iii) any declaration or payment of any dividend or distribution in
respect of its capital stock or any direct or indirect redemption,
purchase or other acquisition of any of its capital stock;
(iv) any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by it to any of its
respective officers, directors, stockholders, employees, consultants or
agents, except for ordinary and customary bonuses and salary increases for
employees in accordance with past practice;
(v) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character that would have a Material
Adverse Effect;
(vi) any distribution, sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of any of its respective
businesses to any person, including, without limitation, the STOCKHOLDERS
and their affiliates;
(vii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to it, including without limitation any
indebtedness or obligation of any STOCKHOLDERS or any affiliate thereof,
provided that it may negotiate and adjust bills in the course of good
faith disputes with customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be deemed to be
included in Schedule 5.10 unless specifically listed thereon;
-46-
54
(viii) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of its assets, property
or rights or requiring consent of any party to the transfer and assignment
of any such assets, property or rights;
(ix) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of business;
(x) any waiver of any of its material rights or claims;
(xi) any cancellation or termination of a Material Contract;
(xii) any other distribution of property or assets by the Company
outside the ordinary course of business; or
(xiii) any transaction by it outside the ordinary course of its
businesses.
5.26. DEPOSIT ACCOUNTS, POWERS OF ATTORNEY. The COMPANY has delivered
to VESTCOM an accurate list set forth on Schedule 5.26, as of the date of
this Agreement, of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have
access thereto.
Schedule 5.26 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the COMPANY and
description of the terms of such power.
5.27. VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by the COMPANY and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors and the
STOCKHOLDERS of the COMPANY and this Agreement has been duly and validly
authorized by all necessary corporate action and, assuming due authorization,
execution and delivery by VESTCOM and NEWCO, is a legal, valid and binding
obligation of the COMPANY, enforceable against the COMPANY in accordance with
its terms,
-47-
55
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors rights generally or the availability of equitable remedies.
5.28. RELATIONS WITH GOVERNMENTS AND OTHER PAYMENTS. (a) The COMPANY has
not made, offered or agreed to offer anything of value to any governmental
official, political party or candidate for government office which would cause
the COMPANY to be in violation of the Foreign Corrupt Practices Act of 1977, as
amended or any law of similar effect.
(b) The STOCKHOLDERS have no knowledge, and the STOCKHOLDERS have no
reason to believe, that any funds or assets of the COMPANY have been used for
illegal purposes; or there has been an accumulation or use of the COMPANY'S
funds without being properly accounted for in the respective books and records
of the COMPANY; or that any material payments by or on behalf of the COMPANY
have not been duly and properly recorded and accounted for in its books and
records; or that any false or artificial entries have been made in the books and
records of the COMPANY for any reason; or that any payment has been made by or
on behalf of the COMPANY with the understanding that any part of such payment is
to be used for any purpose other than that described in the documents supporting
such payment.
5.29. TRANSACTIONS WITH DIRECTORS, OFFICERS AND AFFILIATES. Except as
listed on Schedule 5.29 annexed hereto, there have been no transactions since
January 1, 1992 between the COMPANY and any of its directors, officers,
stockholders or affiliates or any of their Family Members (as defined below)
involving $60,000 or more; except for any transaction with such persons solely
in such capacities. Each transaction set forth on Schedule 5.29 has been on
reasonable commercial terms which could have been obtained at the time from bona
fide third parties. To the best knowledge of the COMPANY, since January 1, 1992,
none of the officers or directors of the COMPANY or any spouse or Family Member
(as defined below) of any of such persons, has been a director, officer or
consultant of, or owns directly or indirectly any interest in, any firm,
corporation, association or business enterprise which during such period has
been a significant supplier, customer or sales agent of the COMPANY or has
competed with or been engaged in any business of the kind being conducted by the
-48-
56
COMPANY except as disclosed on Schedule 5.29 annexed hereto. Except as disclosed
on Schedule 5.29, no Family Member (which includes all relatives and their
spouses in a relationship of first cousins or closer) of any STOCKHOLDER,
officer or director of the COMPANY is currently an employee or consultant
receiving payments from the COMPANY or otherwise on the payroll of the COMPANY
or has any material claim whatsoever against or owes any amount to the COMPANY,
except for claims in the ordinary course of business such as for accrued
vacation pay and accrued benefits under employee benefit plans.
5.30. PAID-UP CAPITAL. The paid-up capital for Tax purposes of each
Purchased Share and of each issued and outstanding share in the capital or a
Subsidiary is no less than their stated capital for corporate purposes.
5.31. LOCATION; PLACE OF BUSINESS. Other than (i) inventory in transit and
vehicles used in the transportation of such inventory and (ii) account
receivables, the COMPANY does not hold directly or indirectly any of its
immovables or real property or movable or personal property anywhere other than
at 0000 Xxxx, Xxxx xx Xxxxx Xxxxx, Xxxxxx, Xxxxxx.
All immovables or real property and tangible movable or personal
property having an acquisition cost (either per unit or in the aggregate for a
category of such property) of $10,000 or more owned by the COMPANY are located
at the locations set forth in Schedule 5.31.
The locations from or in which the COMPANY conducts and has, during
the preceding five (5) years, conducted its business are set out in Schedule
5.31 and, save as therein specified, the COMPANY has not, during the said five
(5) years, conducted any business from or in any other location.
5.32. NO BROKER. Except as set out in Schedule 5.32, none of the COMPANY,
or any of their respective shareholders, directors, officers, employers or
agents, has employed or incurred any liability to any broker, finder or agent
for any brokerage fee, finder's fees, commissions or other amount with respect
to this Agreement or any transactions contemplated hereby.
-49-
57
5.33. STAND ALONE. No part of the business of LIRPACO INC. is conducted
through any person or entity other than COS and none of LIRPACO INC. or the
Subsidiaries (other than COS) conduct or have ever conducted or carried on any
activity.
5.34. ASSETS AND LIABILITIES. None of LIRPACO INC. or its Subsidiaries
(other than COS) have any material assets or liabilities whatsoever except, in
the case of LIRPACO INC., the shares in the capital of COS.
5.35. DISCLOSURE. (a) This Agreement, the Schedules and Annexes hereto,
and the certificates and other documents furnished by the COMPANY and the
STOCKHOLDERS to VESTCOM pursuant hereto and for inclusion in the Registration
Statement (which, for purposes of this Agreement, shall include the completed
Directors and Officers Questionnaires) taken as a whole, do not, and as to any
representation or warranty made to the knowledge of the COMPANY or the
STOCKHOLDERS, such representations and warranties, to the COMPANY'S knowledge,
do not, as of their respective dates contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements contained
herein and therein not misleading.
(b) The COMPANY and the STOCKHOLDERS acknowledge (i) that there
exists no firm commitment, binding agreement, or promise or other assurance of
any kind, whether express or implied, oral or written, that the Registration
Statement will become effective or that the IPO pursuant thereto will occur at a
particular price or within a particular range of prices or occur at all; (ii)
that neither VESTCOM or any of its officers, directors, agents or
representatives nor any prospective Underwriters in the IPO shall have any
liability to the COMPANY, the STOCKHOLDERS or any other person affiliated or
associated with the COMPANY for any failure of the Registration Statement to
become effective, the IPO to occur at a particular price or within a particular
range of prices or to occur at all; and (iii) that the decision of STOCKHOLDERS
to enter into this Agreement, has been or will be made independent of, and
without reliance upon, any statements, opinions or other communications of, or
due diligence investigations which have been or will be made or performed by any
prospective Underwriter, relative to VESTCOM or the prospective IPO. Neither
Underwriters nor
-50-
58
VESTCOM shall have any obligation to the STOCKHOLDERS with respect to any
disclosure contained in the Registration Statement and no STOCKHOLDER may assert
any claim against the Underwriters or VESTCOM based on the Registration
Statement.
(B) REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.
Each STOCKHOLDER jointly represents and warrants that the
representations and warranties set forth below are true as of the date of this
Agreement and, subject to Section 7.8 hereof, shall be true at the time of
Closing and on the Consummation Date.
5.36. AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right,
power and authority to enter into this Agreement and this Agreement has been
duly executed and delivered and is the legal and binding obligation of such
STOCKHOLDER, enforceable against him or her in accordance with its terms, except
as may be limited by applicable bankruptcy, insolvency or similar laws,
affecting creditors' rights generally or the availability of equitable remedies.
Such STOCKHOLDER owns beneficially and of record all of the shares of the
COMPANY Stock identified on Annex I as being owned by such STOCKHOLDER, and,
except as set forth on Schedule 5.36 hereof, such COMPANY Stock is owned free
and clear of all Liens.
5.37. PRE-EMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives
any pre-emptive or other right to acquire shares of COMPANY Stock or VESTCOM
Stock, that such STOCKHOLDER has or may have had other than rights of any
STOCKHOLDER to acquire VESTCOM Stock pursuant to (i) this Agreement or (ii) any
stock option hereinafter granted by VESTCOM.
5.38. RESIDENCE. Such STOCKHOLDER is not a "non resident of Canada" within
the meaning of the Income Tax Act (Canada).
5.39. NO BROKER. Such STOCKHOLDER or any of his respective employees or
agents has not employed or incurred any liability to any broker, finder or agent
for any brokerage fee, finder's fee, commissions or other amounts with respect
to this Agreement or any transaction contemplated hereby.
-51-
59
6. REPRESENTATIONS OF VESTCOM AND NEWCO.
VESTCOM and NEWCO solidarily (without benefit of division or discussion)
represent and warrant that all of the following representations and warranties
are true at the date of this Agreement and shall be true at the Closing Date and
the Consummation Date and that such representations and warranties shall survive
the Consummation Date until the Expiration Date except that (i) the
representations and warranties in Sections 6.2 and 6.4 shall survive until the
tenth (10th) anniversary of the Consummation Date, which shall be deemed to be
the Expiration Date for Sections 6.2 and 6.4 and (ii) solely for purposes of
Section 11.2 (iii) hereof, and solely to the extent that in connection with the
IPO the STOCKHOLDERS actually incur liability under the 1933 Act, the 1934 Act,
or any other federal or state securities laws, the representations and
warranties set forth herein shall survive until the expiration of any applicable
statute of limitations period.
6.1. DUE ORGANIZATION. VESTCOM and NEWCO are each duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and are each duly authorized and qualified under all applicable
laws, regulations, and ordinances of public authorities to carry on their
respective businesses in the places and in the manner as now conducted except
for where the failure to be so authorized or qualified would not have a material
adverse effect on the business, operations, affairs, properties, assets or
condition (financial or otherwise), of VESTCOM and on VESTCOM'S Subsidiaries (as
defined in Section 6.8 herein), taken as a whole (a "VESTCOM MATERIAL ADVERSE
EFFECT"). Copies of the Certificate of Incorporation (as of the date hereof,
certified by a Secretary or an Assistant Secretary of each of VESTCOM and NEWCO
and the By-laws (certified by a Secretary or an Assistant Secretary of each of
VESTCOM and NEWCO), of VESTCOM and NEWCO are attached hereto as Schedule 6.1.
6.2. VESTCOM STOCK. The Dividend Access Shares and the Multiple Voting
Share to be delivered to the STOCKHOLDERS at the Consummation Date shall
constitute valid and legally issued shares of NEWCO and VESTCOM, respectively,
fully paid and non-assessable, and except as set forth in this Agreement, will
be owned free and clear of all Liens created by any person other than the
-52-
60
STOCKHOLDERS and other than the COMPANY, COS INFORMATION INC. and each of their
subsidiaries prior to the Consummation Date. The shares of the VESTCOM Stock,
the Dividend Access Shares and the Multiple Voting Share to be issued to the
STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933
Act.
6.3. VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by VESTCOM and NEWCO and the performance by each of VESTCOM and NEWCO of the
transactions contemplated herein have been duly and validly authorized by the
respective Boards of Directors of VESTCOM and NEWCO, and this Agreement has been
duly and validly authorized by all necessary corporate action, duly executed and
delivered and is the legal, valid and binding obligation of each of VESTCOM and
NEWCO, enforceable against each of VESTCOM and NEWCO in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency or similar
laws, affecting creditors' rights generally or the availability of equitable
remedies.
6.4. AUTHORIZATION. The representatives of VESTCOM and NEWCO executing
this Agreement have the corporate authority to enter into and bind VESTCOM and
NEWCO to the terms of this Agreement. VESTCOM and NEWCO have the corporate
right, power and authority to enter into this Agreement and the Acquisition.
6.5. NO CONFLICTS. The execution, delivery and performance of this
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof will not:
(i) conflict with or result in a breach or violation of the
Certificate of Incorporation or By-laws of either VESTCOM or NEWCO;
(ii) materially conflict with, or result in a material default (or
would constitute a default but for any requirement of notice or lapse of
time or both) (A) under any document, agreement or other instrument to
which either VESTCOM or NEWCO is a party, or result in the creation or
imposition of any lien, charge or encumbrance on any of VESTCOM's or
-53-
61
NEWCO's properties or (B) pursuant to any judgment, order or decree to
which VESTCOM or NEWCO is bound or any of their respective property is
subject; or
(iii) result in termination or any impairment of any material
permit, license, franchise, contractual right or other authorization of
VESTCOM or NEWCO.
6.6. CAPITALIZATION OF VESTCOM AND OWNERSHIP OF VESTCOM STOCK. The
authorized and outstanding capital stock of VESTCOM and NEWCO is, at the date
hereof, and will be (in the case of NEWCO only) at the Closing Date as set forth
in Sections 2.8(ii) and 2.6, respectively. All of the issued and outstanding
shares of VESTCOM Stock are owned beneficially and of record by the persons set
forth on Annex VII. All issued and outstanding shares of VESTCOM Stock are duly
authorized, validly issued, fully paid and non-assessable. There are no
obligations of VESTCOM to repurchase, redeem or otherwise acquire any shares of
VESTCOM Stock. Except as described in the Registration Statement there are no
options, warrants, equity securities, calls, rights, commitments or agreements
of any character to which VESTCOM or any of its subsidiaries are a party or by
which they are bound obligating VESTCOM or any of its subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock of VESTCOM or any of its subsidiaries or obligating VESTCOM or any
of its subsidiaries to grant, extend, accelerate the vesting of or enter into
any such option, warrant, equity security, call, right, commitment or agreement.
To the best knowledge of VESTCOM after diligent inquiry, as of the Consummation
Date, none of the stockholders set forth on Annex VII will be a party to or
subject to any voting trust, proxy or other agreement or understanding with
respect to the shares of capital stock of VESTCOM owned by such stockholder. All
of the shares of VESTCOM Stock issued to persons set forth on Annex VII and,
based on the representations of STOCKHOLDERS contained in this Agreement and in
the documents delivered to VESTCOM pursuant hereto, to STOCKHOLDERS pursuant to
this Agreement, were or will be offered, issued, sold and delivered by VESTCOM
in compliance with all applicable Canadian and U.S. provincial, state and
federal laws concerning the issuance of securities and none of such
-54-
62
shares were or will be issued in violation of the rights of any past or present
stockholder. On the Consummation Date the capitalization of VESTCOM will be as
set forth in the Registration Statement.
6.7. NO SIDE AGREEMENTS. Neither VESTCOM nor NEWCO has entered into any
agreement with any of the Founding Companies or any of the stockholders of the
Founding Companies other than the Other Agreements and the agreements
contemplated by each of the Other Agreements, including the employment
agreements referred to herein and therein, and the agreements referred to in
Section 6.9. VESTCOM has made available to the COMPANY copies of all agreements
entered into between (i) VESTCOM, NEWCO, or VESTCOM's Subsidiaries and their
affiliates and (ii) VESTCOM or NEWCO and the Founding Companies or any
stockholders of the Founding Companies. Furthermore, VESTCOM will make available
to the COMPANY copies of any of the foregoing agreements entered into between
the date hereof and the Consummation Date promptly after such agreements are
entered into.
6.8. SUBSIDIARIES. Except for NEWCO (as defined herein), and each other
corporation defined as 'NEWCO' in the Other Agreements with the Founding
Companies (collectively, "VESTCOM'S SUBSIDIARIES"), VESTCOM does not presently
own, of record or beneficially, or control, directly or indirectly, any capital
stock, securities convertible into capital stock or any other equity interest in
any corporation, association or business entity. VESTCOM is not, directly or
indirectly, a participant in any joint venture, partnership or other
non-corporate entity. NEWCO has no subsidiaries.
6.9. BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS; FINANCIAL INFORMATION.
Neither VESTCOM nor NEWCO has conducted any business since the date of its
inception, except in connection with this Agreement, the Other Agreements, the
initial capitalization of VESTCOM, including the borrowing of funds for working
capital and formation expenses and the IPO of VESTCOM Stock contemplated by
Section 8.5. Neither VESTCOM nor NEWCO owns any immovable and real property or
any material movable and personal property or is a party to any other material
agreement, except as listed on Schedule 6.9 and except that VESTCOM is a party
to the
-55-
63
Other Agreements and the agreements contemplated thereby, agreements entered
into to effectuate the transactions described above and to such agreements as
will be filed as Exhibits to the Registration Statement. VESTCOM was formed in
September 1996, and NEWCO was incorporated in February 1997. VESTCOM and NEWCO
have no material liabilities, accrued or contingent, other than those incurred
in connection with this Agreement, the Other Agreements, the initial
capitalization of VESTCOM and the contemplated IPO of VESTCOM Stock.
6.10. CONFORMITY WITH LAW. Neither VESTCOM nor NEWCO is in violation of
any law or regulation or any order of any court or federal, state, provincial,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over either of them which would have a
VESTCOM Material Adverse Effect. There are no claims, actions, suits or
proceedings, pending or, to the knowledge of VESTCOM or NEWCO, threatened,
against or affecting VESTCOM or NEWCO, at law or in equity, or before or by any
federal, provincial, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentally having jurisdiction over
either of them and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received.
6.11. NO VIOLATIONS. Neither VESTCOM nor NEWCO is (i) in violation of
their respective Certificates of Incorporation or By-laws, each as amended to
date (the "VESTCOM CHARTER DOCUMENTS") or (ii) in default, under any material
lease, instrument, agreement, license, permit to which it is a party or by which
its properties are bound (the "VESTCOM MATERIAL DOCUMENTS"); and, except as set
forth in the schedules and in the Registration Statement, (a) the rights and
benefits of VESTCOM (including VESTCOM's Subsidiaries) under the VESTCOM
Material Documents will not be materially and adversely affected by the
transactions contemplated hereby and (b) the execution of this Agreement and the
performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any material violation or
breach or constitute a default under, any of the terms or provisions of the
VESTCOM Material Documents or the VESTCOM Charter Documents. Except as set forth
on Schedule 6.11 none of the VESTCOM
-56-
64
Material Documents requires notice to, or the consent or approval of, any
governmental agency or other third party to any of the transactions contemplated
hereby to remain in full force and effect or give rise to any right in
termination, cancellation or acceleration or loss of any right or benefit. The
minute books of VESTCOM and each of VESTCOM's subsidiaries as heretofore made
available to the COMPANY are true and correct.
6.12. NEWCO STOCK; INCORPORATION OF NEWCO. (a) Prior to the Acquisition,
VESTCOM will own all of the outstanding shares in the share capital of NEWCO. At
all times prior to the Acquisition, no person other than VESTCOM has owned, or
will own, any of the outstanding shares in the share capital of NEWCO.
(b) NEWCO was incorporated by VESTCOM solely for the purpose of
engaging in the transaction contemplated by this Agreement. As of the date of
this Agreement and the Consummation Date, except for obligations or liabilities
incurred in connection with its incorporation or organization and the
transactions contemplated thereby and in this Agreement, NEWCO has not and will
not have incurred, directly or indirectly through any subsidiary, any
obligations or liabilities or engaged in any business or activities of any type
or kind whatsoever or entered into any agreement or arrangements with any person
or entity. There were not, as of the date of this Agreement, and there will not
be at the Consummation Date, any outstanding or authorized options, warrants,
calls, rights, commitments or any other agreements of any character which NEWCO
is a party to, or may be bound by, requiring it to issue, transfer, sell,
purchase, redeem or acquire any shares of its capital stock or any securities or
rights convertible into, exchangeable for, evidencing the right to subscribe for
or acquire, any shares of its capital stock. Prior to the Consummation Date,
NEWCO did not own any asset other than an amount of cash necessary to
incorporate NEWCO and to pay the expenses of the Acquisition attributable to
NEWCO.
6.13. EXPENSES; INTERCORPORATE INDEBTEDNESS. VESTCOM and NEWCO will each
pay their respective expenses, if any, incurred in connection with the
Acquisition.
-57-
65
6.14. NO BROKER. None of VESTCOM or NEWCO, or any of their respective
shareholders, directors, officers, employers or agents, has employed or incurred
any liability to any broker, finder or agent for any brokerage fee, finder's
fees, commissions or other amount with respect to this Agreement or any
transactions contemplated hereby except for the payment of commissions to the
Underwriters pursuant to the underwriting agreement in respect of the IPO, which
commissions shall be borne and paid exclusively by VESTCOM.
6.15. TAXES. NEWCO is a newly formed entity which has no tax or
operational history. Except as set forth on Schedule 6.15:
(a) All Returns required to have been filed by or with respect
to VESTCOM and any affiliated, combined, consolidated, unitary
or similar group of which VESTCOM is or was a member (a
"VESTCOM RELEVANT GROUP") with any Taxing Authority have been
duly filed, and each such Return correctly and completely
reflects the Tax liability and all other information required
to be reported thereon. All Taxes (whether or not shown on any
Return) owed by the VESTCOM Relevant Group have been paid. The
provisions for Taxes due by VESTCOM and any subsidiaries (as
opposed to any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) in
VESTCOM's financial statements are sufficient for all unpaid
Taxes, being current taxes not yet due and payable, of the
VESTCOM Relevant Group. No corporation in the VESTCOM Relevant
Group is a party to any agreement extending the time within
which to file any Return. No claim has ever been made by any
Taxing Authority in a jurisdiction in which a corporation in
the VESTCOM Relevant Group does not file Returns that it is or
may be subject to taxation by that jurisdiction. No
corporation in the VESTCOM Relevant Group has waived any
statute of limitation in respect
-58-
66
of Taxes or agreed to any extension of time with respect to
any Tax assessment or deficiency.
(b) Each corporation in the VESTCOM Relevant Group has
withheld and paid all Taxes required to have been adequately
and properly withheld and paid in connection with amounts paid
or owing to any employee, creditor, independent contractor or
other third party. No corporation in the VESTCOM Relevant
Group expects any Taxing Authority to assess any additional
Taxes against or in respect of it for any past period except
as may have been accrued and reflected as a reserve in the
VESTCOM's financial statements. There is no dispute or claim
concerning any Tax liability of any corporation in the VESTCOM
Relevant Group either (i) claimed or raised by any Taxing
Authority, or (ii) otherwise known to any corporation in the
VESTCOM Relevant Group. No issues have been raised in any
examination by any Taxing Authority with respect to any
corporation in the VESTCOM Relevant Group which, by
application of similar principles, reasonably could be
expected to result in a proposed deficiency for any other
period not so examined. Schedule 6.15 attached hereto lists
all federal, state, local and foreign income Tax Returns filed
by or with respect to any corporation in the VESTCOM Relevant
Group for all taxable periods ended on or after January 1,
1992, indicates those Returns, if any, that have been audited,
and indicates those Returns that currently are the subject of
audit. Each corporation in the VESTCOM Relevant Group will
make available to the STOCKHOLDERS, at their request, complete
and correct copies of all federal, state, local and foreign
income Tax Returns filed by, and all Tax examination reports
and statements of deficiencies assessed against or agreed to
by, VESTCOM since January 1, 1992.
-59-
67
(c) No corporation in the VESTCOM Relevant Group has made any
payments, is obligated to make payments, or is a party to any
agreement that under certain circumstances could require it to
make any payments, that are not deductible under Section 280G
of the Code.
(d) No corporation in the VESTCOM Relevant Group is a party to
any Tax allocation or sharing agreement.
(e) None of the assets of any corporation in the VESTCOM
Relevant Group constitutes tax-exempt bond financed property
or tax-exempt use property, within the meaning of Section 168
of the Code. No corporation in the VESTCOM Relevant Group is a
party to any "safe harbor lease" that is subject to the
provisions of Section 168(f)(8) of the Internal Revenue Code
as in effect prior to the Tax Reform Act of 1986, or to any
"long-term contract" within the meaning of Section 460 of the
Code.
(f) No corporation in the VESTCOM Relevant Group is a
"consenting corporation" within the meaning of Section
341(f)(1) of the Code, or comparable provisions of any state
statutes, and none of the assets of any corporation in the
VESTCOM Relevant Group is subject to an election under Section
341(f) of the Code or comparable provisions of any state
statutes.
(g) No corporation in the VESTCOM Relevant Group is a party to
any joint venture, partnership or other arrangement that is
treated as a partnership for federal income Tax purposes.
(h) There are no accounting method changes or proposed or
threatened accounting method changes of any corporation in the
VESTCOM Relevant Group that could give rise to an adjustment
under Section 481 of the Code for periods after the
Consummation Date.
-60-
68
(i) No corporation in the VESTCOM Relevant Group has received
any written ruling of a Taxing Authority related to Taxes or
entered into any written and legally binding agreement with a
Taxing Authority relating to Taxes.
(j) Each corporation in the VESTCOM Relevant Group has
substantial authority for the treatment of, or has disclosed
(in accordance with Section 6662(d)(2)(B)(ii) of the Code) on
its federal income Tax Returns all positions taken therein
that could give rise to a substantial understatement of
federal income Tax within the meaning of Section 6662(d) of
the Code.
(k) No corporation in the VESTCOM Relevant Group has any
liability for Taxes of any person other than such corporation
in the VESTCOM Relevant Group (i) under Section 1.1502-6 of
the Treasury regulations (or any similar provisions of state,
local or foreign law), (ii) as a transferee or successor,
(iii) by contract, or (iv) otherwise.
(l) There currently are no limitations on the utilization of
the net operating losses, built-in losses, capital losses, tax
credits or other similar items of any corporation in the
VESTCOM Relevant Group (collectively, the "TAX LOSSES") under
(i) Section 382 of the Code, (ii) Section 383 of the Code,
(iii) Section 384 of the Code, (iv) Section 269 of the Code,
(v) Section 1.1502-15 and Section 1.1502-15A of the Treasury
regulations, (iv) Section 1.1502-21 and Section 1.1502-21A of
the Treasury regulations, or (vii) Sections 1.1502-91 through
1.1502-99 of the Treasury regulations, in each case as in
effect both prior to and following the Tax Reform Act of 1986,
except as may be applicable as a result of entering into this
Agreement or the consummation of the Acquisition.
(m) Neither VESTCOM nor NEWCO is an investment company as
defined in Section 351(e)(1) of the Code.
-61-
69
(n) Neither VESTCOM nor NEWCO is under the jurisdiction of a
court in a Title 11 or similar case within the meaning of
Section 351(e)(2) of the Code.
6.16. NOTIFICATION MATTERS. VESTCOM together with all entities that it
"controls" and that are "controlled" by it have less than $10 million in total
assets as of the last regularly prepared balance sheet which consolidates it and
all of such entities. Accordingly, to the best of its knowledge, no filing or
approval is required under the HSR Act in order to consummate the transactions
contemplated by this Agreement. For purposes of this Section 6.16 "control"
shall have the meaning set forth in Section 5.20.
7. COVENANTS PRIOR TO CLOSING.
7.1. ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this
Agreement and the Consummation Date, the COMPANY will afford to the officers and
authorized representatives of VESTCOM and the other Founding Companies access to
all of the COMPANY's (including COS and the COMPANY's other Subsidiaries) key
employees, sites, properties, books and records during regular business hours
and will furnish VESTCOM with such additional financial and operating data and
other information as to the business and properties of the COMPANY (including
the COMPANY'S Subsidiaries) as VESTCOM or the other Founding Companies may from
time to time reasonably request. The COMPANY will cooperate with VESTCOM and the
other Founding Companies, and VESTCOM's and the other Founding Companies'
representatives, auditors and counsel in the preparation of any documents or
other material which may be required in connection with any documents or
materials required by this Agreement. VESTCOM, NEWCO, the STOCKHOLDERS party
hereto and the COMPANY will treat all information obtained in connection with
the negotiation and performance of this Agreement or the due diligence
investigations conducted with respect to the other Founding Companies as
confidential in accordance with the provisions of Section 14 hereof. In
addition, VESTCOM will cause each of the Founding Companies other than the
COMPANY to enter into a provision identical to this Section 7.1 requiring each
such Founding Company to keep confidential any information obtained by such
Founding Company.
-62-
70
(b) Between the date of this Agreement and the Consummation Date, VESTCOM
will afford to the officers and authorized representatives of the COMPANY access
to all of VESTCOM's and NEWCO's sites, properties, books and records and will
furnish the COMPANY with such additional financial and operating data and other
information as to the business and properties of VESTCOM and NEWCO as the
COMPANY may from time to time reasonably request. VESTCOM and NEWCO will
cooperate with the COMPANY, its representatives, engineers, auditors and counsel
in the preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. The
COMPANY will cause all information obtained in connection with the negotiation
and performance of this Agreement to be treated as confidential in accordance
with the provisions of Section 14 hereof.
(c) If the COMPANY (including the COMPANY'S Subsidiaries) fails to timely
provide information reasonably necessary to the preparation or effectiveness of
the Registration Statement, as required by Section 7.1(a), 7.8, 7.9 or
otherwise, or if as a result of the due diligence conducted by VESTCOM pursuant
to Section 7.1(a), VESTCOM discovers any material facts or circumstances which
in VESTCOM's reasonable discretion have or could reasonably be expected to have
a materially adverse impact on the COMPANY (including the COMPANY'S
(Subsidiaries) or VESTCOM so as to make the consummation of the transactions on
the terms contemplated hereby and/or under the Registration Statement
impractical and if such failure is not cured within three (3) business days of
demand by VESTCOM, then VESTCOM shall have the right to determine not to include
the COMPANY in the transactions contemplated by this Agreement and the Other
Agreements with the other Founding Companies.
(d) If the audit of the COMPANY's financial records costs more than 110%
of the amount estimated by Xxxxxx Xxxxxxxx LLP in a letter dated January 13,
1997, the STOCKHOLDERS solidarily (without benefit of division or discussion)
will be responsible for, and will reimburse VESTCOM for, the amount of any such
costs in excess of 110% of the estimate.
-63-
71
7.2. CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Consummation Date, the COMPANY (including the COMPANY's
Subsidiaries) will, except as set forth on Schedule 7.2:
(i) carry on its respective businesses in substantially the same
manner as it has heretofore and not introduce any material new method of
management, operation or accounting;
(ii) maintain its respective properties and facilities, including
those held under leases, in as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform all of its respective obligations under agreements
relating to or affecting its respective assets, properties or rights;
(iv) keep in full force and effect present insurance policies or
other comparable insurance coverage;
(v) use reasonable commercial efforts to maintain and preserve its
business organization intact, retain its respective present employees and
maintain its respective relationships with suppliers, customers and others
having business relations with the COMPANY (including the COMPANY'S
Subsidiaries);
(vi) maintain compliance with all material permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities and maintain its
Proprietary Rights; and
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments over $10,000, without the
knowledge and consent of VESTCOM.
7.3. PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between
the date of this Agreement and the Consummation Date, the COMPANY (including the
COMPANY'S Subsidiaries) has not and, without the prior written consent of
VESTCOM, will not:
(i) make any change in its Certificate of Incorporation or By-laws;
-64-
72
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase,
redeem or otherwise acquire or retire for value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, except if it is in
the normal course of business (consistent with past practice) and involves
an amount not in excess of $10,000, including contracts to provide
services to customers;
(v) increase the compensation payable or to become payable to any
officer, director, STOCKHOLDER, employee or agent, or make any bonus or
management fee payment to any such person, except ordinary and customary
bonuses or salary increases to employees consistent with past practice or
create any new bonus plan or other benefit plan for the benefit of any
officer, director, STOCKHOLDER, employee or agent;
(vi) create, assume or permit to exist any Lien upon any assets or
properties whether now owned or hereafter acquired, except (1) liens set
forth on Schedule 5.14 hereto, or (2) liens for taxes either not yet due
or material men's, mechanics', workers', repairmen's, employees' or other
like liens arising in the ordinary course of business;
(vii) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(viii) negotiate for the acquisition of any business or the start-up
of any new business and will cause the STOCKHOLDERS not to acquire or
negotiate for the acquisition of any new business or start up any new
business;
(ix) merge, amalgamate or consolidate or agree to merge, amalgamate
or consolidate with or into any other corporation or business entity;
(x) waive any material rights or claims of the COMPANY, provided
that the COMPANY may negotiate and adjust bills in the course of good
faith disputes with customers
-65-
73
in a manner consistent with past practice, provided, further, that such
adjustments shall not be deemed to be included in Schedule 5.10 unless
specifically listed thereon;
(xi) breach or amend or terminate any Material Contract, or material
permit, license or other right of the COMPANY; or
(xii) enter into any other transaction outside the ordinary course
of its business or prohibited hereunder.
7.4. NO SHOP. The STOCKHOLDERS, the COMPANY, the COMPANY'S Subsidiaries
and any agent, officer, director or any representative of any of the foregoing
agree, that during the period commencing on the date of this Agreement and
ending with the earlier to occur of the Consummation Date or the termination of
this Agreement in accordance with its terms, the STOCKHOLDERS, the COMPANY, the
COMPANY'S Subsidiaries and any agent, officer, director or any representative of
any of the foregoing will negotiate exclusively with VESTCOM and NEWCO and will
not during such period, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than VESTCOM or the
Founding Companies relating to,
the sale or other transfer of shares of capital stock of the COMPANY, any
securities of the COMPANY convertible into capital stock of the COMPANY, any
acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the COMPANY or any option or right to acquire any of the
foregoing, or a merger, amalgamation, consolidation or business combination of
the COMPANY.
7.5. NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, if any, and
shall provide VESTCOM with proof that any required notice has been given.
-66-
74
7.6. NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and the COMPANY
shall give prompt notice to VESTCOM of (i) the occurrence or non-occurrence of
any event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the COMPANY or the STOCKHOLDERS contained herein
to be untrue or inaccurate in any material respect at or prior to the
Consummation Date and (ii) any material failure of any STOCKHOLDER or the
COMPANY to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by such person or entity hereunder. VESTCOM and NEWCO
shall give prompt notice to the COMPANY of (i) the occurrence or non-occurrence
of any event the occurrence or nonoccurrence of which would be likely to cause
any representation or warranty of VESTCOM or NEWCO contained herein to be untrue
or inaccurate in any material respect at or prior to the Closing and (ii) any
material failure of VESTCOM or NEWCO to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
delivery of any notice pursuant to this Section 7.6 shall not be deemed to (i)
modify the representations or warranties hereunder of the party delivering such
notice, which notification may only be made pursuant to Section 7.7, (ii) modify
the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
7.7. AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect
to the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Consummation Date to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules, provided that no amendment or supplement to a Schedule prepared by
the COMPANY that constitutes or reflects an event or occurrence that would have
a Material Adverse Effect, shall be effective unless VESTCOM affirmatively
consents to such amendment or supplement. For all purposes of this Agreement,
including without limitation for purposes of determining whether the conditions
set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto
shall be deemed to be the Schedules as
-67-
75
amended or supplemented pursuant to this Section 7.7. In the event that the
COMPANY amends or supplements a Schedule pursuant to this Section 7.7 and
VESTCOM does not consent to the effectiveness of such amendment or supplement,
this Agreement shall remain binding on the COMPANY and VESTCOM shall have
available to it all rights and remedies at law or in equity, including, but not
limited to (i) the right to terminate this Agreement and (ii) the right to seek
damages for breach of this Agreement. Notwithstanding the foregoing, if the
amendment or supplement to the Schedule is a result of an event which occurs
after the date of execution of this Agreement which has a Material Adverse
Effect and which is required to be disclosed on the Schedules hereto, such
amendment or supplement will give VESTCOM the right to terminate this Agreement,
but not the right to seek damages. If this Agreement is terminated pursuant to
the terms of this Section without any breach or default, no party shall have the
right to seek damages. VESTCOM shall not be liable to any other party to this
Agreement if this Agreement shall be terminated by VESTCOM pursuant to the
provisions of this Section 7.7.
7.8. COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY and
the STOCKHOLDERS shall furnish or cause to be furnished to VESTCOM and the
Underwriters all of the information concerning the COMPANY or the STOCKHOLDERS
reasonably requested by VESTCOM and the Underwriters, and will cooperate with
VESTCOM and the Underwriters in the preparation of the Registration Statement
and the prospectus included therein including audited financial statements,
prepared in accordance with generally accepted accounting principles. The
COMPANY and the STOCKHOLDERS agree promptly to advise VESTCOM if at any time
during the period in which a prospectus relating to the offering is required to
be delivered under the 1933 Act, any information contained in the prospectus
concerning the COMPANY or the STOCKHOLDERS becomes incorrect or incomplete in
any material respect, and to provide the information needed to correct such
inaccuracy.
7.9. EXAMINATION OF FINAL FINANCIAL STATEMENTS. The COMPANY shall provide
prior to the Consummation Date, and VESTCOM shall have had sufficient time to
review the unaudited
-68-
76
balance sheet of the COMPANY as of March 31, 1997 or the most recent date
available, and any subsequent fiscal quarters ending prior to the Closing Date,
and the unaudited statement of income, cash flow and retained earnings of the
COMPANY for the fiscal quarter ended March 31, 1997, if available, or interim
monthly statements and any subsequent fiscal quarters ending prior to the
Closing Date, disclosing no material adverse change in the financial condition
of the COMPANY or the results of its operations from the financial statements as
of the Balance Sheet Date. Such financial statements, which shall be deemed to
be COMPANY Financial Statements (as described in Section 5.9) and in respect of
which the COMPANY and the STOCKHOLDERS (except as provided in Schedule 7.9)
shall be deemed to make the representations and warranties set forth in Section
5.9, shall be prepared in accordance with Canadian generally accepted accounting
principals applied on a consistent basis throughout the periods indicated
(except as noted therein).
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS AND THE COMPANY.
The obligations of the STOCKHOLDERS and the COMPANY with respect to
actions to be taken on the Closing Date are subject to the satisfaction or
waiver on or prior to the Closing Date of all of the following conditions. As of
the Closing Date, all conditions not satisfied shall be deemed to have been
waived by the COMPANY and the STOCKHOLDERS unless such parties have notified
VESTCOM in writing to the contrary, except that no such waiver shall be deemed
to affect the survival of the representations and warranties of VESTCOM and
NEWCO contained in Section 6 hereof.
8.1. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of VESTCOM and NEWCO contained in Section 6 shall
be true and correct in all material respects as of the Closing Date as though
such representations and warranties had been made as of that time (except with
respect to any such representations and warranties which relate specifically to
an earlier date, which shall be true and correct in all material respects as of
such earlier date), and a certificate to the foregoing effect dated the Closing
Date and signed by the President or any Vice President of VESTCOM shall have
been delivered to the STOCKHOLDERS, which certificate shall be effective through
the Consummation Date (subject to the provisions of Sections 7.6 and 7.7) and
-69-
77
each and all of the terms, covenants and conditions of this Agreement to be
complied with and performed by VESTCOM and NEWCO on or before the Closing Date
shall have been duly complied with and performed in all material respects.
8.2. SATISFACTION. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be satisfactory to the COMPANY and its counsel. The
STOCKHOLDERS and the COMPANY shall be satisfied that the Registration Statement
and the prospectus forming a part thereof, including any amendments thereof or
supplement thereto, shall not contain any untrue statement of a material fact,
or omit to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that the
condition contained in this sentence shall be deemed satisfied if (i) VESTCOM
shall have made available to the COMPANY copies of the draft of the Registration
Statement produced prior (x) to the initial filing with the SEC and (y) the
effectiveness thereof and (ii) the COMPANY or the STOCKHOLDERS shall have failed
to inform VESTCOM in writing prior to the filing or the effectiveness thereof,
as the case may be, of the existence of an untrue statement of a material fact
or the omission of such a statement of a material fact, provided however, that
for the period commencing 72 hours prior to any such filing or effectiveness,
VESTCOM can make such draft or changed pages available by facsimile.
8.3. NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Acquisition or the offering and sale by VESTCOM of VESTCOM Stock
pursuant to the Registration Statement.
8.4. OPINION OF COUNSEL. The COMPANY shall have received an opinion from
counsel for VESTCOM, dated the Closing Date in the form annexed hereto as Annex
VIII which opinion shall be effective through and allow reliance thereon on the
Consummation Date (unless notification to the contrary given after the Closing
Date but prior to the Consummation Date by the counsel having provided such
opinion).
-70-
78
8.5. REGISTRATION STATEMENT. VESTCOM shall have filed with the SEC a
registration statement on Form S-1 covering the offer and sale of shares of
VESTCOM Stock having a value of at least $25 million, net of all underwriting
discounts and commissions (the "REGISTRATION STATEMENT"). The Registration
Statement shall have been declared effective by the SEC and the Underwriters
named therein shall have agreed to acquire on a firm commitment basis, subject
to the conditions set forth in the underwriting agreement, the shares of VESTCOM
Stock included in the Registration Statement. The closing of the sale of the
VESTCOM Stock to the Underwriters in the IPO shall occur simultaneously with the
Consummation Date hereunder.
8.6. CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and no action
or proceeding shall have been instituted or threatened to restrain or prohibit
the Acquisition or the transactions contemplated by the Other Agreements and no
governmental agency or body shall have taken any other action or made any
request of the COMPANY as a result of which COMPANY deems it inadvisable to
proceed with the transaction hereunder.
8.7. GOOD STANDING CERTIFICATES. VESTCOM and NEWCO each shall have
delivered to the COMPANY a certificate, dated as of a date no later than ten
days prior to the Closing Date, duly issued by the appropriate governmental
authority in VESTCOM's and NEWCO's respective jurisdiction of incorporation
showing that each of VESTCOM and NEWCO is in good standing and (in the case of
VESTCOM only) authorized to do business and that all state franchise and/or
income tax returns and taxes for VESTCOM, for all periods prior to the Closing
have been filed and paid.
8.8. NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred which would constitute a VESTCOM Material Adverse Effect; and the
STOCKHOLDERS shall have received a certificate signed by VESTCOM to such effect.
8.9. EMPLOYMENT AGREEMENTS. The individuals listed on Schedule 8.9 shall
have been afforded the opportunity to enter employment agreements substantially
on the terms and in the form of Annex IX.
-71-
79
8.10. SUPPORT AGREEMENT. VESTCOM shall have entered into the Support
Agreement.
8.11. MULTIPLE VOTING SHARE. VESTCOM shall have accepted the Subscription
to Multiple Voting Share and NEWCO shall have approved the issuance of the
Dividend Access Shares.
8.12. SECRETARY'S CERTIFICATE. The STOCKHOLDERS shall have received a
certificate or certificates dated the Closing Date and signed by the Secretary
or an Assistant Secretary of VESTCOM and NEWCO, certifying the accuracy of
VESTCOM's and NEWCO's respective Certificates of Incorporation, By-laws and
resolutions of the Boards of Directors, which certificate shall be effective
through the Consummation Date.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VESTCOM AND NEWCO.
The obligations of VESTCOM and NEWCO with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of all of the following conditions. The obligations of
VESTCOM and NEWCO with respect to actions to be taken on the Consummation Date
are subject to the satisfaction or waiver on or prior to the Consummation Date
of the conditions set forth in Sections 9.1, 9.4 and 9.18. As of the Closing
Date or the Consummation Date, as the case may be, all conditions not satisfied
shall be deemed to have been waived by VESTCOM and NEWCO unless such parties
have notified the COMPANY in writing to the contrary, except that no such waiver
shall be deemed to affect the survival of the representations and warranties of
the COMPANY and the STOCKHOLDERS in Section 5 hereof.
9.1. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All the
representations and warranties of the STOCKHOLDERS and the COMPANY contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date and the Consummation Date with the same effect as though such
representations and warranties had been made on and as of such date (except with
respect to any such representations and warranties which relate specifically to
an earlier date, which shall be true and correct in all material respects as of
such earlier date), and the STOCKHOLDERS shall have delivered to VESTCOM a
certificate dated the Closing Date, effective through the Consummation Date
(subject to the provisions of Sections 7.6 and
-72-
80
7.7), signed by them to such effect; each and all of the terms, covenants and
conditions of this Agreement to be complied with or performed by the
STOCKHOLDERS and the COMPANY on or before the Closing Date or the Consummation
Date, as the case may be, shall have been duly performed or complied with in all
material respects.
9.2. NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Acquisition or the offering and sale by VESTCOM of VESTCOM Stock
pursuant to the Registration Statement and no governmental agency or body shall
have taken any other action or made any request of VESTCOM as a result of which
the management of VESTCOM deems it inadvisable to proceed with the transactions
hereunder.
9.3. EXAMINATION OF FINAL FINANCIAL STATEMENTS. Prior to the Consummation
Date, VESTCOM shall have had sufficient time to review the unaudited balance
sheets of each of LIRPACO INC. and COS for the fiscal quarters following
December 31, 1996, and the unaudited statement of income, cash flow and retained
earnings of each of them for the fiscal quarters following December 31, 1996,
disclosing no material adverse change in the financial condition of either
LIRPACO INC. or COS or the results of their operations from the financial
statements as of the Balance Sheet Date.
9.4. NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred which would constitute a Material Adverse Effect; and VESTCOM shall
have received a certificate signed by the STOCKHOLDERS dated the Closing Date,
effective through the Consummation Date (the effectiveness of which shall not
have been revoked on or prior to the Consummation Date) to such effect.
9.5. STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to
VESTCOM immediately prior to the Closing Date an instrument dated the Closing
Date to be released on the Consummation Date releasing the COMPANY from any and
all claims of the STOCKHOLDERS against the COMPANY and any and all obligations
of the COMPANY to the STOCKHOLDERS, except for items specifically identified on
Schedules 5.10 and 5.14 as being
-73-
81
claims of or obligations to the STOCKHOLDERS and continuing obligations to
STOCKHOLDERS relating to their employment by COS pursuant to the employment
agreements attached as Annex IX after the Consummation Date.
9.6. SATISFACTION. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall be satisfactory to
VESTCOM and its counsel.
9.7. TERMINATION OF RELATED PARTY AGREEMENTS. All existing agreements
between the COMPANY and the STOCKHOLDERS or business or personal affiliates of
the COMPANY or the STOCKHOLDERS, other than those set forth on Schedule 9.7,
shall have been canceled, and any stockholder agreements, voting agreements,
voting trusts, options, or warrants relating to the COMPANY or COMPANY Stock,
and any employment agreements between the COMPANY and any employee listed on
Schedule 9.7, shall have been terminated. In addition, the COMPANY shall be
released as a guarantor on all real estate loans and other lending arrangements
or obligations which were guaranteed for the benefit of any of the STOCKHOLDERS
or any other third party.
9.8. OPINION OF COUNSEL. VESTCOM shall have received an opinion from
counsel to the COMPANY and the STOCKHOLDERS, dated the Closing Date, in the form
annexed hereto as Annex X, and the Underwriters shall have received a copy of
the same opinion addressed to them, which opinion shall be effective through and
allow reliance thereon on the Consummation Date (unless notification to the
contrary given after the Closing Date but prior to the Consummation Date by the
counsel having provided such opinion).
9.9. CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and no action
or proceeding shall have been instituted or threatened to restrain or prohibit
the Acquisition and no governmental agency or body shall have taken any other
action or made any request of VESTCOM as a result of which VESTCOM deems it
inadvisable to proceed with the transactions hereunder.
-74-
82
9.10. GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to
VESTCOM a certificate, dated as of a date no later than ten days prior to the
Closing Date, duly issued by the appropriate governmental authority in the
COMPANY's jurisdiction of incorporation and, unless waived by VESTCOM, in each
jurisdiction in which the COMPANY is authorized to do business, showing the
COMPANY is in good standing and authorized to do business.
9.11. REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and the Underwriters named therein shall have
agreed to acquire on a firm commitment basis, subject to the conditions set
forth in the underwriting agreement, the shares of VESTCOM Stock included in the
Registration Statement.
9.12. EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.10
shall have entered into an employment agreement (collectively, the "Employment
Agreements") with COS substantially on the terms and in the form of Annex IX.
9.13. REPAYMENT OF INDEBTEDNESS. Prior to the Closing Date, the
STOCKHOLDERS shall have repaid the COMPANY (including the COMPANY'S
Subsidiaries) in full all amounts owing by the STOCKHOLDERS to the COMPANY
(including the COMPANY'S Subsidiaries).
9.14. INSURANCE. VESTCOM shall be named as an additional named insured on
all of the COS's insurance policies.
9.15. VOTING TRUST AGREEMENT. The STOCKHOLDERS and the trustee appointed
thereunder shall have entered into the Voting Trust Agreement.
9.16. SECRETARY'S CERTIFICATE. VESTCOM shall have received a certificate
dated the Closing Date and signed by the Secretary or an Assistant Secretary of
the COMPANY, certifying the accuracy of the COMPANY'S Certificate of
Incorporation, By-laws and resolutions of the Board of Directors, which
certificate shall be effective through the Consummation Date.
-75-
83
9.17. FIRPTA CERTIFICATES. Each STOCKHOLDER shall have caused the COMPANY
and COS to have delivered to VESTCOM a certificate to the effect that they have
not made an election to be treated as a domestic corporation under Section
897(i) of the Code.
10. COVENANTS OF VESTCOM, THE COMPANY AND THE STOCKHOLDERS AFTER CLOSING.
10.1. DISCLOSURE. If, subsequent to the Pricing Date and prior to the 25th
day after the date of the final prospectus included in the Registration
Statement of VESTCOM utilized in connection with the IPO, the COMPANY or the
STOCKHOLDERS become aware of any fact or circumstance which would change (or, if
after the Closing Date, would have changed) a representation or warranty of
COMPANY or STOCKHOLDERS in this Agreement or would affect any document delivered
pursuant hereto in any material respect, the COMPANY and the STOCKHOLDERS shall
promptly give notice of such fact or circumstance to VESTCOM.
10.2. PREPARATION AND FILING OF TAX RETURNS; RECORD RETENTION. (a) Each
party hereto shall, and shall cause its subsidiaries and affiliates to, provide
to each of the other parties hereto such cooperation and information as any of
them reasonably may request in filing any Return, amended Return or claim for
refund, determining a liability for Taxes or a right to refund of Taxes or in
conducting any audit or other proceeding in respect of Taxes. Such cooperation
and information shall include providing copies of all relevant portions of
Returns, together with relevant accompanying schedules and work papers, relevant
documents relating to rulings or other determinations by Taxing Authorities and
relevant records concerning the ownership and Tax basis of property, which such
party may possess. Each party shall make its employees reasonably available on a
mutually convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party required
to file Returns pursuant to this Agreement shall bear all costs of filing such
Returns.
(b) Each STOCKHOLDER shall file or cause to be filed Returns of the
COMPANY and any other Acquired Party for the tax periods prior to and ending on
the Consummation Date, shall jointly
-76-
84
and severally be responsible for paying any and all income taxes due and payable
with respect to such periods and shall forward a copy of such Returns to
VESTCOM, and VESTCOM shall file or cause to be filed all separate Returns of,
and those that include, any Acquired Party for all taxable periods ending after
the Consummation Date, and shall pay any and all Taxes with respect to such
Returns.
(c) With respect to any Tax Return of any Acquired Party for a taxable
period that begins before and ends after the Consummation Date (a "Straddle
Period Return"), VESTCOM shall deliver a copy of such Tax Return to each
STOCKHOLDER at least 30 calendar days prior to the due date therefor (giving
effect to any extension thereof), accompanied by an allocation between the
pre-Consummation Date period of the Taxes shown to be due on such Tax Return.
Such Tax Return and allocation shall be final and binding on each STOCKHOLDER,
unless, within ten calendar days after the date of receipt by each STOCKHOLDER
of such Tax Return and allocation, each STOCKHOLDER delivers to VESTCOM a
written request for changes to such Tax Return or allocation.
(d) In the case of each Straddle Period Return, not later than (i) five
business days before the due date (including any extension thereof) for payment
of Taxes with respect to such Tax Return or (ii) in the event of a dispute, five
business days after the resolution thereof either by mutual agreement of the
parties or by a determination of an independent accounting firm, each
STOCKHOLDER shall cause to be paid to VESTCOM the portion of the income taxes
and taxes for which the STOCKHOLDERS are personally responsible set forth on
such Tax Return that are allocable to the pre-Consummation Date period, after
giving effect to any agreement of the parties or any determination by the
independent accounting firm, net of any payments made prior to the Consummation
Date in respect of such taxes, whether as estimated taxes or otherwise, and net
of any applicable provision for current Taxes not yet due and payable of the
Acquired Party that is contained in the COMPANY Financial Statements.
(e) VESTCOM, NEWCO and the STOCKHOLDERS shall (i) cause the COMPANY to,
retain all Tax returns, schedules, work papers and all material records or other
documents relating to Tax matters of the COMPANY (including the COMPANY'S
Subsidiaries) for the first taxable year or
-77-
85
other taxable period ending after the Consummation Date and for all prior
taxable years or other taxable periods until the later of (a) seven (7) years
after the later of filing or the due date of the Tax Return with respect to a
taxable year or (b) the expiration of all applicable statutes of limitation, and
(ii) provide the other party with any record or information (including, to the
extent a party has such power, making employees available to such other party
for reasonable periods of time) which may be relevant to any Tax matters.
Neither VESTCOM nor NEWCO shall destroy or dispose of or allow the destruction
or disposition of any books, records or files relating to the business,
properties, assets or operations of the COMPANY (including the COMPANY'S
Subsidiaries) to the extent that they pertain to the operations of the COMPANY
(including the COMPANY'S Subsidiaries) on or prior to the Consummation Date,
without first having offered in writing to deliver such books, records and files
to each of the STOCKHOLDERS. VESTCOM and NEWCO shall be entitled to dispose of
the books, records and files described in such notice if none of the
STOCKHOLDERS requests copies of such books, records and files within 60 days
after receipt of the notice described in the preceding sentence.
10.3. PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Consummation
Date, VESTCOM shall not terminate any health insurance or life insurance in
effect at the COMPANY until such time as VESTCOM is able to replace such plan
with a plan that is applicable to VESTCOM and all of its then existing
subsidiaries which will in combination with all COMPANY employee benefit plans
in the aggregate provide substantially equivalent value to the COMPANY'S
employees as that provided in the aggregate to such employees prior to the
VESTCOM Plan of Organization, provided however, that VESTCOM shall have no
obligation to provide any particular replacement plan of any plan that has the
same or similar terms and provisions as the existing plans.
10.4. RELEASE FROM GUARANTEES. VESTCOM shall have the STOCKHOLDERS
released within 120 days after the Consummation Date from any and all guarantees
on any COMPANY debt that they personally guaranteed for the benefit of the
COMPANY (including the COMPANY'S Subsidiaries), as listed on Schedule 5.10.
VESTCOM shall use its best efforts to cause the relevant lender to release the
STOCKHOLDERS' personal guarantees of the debt and accept in substitution
-78-
86
thereof the guaranty of VESTCOM or, if the lender is unwilling to accept the
substitution, use a portion of the proceeds of the IPO to pay off the guaranteed
debt, or any combination of the foregoing. VESTCOM agrees, after the
Consummation Date, to indemnify the STOCKHOLDERS against any and all claims made
by lenders under such guarantees or those made by third parties pursuant to a
personal guarantee listed on Schedule 5.10 hereto, which arise as a result of
VESTCOM's failure to cause such guarantees to be released.
11. INDEMNIFICATION.
The STOCKHOLDERS, VESTCOM and NEWCO each make the following covenants that
are applicable to them, respectively:
11.1. GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS
covenant and agree that they, solidarily, without benefit of division or
discussion, (except with respect to Sections 5.36 through 5.39 which shall be
joint) will indemnify, defend, protect and hold harmless VESTCOM, NEWCO, the
COMPANY and, solely with respect to clause (v) of this Section 11.1, the
Underwriters, at all times from and after the Consummation Date until (A) the
Expiration Date as defined in Section 5 above, in the case of an event described
in (i) or (v) of this Section 11.1 below (B) 90 days after the last date on
which the relevant taxing authority is entitled to assess or reassess the
COMPANY (including the COMPANY'S Subsidiaries) in the case of events described
in (iii), (iv) or (vi) of this Section 11.1 below and (C) the date of expiration
of any applicable statute of limitations period in the case of an event
described in (ii) of this Section 11.1 below, from and against all claims,
damages, actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by VESTCOM, NEWCO, the
COMPANY or the Underwriters as a result of or arising from (i) any breach of the
representations and warranties of the STOCKHOLDERS or the COMPANY set forth
herein or on the Schedules or certificates delivered in connection herewith,
(ii) any non fulfillment of any covenant or agreement on the part of the
STOCKHOLDERS or the COMPANY under this Agreement, (iii) any Tax imposed upon or
relating to an Acquired Party for any pre-Consummation
-79-
87
Date period arising out of or in connection with the transactions effected
pursuant to this Agreement, (iv) any Tax imposed upon or relating to any
Acquired Party for a pre-Consummation Date period except to the extent such Tax
is an obligation of the COMPANY (including the COMPANY's Subsidiaries) (not the
STOCKHOLDERS) and the COMPANY (including the COMPANY's Subsidiaries) has accrued
a liability for such Tax on its books and records in the ordinary course, (v)
any liability under the 1933 Act, the 1934 Act or other federal or state law or
regulation at common law or otherwise arising out of or based upon any untrue
statement of a material fact relating to the COMPANY (including the COMPANY'S
Subsidiaries) or the STOCKHOLDERS, and provided in writing to VESTCOM or its
counsel or the Underwriters or their counsel by the COMPANY or the STOCKHOLDERS,
contained in any preliminary prospectus relating to the IPO, the Registration
Statement or any prospectus forming a part thereof, or any amendment thereof or
supplement thereto, or arising out of or based upon any omission to state
therein a material fact relating to the COMPANY (including the COMPANY'S
Subsidiaries) or the STOCKHOLDERS required to be stated therein or necessary to
make the statements therein not misleading and not provided to VESTCOM or its
counsel or the Underwriters or their counsel by the COMPANY or the STOCKHOLDERS,
provided, however, that such indemnity shall not inure to the benefit of
VESTCOM, NEWCO, the COMPANY or the Underwriters to the extent that such untrue
statement (or alleged untrue statement) was made in, or omission (or alleged
omission) occurred in, any preliminary prospectus and the STOCKHOLDERS provided,
in writing, corrected information to VESTCOM's counsel and to VESTCOM or to the
Underwriters or their counsel for inclusion in the final prospectus, and such
information was not so included or (vi) any liability for withholding tax or
other taxes resulting from the issuance by NEWCO to the STOCKHOLDERS of the
Adjusted Earnout Shares. All parties hereto have expressly agreed that with
respect to clause (v) of this Section 11.1, the Underwriters shall be deemed a
third party beneficiary.
11.2. INDEMNIFICATION BY VESTCOM. VESTCOM covenants and agrees that it
will indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times
from and after the
-80-
88
Consummation Date until (A) the Expiration Date as defined in Section 5 above,
in the case of an event described in (i) or (iii) of this Section 11.2 below and
(B) the date of expiration of any applicable statute of limitation period in the
case of an event described in (ii) of this Section 11.2 below, from and against
all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
STOCKHOLDERS as a result of or arising from (i) any breach by VESTCOM or NEWCO
of their representations and warranties set forth herein or on the Schedules or
certificates attached hereto, (ii) any non-fulfillment of any covenant or
agreement on the part of VESTCOM or NEWCO under this Agreement, or (iii) any
liability under the 1933 Act, the 1934 Act or other federal or state law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating to VESTCOM or
NEWCO contained in any preliminary prospectus, the Registration Statement or any
prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to VESTCOM or NEWCO required to be stated
therein or necessary to make the statements therein not misleading.
11.3. THIRD PERSON CLAIMS. Promptly after any party hereto or the
Underwriters (hereinafter the "INDEMNIFIED PARTY") has received notice of or has
knowledge of any claim by a person not a party to this Agreement ("THIRD
PERSON"), or the commencement of any action or proceeding by a Third Person, the
Indemnified Party shall, as a condition precedent to a claim with respect
thereto being made against any party obligated to provide indemnification
pursuant to Section 11.1, 11.2 or 11.5 hereof (hereinafter the "INDEMNIFYING
PARTY"), give the Indemnifying Party written notice of such claim or the
commencement of such action or proceeding. Such notice shall state the nature
and the basis of such claim and a reasonable estimate of the amount thereof (the
"CLAIM AMOUNT"). The Indemnifying Party shall have the right to defend and
settle, at its own expense and by its own counsel, any such matter so long as
the Indemnifying Party pursues the same in good faith and diligently, provided
that the Indemnifying Party shall not settle any criminal proceeding without the
-81-
89
consent of the Indemnified Party. If the Indemnifying Party undertakes to defend
or settle, it shall promptly notify the Indemnified Party of its intention to do
so, and the Indemnified Party shall cooperate with the Indemnifying Party and
its counsel in the defense thereof and in any settlement thereof. Such
cooperation shall include, but shall not be limited to, furnishing the
Indemnifying Party with any books, records or information reasonably requested
by the Indemnifying Party that are in the Indemnified Party's possession or
control. All Indemnified Parties shall use the same counsel, which shall be the
counsel selected by the Indemnifying Party, provided that if such counsel shall
have a conflict of interest that prevents such counsel from representing the
Indemnified Party, the Indemnified Party shall have the right to participate in
such matter through counsel of its own choosing and the Indemnifying Party will
reimburse the Indemnified Party for the expenses of its counsel. After the
Indemnifying Party has notified the Indemnified Party of its intention to
undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except to the extent such participation is requested by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expense and out-of-pocket
expenses. If the Indemnifying Party desires to accept a final and complete
settlement of any such Third Person claim and the Indemnified Party refuses to
consent to such settlement, then the Indemnifying Party's liability under this
Section with respect to such Third Person claim shall be limited to the amount
so offered in settlement by said Third Person and the Indemnified Party shall
reimburse the Indemnifying Party for any additional costs of defense which it
subsequently incurs with respect to such claim and all additional costs of
settlement or judgment. If the Indemnifying Party does not undertake to defend
such matter to which the Indemnified Party is entitled to indemnification
hereunder, or fails diligently to pursue such defense, the Indemnified Party may
undertake such defense through counsel of its choice, at the cost and expense of
the Indemnifying Party, and the Indemnified Party may settle such matter, and
the Indemnifying Party shall reimburse the Indemnified Party for the amount paid
in such settlement and any other liabilities or expenses incurred by the
Indemnified Party
-82-
90
in connection therewith, provided, however, that under no circumstances shall
the Indemnified Party settle any Third Person claim without the written consent
of the Indemnifying Party, which consent shall not be unreasonably withheld or
delayed. All settlements hereunder shall effect a complete release of the
Indemnified Party, unless the Indemnified Party otherwise agrees in writing. The
parties hereto will make appropriate adjustments for insurance proceeds in
determining the amount of any indemnification obligation under this Article 11,
provided that no Indemnifying Party shall be obligated to seek any payment
pursuant to the terms of any insurance policy.
11.4. LIMITATIONS ON INDEMNIFICATION. (a) Notwithstanding any other term
of this Agreement, neither the STOCKHOLDER on the one hand or VESTCOM and NEWCO
on the other, shall have any liability under this Section 11 to make any
payments in excess of the aggregate purchase price set forth in Section 2.1. In
addition, no individual STOCKHOLDER's liability to the Underwriters pursuant to
Section 11.1(v) shall exceed the portion of the aggregate purchase price paid to
him in cash, as set forth in Annex II, and no individual STOCKHOLDER's aggregate
liability under Section 11.1 shall exceed the portion of the aggregate purchase
price paid to him. Any payment pursuant to this Article 11 by the STOCKHOLDERS
may, at their option, be made in cash, in VESTCOM Stock valued at Current Market
Price on the date of delivery or in a combination thereof.
(b) VESTCOM, NEWCO, the COMPANY, the Underwriters and the other persons
or entities entitled to be indemnified pursuant to Section 11.1 shall not assert
any claim for indemnification hereunder against the STOCKHOLDERS until such time
as, and solely to the extent that, the aggregate of all claims which such
persons may have against the STOCKHOLDERS exceeds $50,000 (the "INDEMNIFICATION
THRESHOLD"), and then only for the amount of such claims exceeding the
Indemnification Threshold, provided however, that VESTCOM, NEWCO and the COMPANY
and the other persons or entities entitled to indemnification pursuant to
Section 11.1 may assert and shall be entitled to indemnification for any breach
of the representations or warranties contained in Sections 5.36 through 5.39 or
the Schedules or certificates delivered in connection therewith and any claim
under Section 11.1(iii), (iv) and (vi) at any time regardless of whether the
aggregate of all claims which
-83-
91
such persons may have against the STOCKHOLDERS exceeds the Indemnification
Threshold, it also being understood that the amounts of any such claim under
Section 11.1(iii), (iv) or (vi) shall not be counted towards the Indemnification
Threshold. The STOCKHOLDERS shall not assert any claim for indemnification
hereunder against VESTCOM or NEWCO until such time as, and solely to the extent
that, the aggregate of all claims which the STOCKHOLDERS have against VESTCOM or
NEWCO shall exceed the Indemnification Threshold and then only for the amount of
such claims exceeding the Indemnification Threshold, provided, however, that the
STOCKHOLDERS may assert and shall be entitled to indemnification for (i) amounts
relating to the aggregate purchase price to be paid to the STOCKHOLDERS
indicated in Annex II and (ii) amounts related to the release of or
indemnification for personal guarantees pursuant to Section 10.4 hereof
regardless of whether the aggregate amount of all claims exceeds the
Indemnification Threshold, it also being understood that such amounts shall not
be counted towards the Indemnification Threshold. No claim shall be asserted
pursuant to Sections 11.1 or 11.2 for punitive damages.
11.5. RETAINED LIABILITIES. Notwithstanding the disclosure on the
STOCKHOLDERS' and the COMPANY's (including the COMPANY's Subsidiaries) schedules
annexed hereto, the STOCKHOLDERS shall indemnify, defend and hold harmless
VESTCOM and NEWCO for any and all liabilities or costs in excess of $50,000 in
the aggregate, arising out of the matters listed on Schedule 11.5, up to the
limitations indicated in Section 11.4, provided however, that VESTCOM, NEWCO and
the COMPANY, may assert and shall be entitled to indemnification for any claim
for contingent Tax liabilities detailed on Schedule 11.5 without regard to the
Indemnification Threshold, and the amounts of any such claim shall not be
counted towards the Indemnification Threshold. If the matters indicated on
Schedule 11.5 involve a Third Person claim, VESTCOM and NEWCO shall follow the
procedures set forth in Section 11.3 to the extent possible in asserting an
indemnification claim under this Section 11.5.
11.6. NO RECOURSE BY STOCKHOLDERS. The STOCKHOLDERS agree and covenant
that, once Closing has occurred and the Acquisition is completed as provided in
this Agreement on the
-84-
92
Consummation Date, they shall have no recourse whatsoever against the COMPANY
(including the COMPANY's Subsidiaries) to recover any amounts paid by the
STOCKHOLDERS as a result of any liability under this Section 11.
12. TERMINATION OF AGREEMENT
12.1. TERMINATION. This Agreement may be terminated at any time prior to
the Consummation Date solely:
(i) by written agreement signed by all parties hereto;
(ii) by the STOCKHOLDERS (acting together) or the COMPANY (acting
through its board of directors), on the one hand, or by VESTCOM and NEWCO
(acting through their board of directors), on the other hand, if the
transactions contemplated by this Agreement to take place at the Closing
shall not have been consummated by the date seven (7) months after the
date this Agreement becomes effective and binding, unless the failure of
such transactions to be consummated is due to the willful failure of the
party seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to be performed by
it prior to or on the Consummation Date;
(iii) by the STOCKHOLDERS or the COMPANY (acting through its board
of directors) if a material breach or default shall be made by the other
party in the observance or in the due and timely performance of any of the
covenants, agreements or conditions contained herein, and the curing of
such default shall not have been made on or before the Closing Date and
shall not reasonably be expected to occur;
(iv) by VESTCOM and NEWCO (acting through their board of directors)
if a material breach or default shall be made by the other party in the
observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein, and the curing of such default
shall not have been made on or before Closing Date and the Consummation
Date and shall not reasonably be expected to occur;
(v) by VESTCOM pursuant to Section 7.1(c) or 7.7 hereof;
-85-
93
(vi) by the STOCKHOLDERS or the COMPANY if the conditions set forth
in Section 8 are not satisfied or waived by the STOCKHOLDERS and the
COMPANY at the times provided in Section 8;
(vii) by VESTCOM if the conditions set forth in Section 9 are not
satisfied or waived by VESTCOM at the times provided in Section 9; or
(vii) by the STOCKHOLDERS or the COMPANY, on the one hand, or by
VESTCOM and NEWCO, on the other hand, if the underwriting agreement in
respect to the IPO is terminated as set forth in Section 3.2.
12.2. TERMINATION UPON PURCHASE PRICE REDUCTION. The STOCKHOLDERS and the
COMPANY understand that the initial market value of the shares of VESTCOM Stock
is dependent upon market conditions at the time the Registration Statement
becomes effective and negotiations with the underwriters of VESTCOM, and that
the STOCKHOLDERS and the COMPANY will remain bound by this Agreement
notwithstanding any reduction in the initial public offering price of the
VESTCOM Stock from the assumed price contemplated on Annex II, except that the
STOCKHOLDERS or the COMPANY may terminate this Agreement in the event that
VESTCOM notifies Xxxxxx Xxxxx, as representative, by telecopy at the COMPANY'S
offices that the initial public offering price of the shares of VESTCOM Stock to
be received by the STOCKHOLDERS on the Consummation Date is less than
twenty-five percent (25%) below the mid-point of the range of the initial per
share public offering price set forth in the initial filing of the Registration
Statement (the "BENCHMARK PRICE") and if Mr. April gives prompt written notice
of termination to VESTCOM which notice must be received at least two hours prior
to the time VESTCOM and the Underwriters request acceleration of the
effectiveness of the Registration Statement with the SEC. VESTCOM may also
terminate this Agreement in the event the initial public offering price of its
shares is less than the Benchmark Price.
12.3. LIABILITIES IN EVENT OF TERMINATION. In the event of termination of
this Agreement as provided in this Section 12.1 or 12.2, all further obligations
of the parties hereto under this Agreement
-86-
94
(other than pursuant to Section 7.1(d), 14 and 17.5, which shall continue in
full force) shall terminate without further liability or obligation on the part
of any party hereto; provided however, that no party shall be released from
liability hereunder if this Agreement is terminated and the transactions are
abandoned by reason of (i) willful failure of such party to have performed its
obligations hereunder, or (ii) any knowing misrepresentation made by such party
of any matter set forth herein.
13. NON-COMPETITION
13.1. PROHIBITED ACTIVITIES. Except as set forth on Schedule 13.1, the
STOCKHOLDERS will not, for a period of five (5) years following the Consummation
Date or, if the STOCKHOLDER becomes an employee or director of VESTCOM or one of
its subsidiaries for a period of one (1) year following the termination of such
relationship as an employee or director of VESTCOM or its subsidiaries
(whichever period is longer), for any reason whatsoever, directly or indirectly,
for themselves or on behalf of or in conjunction with any other person, persons,
company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any business selling any products or services in direct
competition with VESTCOM or COS or any of the subsidiaries of either
thereof, within 100 miles of where VESTCOM or COS or any of their
respective subsidiaries conducts business (the "TERRITORY");
(ii) call upon any person who is, at that time, within the
Territory, an employee of VESTCOM (including the subsidiaries thereof) in
a managerial capacity for the purpose or with the intent of enticing such
employee away from or out of the employ of VESTCOM (including the
subsidiaries of either thereof), provided that any STOCKHOLDER shall be
permitted to call upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is, at that time, or
which has been, within 18 months prior to that time, a customer of VESTCOM
or COS (including the subsidiaries of
-87-
95
either thereof) within the Territory for the purpose of soliciting or
selling products or services in direct competition with VESTCOM or COS
within the Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the business of
creating, distributing or archiving computer-generated documents, or
performing any other service for customers described in VESTCOM's
Registration Statement, which candidate was either called upon by VESTCOM
or COS (including the subsidiaries of either thereof) or for which VESTCOM
or COS (or any subsidiary of either thereof) made an acquisition analysis,
for the purpose of acquiring such entity, provided that no STOCKHOLDER
shall be charged with a violation of this section unless and until such
STOCKHOLDER shall have knowledge or notice that such prospective
acquisition candidate was called upon, or that an acquisition analysis was
made, for the purpose of acquiring such entity; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY (or the COMPANY'S Subsidiaries) to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever excluding
disclosure to VESTCOM or any of VESTCOM's Subsidiaries (all of the
foregoing collectively referred to as the "PROHIBITED ACTIVITIES").
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any STOCKHOLDER from acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is
publicly traded.
In determining whether any of the Prohibited Activities have occurred,
such determination shall be made with respect to the business and locations of
VESTCOM and NEWCO, including the subsidiaries of either thereof, subsequent to
the Acquisition and the effectiveness of the Registration Statement.
13.2. DAMAGES. Because of the difficulty of measuring economic losses to
VESTCOM as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to VESTCOM for which it
would have no other adequate remedy, each
-88-
96
STOCKHOLDER agrees that the foregoing covenant may be enforced by VESTCOM in the
event of breach by such STOCKHOLDER, by injunctions and restraining orders.
13.3. REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of VESTCOM (including the
subsidiaries thereof) and the activities of the other Founding Companies on the
date of the execution of this Agreement and the current plans of VESTCOM; but it
is also the intent of VESTCOM and the STOCKHOLDERS that such covenants be
construed and enforced in accordance with the changing activities and business
of VESTCOM (including the subsidiaries thereof) throughout the term of this
covenant, but provided that for each STOCKHOLDER who enters into employment with
VESTCOM or one of its Subsidiaries, such covenants shall be construed and
enforced in accordance with the changing activities and business of VESTCOM
(including the Subsidiaries thereof) up to the date of that STOCKHOLDER's
separation from service, throughout the term of this covenant for that
STOCKHOLDER.
It is further agreed by the parties hereto that, in the event that any
STOCKHOLDER who has entered into an employment agreement with VESTCOM and/or any
subsidiary thereof as set forth in Section 9.12 hereof shall thereafter cease to
be employed thereunder, and such STOCKHOLDER shall enter into a business or
pursue other activities not in competition with VESTCOM and/or any subsidiary
thereof, or similar activities or business in locations the operation of which,
under such circumstances, does not violate clause (i) of this Section 13, and in
any event such new business, activities or location are not in violation of this
Section 13 or of such STOCKHOLDER's obligations under this Section 13, if any,
such STOCKHOLDER shall not be chargeable with a violation of this Section 13 if
VESTCOM and/or any subsidiary thereof shall thereafter enter the same, similar
or a competitive (i) business, (ii) course of activities or (iii) location, as
applicable.
13.4. SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope,
-89-
97
time or territorial restrictions set forth are unreasonable, then it is the
intention of the parties that such restrictions be enforced to the fullest
extent which the court deems reasonable, and this Agreement shall thereby be
reformed.
13.5. INDEPENDENT COVENANT. All of the covenants in this Section 13 shall
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any STOCKHOLDER
against VESTCOM (including the subsidiaries thereof), whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
VESTCOM of such covenants. It is specifically agreed that the period of five (5)
years stated at the beginning of this Section 13, during which the agreements
and covenants of each STOCKHOLDER made in this Section 13 shall be effective,
shall be computed by excluding from such computation any time during which such
STOCKHOLDER is in violation of any provision of this Section 13. The covenants
contained in this Section 13 shall not be affected by any breach of any other
provision hereof by any party hereto (other than failure by VESTCOM to pay the
consideration indicated on Annex II, Part A) and shall have no effect if the
transactions contemplated by this Agreement are not consummated.
13.6. MATERIALITY. The COMPANY and the STOCKHOLDERS hereby agree that this
covenant is a material and substantial part of this transaction.
14. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
14.1. STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they
had in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANY, the Founding Companies and/or
VESTCOM, such as lists of customers, operational policies, and pricing and cost
policies that are valuable, special and unique assets of the COMPANY's, the
Founding Companies' and/or VESTCOM's respective businesses. The STOCKHOLDERS
agree that they will not disclose such confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of VESTCOM, (b) following
the Consummation Date, such information may be
-90-
98
disclosed by the STOCKHOLDERS as is required in the course of performing their
duties for VESTCOM, and (c) to counsel and other advisers, provided that such
advisers (other than counsel) agree to the confidentiality provisions of this
Section 14.1; provided, further, that confidential information shall not include
(i) such information which becomes known to the public generally through no
fault of the STOCKHOLDERS, (ii) information required to be disclosed by law or
the order of any governmental authority under control of law, provided, that
prior to disclosing any information pursuant to this clause (ii), the
STOCKHOLDERS shall, if possible, give prior written notice thereof to VESTCOM
and provide VESTCOM with the opportunity to contest such disclosure, or (iii)
the disclosing party reasonably believes that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party and the
STOCKHOLDERS provide the same prior disclosure set forth in clause (ii) above.
In the event of a breach or threatened breach by any of the STOCKHOLDERS of the
provisions of this section, VESTCOM shall be entitled to an injunction
restraining such STOCKHOLDERS from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
VESTCOM from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
14.2. VESTCOM AND NEWCO. VESTCOM and NEWCO recognize and acknowledge that
they had in the past and currently have access to certain confidential
information of the COMPANY, such as lists of customers, operational policies,
and pricing and cost policies that are valuable, special and unique assets of
the COMPANY's business. VESTCOM and NEWCO agree that, prior to the Consummation
Date and for a period of two years after the date hereof if there is no
Consummation Date, they will not disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of the COMPANY, (b) to
counsel and other advisers, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section 14.2 and (c) to the
Founding Companies, other than the Company, the Underwriters and their
representatives pursuant to Section 7.1(a), unless (i) such information becomes
known to the public generally through no fault of
-91-
99
VESTCOM or NEWCO, (ii) disclosure is required by law or the order of any
governmental authority under control of law, provided, that prior to disclosing
any information pursuant to this clause (ii), VESTCOM and NEWCO shall, if
possible, give prior written notice thereof to the COMPANY and the STOCKHOLDERS
and provide the COMPANY and the STOCKHOLDERS with the opportunity to contest
such disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party and VESTCOM or NEWCO provide the same prior disclosure set
forth in clause (ii) above. In the event of a breach or threatened breach by
VESTCOM or NEWCO of the provisions of this section, the COMPANY and the
STOCKHOLDERS shall be entitled to an injunction restraining VESTCOM and NEWCO
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting the COMPANY and the STOCKHOLDERS from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
14.3. DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4. SURVIVAL. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement.
15. TRANSFER RESTRICTIONS.
15.1. TRANSFER RESTRICTIONS. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section 15.1
(or trusts for the benefit of the STOCKHOLDERS or family members, the trustees
of which so agree), for an indefinite period in the case of Dividend Access
Shares, Adjusted Earnout Shares and Multiple Voting Share, for a period of two
years from the Consummation Date in the case of shares of VESTCOM Stock received
by the STOCKHOLDERS in exchange for Dividend Access Shares and for a period of
two years from the
-92-
100
date of issuance of the Adjusted Earnout Shares in the case of shares of VESTCOM
Stock received by the STOCKHOLDERS in exchange for Adjusted Earnout Shares, none
of the STOCKHOLDERS shall (i) offer, sell, assign, exchange, pledge,
hypothecate, transfer, encumber, distribute, or otherwise dispose of in any
manner, or enter into one or more transactions whereby the STOCKHOLDERS give up
substantially all of the benefits and burdens of ownership of any such shares or
any interest (including, without limitation, an option to buy or sell) in any
such shares in whole or in part, and no such attempted transfer shall be treated
as effective for any purpose; or (ii) engage in any transaction, whether or not
with respect to any such shares or any interest therein, the intent or effect of
which is to reduce the risk of continuing ownership of such shares (including,
by way of example and not limitation, engaging in put, call, short-sale,
straddle or similar market transactions) unless they obtain the prior written
consent of VESTCOM and such transaction is in compliance with Section 16.2
hereof and the agreements entered into pursuant to Section 16.4 hereof. The
certificates evidencing the Dividend Access Shares, the Adjusted Earnout Shares,
the Multiple Voting Share and the VESTCOM Stock delivered (or to be delivered)
to the STOCKHOLDERS (or permitted assigns) pursuant to this Agreement will bear
a legend substantially in the form set forth below and containing such other
information as VESTCOM and/or NEWCO may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR
OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT
TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE,
PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION (FOR VESTCOM STOCK
ONLY: PRIOR TO THE SECOND ANNIVERSARY OF THE CONSUMMATION DATE. UPON THE
WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO
REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE
TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.)
-93-
101
15.2. STATUTORY HOLD PERIOD. The STOCKHOLDERS acknowledge that the shares
of VESTCOM Stock to be issued upon the exchange of Dividend Access Shares and
Adjusted Earnout Shares may be subject to certain additional statutory hold
periods pursuant to applicable laws.
16. FEDERAL SECURITIES ACT REPRESENTATIONS.
16.1. NO REGISTRATION. The STOCKHOLDERS acknowledge that the shares of
VESTCOM Stock to be delivered to the STOCKHOLDERS upon exchange of the Dividend
Access Shares and Adjusted Earnout Shares have not been and will not be
registered under the 1933 Act and therefore may not be resold without compliance
with the 1933 Act. The VESTCOM Stock to be acquired by such STOCKHOLDERS
pursuant to this Agreement is being acquired solely for their own respective
accounts, for investment purposes only, and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution.
16.2. COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and
represent that none of the shares of VESTCOM Stock to be issued to such
STOCKHOLDERS will be offered, sold, assigned, exchanged, pledged, hypothecated,
transferred, encumbered, distributed or otherwise disposed of except after full
compliance with all of the applicable provisions of the 1933 Act and the rules
and regulations of the SEC as well as the Securities Act (Quebec) and the
regulations, rules and policies thereunder. All the certificates representing
the shares of VESTCOM Stock to be issued to the STOCKHOLDERS (or their permitted
assigns) shall bear the following legend in addition to the legend required
under Section 15 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE
TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND APPLICABLE
SECURITIES LAW.
16.3. ECONOMIC RISKS; SOPHISTICATION. The STOCKHOLDERS party hereto are
able to bear the economic risk of an investment in the Dividend Access Shares,
the Adjusted Earnout Shares and the Multiple Voting Share acquired and the
shares of VESTCOM Stock to be acquired pursuant to
-94-
102
this Agreement and can afford to sustain a total loss of such investment and
have such knowledge and experience in financial and business matters that they
are capable of evaluating the merits and risks of the proposed investment in the
VESTCOM Stock. The STOCKHOLDERS party hereto or their respective purchaser
representative have had an adequate opportunity to ask questions and receive
answers from the officers of VESTCOM concerning any and all matters relating to
the transactions described herein including, without limitation, the background
and experience of the current and proposed officers and directors of VESTCOM,
the plans for the operation of the business of VESTCOM, the business, operations
and financial condition of the Founding Companies other than the COMPANY, and
any plans for additional acquisitions and the like. The STOCKHOLDERS or their
respective purchaser representatives have asked any and all questions in the
nature described in the preceding sentence and all questions have been answered
to their satisfaction.
16.4. MARKET STANDOFF. If requested by the Underwriters, the STOCKHOLDERS
agree that they will not sell, transfer or otherwise dispose of, including
without limitation, through put or short sale arrangements, shares of VESTCOM
Stock for a period of up to 180 days following the Consummation Date and that
they will execute a standard lock-up letter to that effect.
16.5. REGISTRATION RIGHTS. After the Consummation Date and prior to March
31, 1999, if Xxxx Xxxxxx registers under the Federal Securities Laws any VESTCOM
Common Stock acquired by him pursuant to the Agreement and Plan of
Reorganization between VESTCOM and Comvestrix Corp., each STOCKHOLDER will be
granted the right to register a number of shares of VESTCOM Common Stock to be
acquired by them upon exchange of Dividend Access Shares acquired pursuant to
the terms of this Agreement equal to the number of shares acquired by the
STOCKHOLDER pursuant to this Agreement, multiplied by a fraction, the numerator
of which is the number of such shares registered by Xxxx Xxxxxx and the
denominator of which is the number of shares issued to Xxxx Xxxxxx pursuant to
the Agreement and Plan of Reorganization between VESTCOM and Comvestrix Corp.
17. GENERAL.
-95-
103
17.1. COOPERATION. The COMPANY, STOCKHOLDERS, VESTCOM and NEWCO shall each
deliver or cause to be delivered to the other on the Consummation Date, and at
such other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The COMPANY will cooperate and use its reasonable efforts to
have the present officers, directors and employees of the COMPANY cooperate with
VESTCOM on and after the Consummation Date in furnishing information, evidence,
testimony and other assistance in connection with any Return filing obligations,
actions, proceedings, arrangements or disputes of any nature with respect to
matters pertaining to all periods prior to the Consummation Date.
17.2. SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
VESTCOM, and the heirs and legal representatives of the STOCKHOLDERS, except
that VESTCOM may assign the rights of NEWCO to another wholly owned subsidiary
of VESTCOM.
17.3. ENTIRE AGREEMENT. This Agreement (including the Schedules, exhibits
and Annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDERS, the
COMPANY, NEWCO and VESTCOM and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and this Agreement and the Annexes
hereto may be modified or amended only by a written instrument executed by the
STOCKHOLDERS, the COMPANY, NEWCO and VESTCOM, acting through their respective
officers, duly authorized by their respective Boards of Directors. Any
disclosure made on any Schedule delivered pursuant hereto shall be deemed to
have been disclosed for purposes of any other Schedule required hereby.
-96-
104
17.4. COUNTERPARTS. This Agreement may be executed simultaneously in
two (2) or more counterparts, each of which shall be deemed an original and
all of which together shall constitute but one and the same instrument. Each
party agrees to be bound by facsimile signatures.
17.5. EXPENSES. (a) Whether or not the transactions contemplated herein
shall be consummated, (i) VESTCOM will pay the fees, expenses and disbursements
of VESTCOM, NEWCO and VESTCOM's agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement, any amendments
hereto and all agreements contemplated hereunder, including all costs and
expenses incurred in the performance and compliance with all conditions to be
performed by VESTCOM under this Agreement, including, subject to Section 7.1(d),
the fees and expenses of Xxxxxx Xxxxxxxx LLP, Xxxxxxxxxx, Sandler, Kohl, Xxxxxx
& Xxxxxx, P.C., and the costs of preparing the Registration Statement and (ii)
the STOCKHOLDERS will pay, from personal funds the fees, expenses and
disbursements of their counsel and other professionals incurred in connection
with the subject matter of this Agreement or the Registration Statement, except
for any expense incurred by the STOCKHOLDERS pursuant to Section 7.1(d), which
must be paid from personal funds of the STOCKHOLDERS and not from COMPANY funds.
Notwithstanding the foregoing, VESTCOM agrees to contribute up to an aggregate
of $15,000 to the actual fees, expenses and disbursements of the STOCKHOLDERS'
counsel and accountants as follows: (a) $7,500 promptly upon receipt of invoices
and other supporting documentation and (b) $7,500 on the Consummation Date. The
STOCKHOLDERS shall pay all sales, use, transfer, real property transfer,
recording, gains, stock transfer and other similar taxes and fees ("TRANSFER
TAXES") incurred in connection with the transactions contemplated by this
Agreement. The STOCKHOLDERS shall file all necessary documentation and Returns
with respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges
that he or she, and not the COMPANY or VESTCOM, will pay all taxes due upon
receipt of the consideration payable to such STOCKHOLDER pursuant to Section 2
hereof.
(b) If the transactions contemplated herein are consummated, then after
the Consummation Date, the STOCKHOLDERS will be entitled to be reimbursed by
VESTCOM for the reasonable fees,
-97-
105
expenses and disbursements of their counsel or other professionals incurred in
connection with the transactions contemplated by this Agreement, any amendment
hereto and the Registration Statement, except for any expenses incurred by the
STOCKHOLDERS pursuant to Section 7.1(d), for which the STOCKHOLDERS will not be
reimbursed.
17.6. NOTICES. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States or Canadian mail, addressed to the party to be notified, postage prepaid
and registered or certified with return receipt requested, or by use of an
independent third party commercial delivery service for same day or next day
delivery, or by delivering the same in person to an officer or agent of such
party. Notice by mail shall be deemed effective on the fourth business day after
its deposit with the United States Postal Service, or the Canadian Postal
Service, as the case may be, notice by same day courier shall be deemed
effective on the day of deposit with the delivery service and notice by next day
delivery service shall be deemed effective on the day following the deposit with
the delivery service.
(a) If to VESTCOM or NEWCO, addressed to them at:
VESTCOM International, Inc.
0000 Xxxxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000-0000
Attn.: Xxxx Xxxxxx, President
with copies in all cases to:
Xxxxxxxxxx, Sandler, Kohl, Xxxxxx & Xxxxxx, P.A.
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Attn.: Xxxx Xxxxxxxxxx, Esq.
-and-
Stikeman, Xxxxxxx
0000 Xxxx Xxxxxxxx Xxxx. Xxxx
Xxxxx 0000
Xxxxxxxx, Xxxxxx
X0X 0X0
Attn.: Xxxx X. Xxxxxxx, Esq.
-98-
106
(b) If to the STOCKHOLDERS, addressed to them at their addresses
set forth on Annex I, with copies to such counsel as is set
forth with respect to each STOCKHOLDER on such Annex I;
(c) If to the COMPANY, addressed to it at:
0000 Xxxx
Xxxx xx Xxxxx Xxxxx, Xxxxxx
Attn.: The President
and marked "Personal and Confidential"
with copies to:
Xxxxxxx, Xxxxxxxx & Xxxxxxxx
1501 XxXxxx Xxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
or to such other address or counsel as any party hereto shall specify
pursuant to this Section 17.6 from time to time.
17.7. GOVERNING LAW. This Agreement shall be governed by and interpreted
and construed in accordance with the laws of the Province of Quebec and the laws
of Canada applicable therein and shall be treated in all respects as a Quebec
contract. By executing this Agreement, each STOCKHOLDER and the COMPANY consent
to personal jurisdiction in the state and federal courts of the State of New
Jersey.
17.8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein, or in writing
delivered pursuant to the provisions of this Agreement shall survive the
consummation of the transactions contemplated hereby and any examination on
behalf of the parties until the dates provided in Sections 11.1 and 11.2.
17.9. EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or
-99-
107
remedy, nor shall it be construed as a waiver of or acquiescence in any such
breach or default, or of any similar breach or default occurring later; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default occurring before or after that waiver.
17.10. TIME. Time is of the essence with respect to this Agreement.
17.11. REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
17.12. REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
17.13. CAPTIONS. The headings of this Agreement are inserted for
convenience only, and shall not constitute a part of this Agreement or be used
to construe or interpret any provision hereof.
17.14. CURRENCY. Except as specifically indicated, all dollar amounts
herein shall be in lawful currency of the United States. The parties further
agree that for purposes of interpretation of this Agreement except as otherwise
provided in Article 2, the Canada/U.S. exchange rate to be used is 1US$ = 1.35
Cdn$ until the Consummation Date. After the Consummation Date, the exchange rate
to be used shall be the exchange rate on the day preceding the date on which
such determination must be made for purposes hereof for such foreign currency
expressed in Canadian Dollars as reported in The Wall Street Journal under
"Currency Trading; Exchange Rates" or, in the event such exchange rate is not
available, such exchange rate on such date for such foreign currency expressed
in Canadian Dollars as may be deemed by the board of directors of VESTCOM to be
appropriate for such purpose.
-100-
108
17.15. THIRD PARTY BENEFICIARIES. The parties to this Agreement hereby
agree and acknowledge that the Underwriters are third party beneficiaries of
this Agreement and that there are no other third party beneficiaries who are not
parties to this Agreement.
-101-
109
IN WITNESS WHEREOF, the parties hereto have executed this Agreements as of
the day and year first above written.
ATTEST: VESTCOM INTERNATIONAL, INC.
/s/ XXXXX XXXXXXX /s/ XXXXX XXXXXXXXXX
---------------------- ---------------------------------
Xxxxx XxXxxxxxxx, Vice-President
ATTEST: 504087 N.B. INC.
/s/ XXXXX XXXXXXX /s/ XXXXX XXXXXXXXXX
---------------------- ---------------------------------
Xxxxx XxXxxxxxxx, Vice-President
ATTEST:
/s/ XXXXX XXXXXXX /s/ XXXXXX XXXXX
---------------------- ---------------------------------
Xxxxxx Xxxxx
ATTEST:
/s/ XXXXX XXXXXXX /s/ XXXXXXX XXXXX
---------------------- ---------------------------------
Xxxxxxx Xxxxx
ATTEST:
/s/ XXXXX XXXXXXX /s/ XXXXXX APRIL
---------------------- ---------------------------------
Xxxxxx April
ATTEST: LIRPACO INC.
/s/ XXXXX XXXXXXX /s/ XXXXXX XXXXX
---------------------- ---------------------------------
/s/ XXXXX XXXXXXX /S/ XXXXXXX XXXXX
---------------------- ---------------------------------
-102-
110
INTERVENTIONS
AND HERETO INTERVENED the Underwriters to take cognizance and accept the benefit
of the provisions of Section 11 of the foregoing Agreement.
ATTEST: LEAD UNDERWRITER:
---------------------- ---------------------------------
---------------------- ---------------------------------
AND HERETO INTERNENED COS INFORMATION INC. to take cognizance of the
foregoing and guarantee solidarily (without benefit of division or
discussion) the truth of the representations and warranties of LIRPACO INC.
contained herein as well as the execution and performance of any and all of
LIRPACO INC.'s obligations, covenants and agreements contained herein.
ATTEST: COS INFORMATION INC.:
/s/ Xxxxx Xxxxxxx /s/ Xxxxxx Xxxxx
---------------------- ---------------------------------
-103-
111
ANNEX I
STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY
The following is a list of the STOCKHOLDERS, their addresses and the
amount of the COMPANY'S Stock held by each thereof:
STOCKHOLDER
AND COMPANY
ADDRESS STOCK
-------------------------------------- ----------------------------------------------
Xxxxxx Xxxxx 417,082 Class E shares of the COMPANY
0000-0000 XxxXxxxxx Xxxxxx ---------- (100 % of outstanding Class E)
Xxxxxxxx, Xxxxxx, Xxxxxx X0X 0X0 8,424.78 Class F shares of the COMPANY
---------- (5.06% of outstanding Class F)
Xxxxxxx Xxxxx 100 Class A shares of the COMPANY
6824 Xxxxxx ---------- (100% of outstanding Class A)
Xxxx-Xxxxx-Xxx, Xxxxxx, Xxxxxx X0X 0X0
Xxxxxx April 158,140.67 Class F shares of the COMPANY
0000-0000 XxxXxxxxx Xxxxxx ---------- (94.95% of outstanding Class F)
Xxxxxxxx, Xxxxxx, Xxxxxx X0X 0X0
Copies of any notices delivered to any STOCKHOLDER pursuant to Section
17.7 should be sent to:
Xxxxxxx Xxxxxxx, Esq.
Xxxxxxx Xxxxxxxx & Xxxxxxxx
0000 XxXxxx Xxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxx, Xxxxxx, Xxxxxx X0X 0X0
112
ANNEX II
CONSIDERATION TO FOUNDING COMPANIES
PART A
The aggregate consideration to be paid to the STOCKHOLDERS is as
follows(1):
239,988 shares of NEWCO stock exchangeable into 239,988 shares of
---------- VESTCOM Stock (assuming but not guaranteeing a public offering
price of $13 per share)
$1,036,000 in cash(2)
----------
1 multiple voting share
----------
The consideration to be paid to each STOCKHOLDER is as follows:
SHARES OF MULTIPLE VOTING
STOCKHOLDER NEWCO STOCK SHARES CASH
------------- ----------- --------------- --------
Xxxxxx Xxxxx 127,746 (127,746 votes) $502,640
Xxxxxxx Xxxxx 112,242 (112,242 votes) $426,000
Xxxxxx April 0 0 $107,360
(1.) In addition Xxxxxx Xxxxx and Xxxxxxx Xxxxx may be entitled to receive
additional shares of NEWCO exchangeable into VESTCOM Stock in accordance
with the provisions of Section 2.3 of the Share Purchase Agreement.
(2.) Figure presented in U.S. dollars. The cash payment is to be made in
Canadian dollars on a 1.35 conversion rate.
113
ANNEX II
PART B
The aggregate consideration to be paid to the Founding Stockholders of each
Founding Company is as follows:*
[NOTE: The underwriter has not reviewed any financial statements or projections
nor assumed a $13/share price. All numbers are subject to adjustment following
review of the financial data and fixing of the price range.]
Shares of
VESTCOM
Founding Company Common Stock Cash
---------------- ------------ ----
1. Computer Output Systems, Inc.(1) 297,028 $1,591,636
2. Comvestrix Corp. 943,643 4,770,641
3. Direct Mail Services, Inc. and 1,049,760 5,307,120
its affiliates
4. Electronic Imaging Services, Inc.(2) 114,000 1,018,000
5. Image Printing Systems, Inc.(3) 76,923 2,999,990
6. COS (Lirpaco, Inc.)(4) (5) 239,988(6) 1,036,000
7. Mystic Graphic Systems, Inc. 130,769 1,700,003
1. Subject to an earn-out of up to an additional $1,500,000 payable 28%
($420,012) in cash and 72% in VESTCOM Common Stock (83,076 shares if
stock price remains at $13 per share), which is based on 1997 revenues
and EBIT (except for interest on any capital equipment purchases made
after the beginning of the earn-out period).
2. Subject to an earn-out of up to an additional $6,000,000 payable 28% in
cash ($1,680,009) and 72% in VESTCOM Preferred Stock issued on the
Consummation Date which can convert into VESTCOM Common Stock (332,307
shares if stock price remains at $13 per share), both of which are based
on EBIT (except for interest on any capital equipment purchases made
after the beginning of the earn-out period) for the two year period
beginning on the first day of the fiscal quarter within which the
Consummation Date occurs.
3. Subject to an earn-out of up to $4,499,997, payable $700,007 in cash and
the balance in VESTCOM Preferred Stock issued on the Consummation Date
which can convert into 292,307 shares of VESTCOM Common Stock (if the
initial public offering price remains at $13 per share) based on EBIT
(except for interest on any capital equipment purchases made after the
beginning of the earn-out period) for the one year period beginning on
the first day of the fiscal quarter within which the Consummation Date
occurs.
4. Figures presented in U.S. Dollars. The cash payment is to be made in
Canadian Dollars based on a 1.35 conversion rate.
----------
*ALL OF THE ABOVE NUMBERS ARE PRELIMINARY AND SUBJECT TO ADJUSTMENT AFTER REVIEW
OF THE FINANCIAL STATEMENTS AND PROJECTIONS.
114
-2-
5. Subject to an earn-out (based upon EBIT for calendar year 1997, except
for interest on any capital equipment purchases made after the beginning
of the earn-out period) of up to an additional $2,100,000 Cdn., payable
in a special class of shares of stock of VESTCOM Canadian Acquisition
Subsidiary (using $l3) which are exchangeable into an equal
number of shares of VESTCOM Common Stock, with the conversion rate from
Canadian to U.S. Dollars determined at the date of determination of the
earn-out, plus special class of VESTCOM preferred stock providing voting
rights.
6. Special class of shares of stock of VESTCOM Canadian Acquisition
Subsidiary exchangeable into 239,988 shares of VESTCOM Common Stock, plus
special class of VESTCOM preferred stock providing the equivalent voting
rights of 239,988 shares of VESTCOM Common Stock.
115
ANNEX III TO SHARE PURCHASE AGREEMENT
FORM OF
VOTING TRUST AGREEMENT
MEMORANDUM OF AGREEMENT made as of the ____th day of __, 1997.
BETWEEN: VESTCOM INTERNATIONAL, INC., a corporation subsisting under
the laws of the State of New Jersey (hereinafter referred to
as "VESTCOM")
AND: XXXXXX XXXXX, executive, residing at ________________________
(hereinafter referred to as "H.A.")
AND: XXXXXXX XXXXX, executive, residing at _______________________
(hereinafter referred to as "L.A.")
AND: XXXXXX APRIL, executive, residing at ________________________
(hereinafter referred to as "S.A.")
(H.A., L.A. and S.A. being also hereinafter referred to
individually as a "STOCKHOLDER" and collectively as the
"STOCKHOLDERS")
AND: MONTREAL TRUST COMPANY, a trust company existing under the
laws of Canada (the "DEPOSITARY").
WHEREAS VESTCOM is to issue to the Stockholders one Multiple
Voting Share (as hereinafter defined) which is to be held by the Depositary as
hereinafter provided;
WHEREAS VESTCOM, through 504087 N.B. Inc., a wholly-owned
subsidiary ("NEWCO"), has purchased from the Stockholders all the issued and
outstanding shares of LIRPACO INC. by way of a Share Purchase Agreement (as
hereinafter defined);
WHEREAS NEWCO has issued, in partial consideration for said
purchase, -, - and - non-voting shares in the capital of NEWCO (the "DIVIDEND
ACCESS SHARES"), respectively, to each of H.A., L.A. and S.A.;
WHEREAS the Stockholders, simultaneously, subscribed to one
(1) Multiple Voting Share;
WHEREAS the Stockholders agreed in the Share Purchase
Agreement to transfer the one Multiple Voting Share to the Depositary, who shall
hold same for and on behalf of the Stockholders;
116
-2-
WHEREAS the parties desire to make appropriate provision for
and to establish a procedure whereby voting rights attached to the Multiple
Voting Share shall be exercisable by the Depositary for and on behalf of the
Stockholders and whereby the Multiple Voting Share may be redeemed by VESTCOM;
AND WHEREAS these recitals and any statements of fact in this
trust agreement are made by VESTCOM and the Stockholders and not by the
Depositary;
NOW THEREFORE, in consideration of the respective covenants
and agreements provided in this trust agreement and for other good consideration
(the receipt and sufficiency of which are hereby acknowledged), the parties
agree as follows:
DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS. In this trust agreement, unless something in the subject
matter or content is inconsistent therewith:
"BOARD OF DIRECTORS" means the board of directors of NEWCO.
"BUSINESS DAY" means a day other than a Saturday, a Sunday or a day
when banks are not open for business in New Jersey.
"DEPOSITARY" means Montreal Trust Company and, subject to the
provisions of Article 7 hereof, includes any successor Depositary or
permitted assigns.
"DIVIDEND ACCESS SHARE PROVISIONS" means the rights, privileges,
restrictions and conditions attaching to the Dividend Access Shares,
the whole as provided for in the Articles of Incorporation of NEWCO.
"DIVIDEND ACCESS SHARES" has the meaning set out in the recitals
hereto.
"INDEMNIFIED PARTIES" has the meaning ascribed thereto in section 6.1
hereof.
"LIQUIDATION CALL RIGHT" has the meaning ascribed thereto in the Share
Purchase Agreement.
"LIST" has the meaning set out in section 3.7 hereof.
"MULTIPLE VOTING SHARE" means the one share of special voting stock of
VESTCOM, no par value, issued by VESTCOM to the Stockholders and
deposited with the Depositary, which entitles the holder of record to a
number of votes at meetings of holders of VESTCOM Common Stock equal to
the number of Dividend Access Shares outstanding from time to time that
are held by such holder.
117
- 3 -
"NBCA" MEANS THE NEW BRUNSWICK COMPANIES ACT , AS AMENDED.
"NEWCO" means 504087 N.B. Inc., a New-Brunswick company.
"OFFICER'S CERTIFICATE" means, with respect to VESTCOM or NEWCO, as the
case may be, a certificate signed by any one of the Chairman of the
Board, the Vice-Chairman of the Board, the President or any
Vice-President of VESTCOM or NEWCO, as the case may be.
"PUT RIGHT" has the meaning ascribed thereto in the Share Purchase
Agreement.
"REDEMPTION CALL RIGHT" has the meaning ascribed thereto in the Share
Purchase Agreement.
"RETRACTION CALL RIGHT" has the meaning ascribed thereto in the Share
Purchase Agreement.
"RIGHT OF RETRACTION" has the meaning ascribed thereto in the Share
Purchase Agreement.
"SHARE PURCHASE AGREEMENT" means the share purchase agreement dated as
of _______________, 1997 among VESTCOM, NEWCO, the Stockholders and
LIRPACO INC.
"STOCKHOLDER VOTES" has the meaning set out in section 3.3 hereof.
"STOCKHOLDERS" means H.A., L.A. and S.A. and their successors and
assigns, other than VESTCOM or a Subsidiary.
"SUBSIDIARY" means any corporation more than 50% of the outstanding
stock of which, by vote, is owned, directly or indirectly, by VESTCOM,
by one or more other Subsidiaries of VESTCOM or by VESTCOM and one or
more other Subsidiaries of VESTCOM.
"TRANSFER AGENT" means [-], a corporation existing under the laws
of Canada, or such other person as may from time to time be the
registrar and transfer agent for the Dividend Access Shares.
"TRUST" means the trust created by this trust agreement.
"VESTCOM BOARD OF DIRECTORS" means the board of directors of VESTCOM.
"VESTCOM COMMON STOCK" means the shares of Common Stock of VESTCOM, no
par value, having voting rights of one vote per share, and any other
securities into which such shares may be changed or for which such
shares may be exchanged (whether or not VESTCOM shall be the issuer of
such other securities) or any other consideration which
118
- 4 -
may be received by the holders of such shares, pursuant to a
recapitalization, reconstruction, reorganization or reclassification
of, or amalgamation, merger, liquidation or similar transaction,
affecting such shares.
"VESTCOM MEETING" has the meaning set out in section 3.3 hereof.
"VESTCOM VOTE" has the meaning set out in Section 3.3 hereof;
"VOTING RIGHTS" means the voting rights attached to the Multiple Voting
Share.
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC. The division of this
trust agreement into articles and sections and the insertion of
headings are for reference purposes only and shall not affect the
interpretation of this trust agreement. Unless otherwise indicated, any
reference in this trust agreement to an article or section refers to
the specified article or section of this trust agreement.
1.3 NUMBER, GENDER AND PERSONS. In this trust agreement, unless the context
otherwise requires, words importing the singular number include the
plural and vice versa, words importing any gender include all genders
and words importing persons include individuals, corporations,
partnerships, companies, associations, trusts, unincorporated
organizations, governmental bodies and other legal or business entities
of any kind.
1.4 DATE FOR ANY ACTION. If any date on which any action is required to be
taken under this trust agreement is not a Business Day, such action
shall be required to be taken on the next succeeding Business Day.
1.5 PAYMENTS. All payments to be made hereunder will be made without
interest and less any tax required by law to be deducted and withheld.
119
- 5 -
2
TRUST
2.1 ESTABLISHMENT OF TRUST. The purpose of this trust agreement is to
create the Trust for the benefit of the Stockholders and VESTCOM, as
herein provided. The Depositary will hold the Multiple Voting Share in
order to enable the Depositary to exercise the Voting Rights and will
hold the other rights granted in or resulting from the Depositary being
a party to this trust agreement in order to enable the Depositary to
exercise or enforce such rights, in each case as trustee for and on
behalf of the Stockholders or VESTCOM, as the case may be, as provided
in this trust agreement.
3
MULTIPLE VOTING SHARE
3.1 ISSUE AND OWNERSHIP OF THE MULTIPLE VOTING SHARE. Simultaneously with
the execution and delivery of this trust agreement, VESTCOM will issue
to the Stockholders, and the Stockholders will deposit with the
Depositary the Multiple Voting Share to be hereafter held of record by
the Depositary as trustee for and on behalf of, and for the use and
benefit of, the Stockholders, in accordance with the provisions of this
trust agreement. VESTCOM hereby acknowledges receipt from the
Stockholders of good consideration (and the sufficiency thereof) for
the issuance of the Multiple Voting Share by VESTCOM to the
Stockholders being the subscription price therefore of $1. During the
term of the Trust and subject to the terms and conditions of this trust
agreement, the Depositary shall possess and be vested with full legal
ownership of the Multiple Voting Share and shall be entitled to
exercise all of the rights and powers of an owner with respect to the
Multiple Voting Share, provided that the Depositary shall:
(a) hold the Multiple Voting Share and the legal title thereto as
Depositary solely for the use and benefit of the Stockholders
in accordance with the provisions of this trust agreement; and
(b) except as specifically authorized by this trust agreement,
have no power or authority to sell, transfer, vote or
otherwise deal in or with the Multiple Voting Share and the
Multiple Voting Share shall not be used or disposed of by the
Depositary for any purpose other than the purposes for which
the Trust is created pursuant to this trust agreement.
120
- 6 -
3.2 VOTING RIGHTS. The Depositary, as the holder of record of the Multiple
Voting Share, shall be entitled to all of the Voting Rights, including
the right to consent to or to vote in person or by proxy the Multiple
Voting Share, on any matter, question or proposition whatsoever that
may come before the stockholders of VESTCOM at a VESTCOM Meeting or
upon a VESTCOM Vote. The Voting Rights shall be and remain vested in
and exercised by the Depositary. Subject to section 4.13 hereof, the
Depositary shall exercise the Voting Rights only on the basis of
instructions received pursuant to this Article 3 from Stockholders
entitled to instruct the Depositary as to the voting thereof at the
time at which the VESTCOM Meeting is held or the VESTCOM Vote occurs.
To the extent that no instructions are received from a Stockholder with
respect to the Voting Rights to which such Stockholder is entitled, the
Depositary shall not exercise or permit the exercise of the Voting
Rights relating to the Dividend Access Shares held by such STOCKHOLDER
who did not provide the Depositary with instructions as aforesaid.
3.3 NUMBER OF VOTES. With respect to all meetings of stockholders of
VESTCOM at which holders of shares of VESTCOM Common Stock are entitled
to vote (a "VESTCOM MEETING"), and with respect to any other
circumstance in which the holders of VESTCOM Common Stock are entitled
to vote (a "VESTCOM VOTE") each Stockholder shall be entitled to
instruct the Depositary to cast and exercise, in the manner instructed,
one vote for each Dividend Access Share owned of record by such
Stockholder on the record date established by VESTCOM or by applicable
law for such VESTCOM Meeting, and|or such VESTCOM Vote as the case may
be (the "STOCKHOLDER VOTES") in respect of each matter, question or
proposition to be voted on at such VESTCOM Meeting.
3.4 MAILINGS TO STOCKHOLDERS. With respect to each VESTCOM Meeting, and|or
VESTCOM Vote the Depositary will mail or cause to be mailed (or
otherwise communicate in the same manner that VESTCOM utilizes in
communications to holders of VESTCOM Common Stock, VESTCOM agreeing to
advise the Depositary in writing of such method and subject to the
Depositary's ability to provide this method of communication) to each
of the Stockholders named in the List on the same day as the initial
mailing or notice (or other communication) with respect thereto is
received by the Depositary from VESTCOM:
(a) a copy of such notice, together with any proxy or information
statement and related materials to be provided to stockholders
of VESTCOM;
(b) a statement that such Stockholder is entitled, subject to the
provisions of section 3.8 hereof, to instruct the Depositary
as to the exercise of the Stockholder Votes with respect to
such VESTCOM Meeting and|or VESTCOM Vote, or, pursuant and
subject to section 3.8 hereof, to attend such VESTCOM Meeting
and to exercise personally the Stockholder Votes thereat;
(c) a statement as to the manner in which such instructions may be
given to the Depositary, including an express indication that
instructions may be given to the Depositary to give:
121
- 7 -
(i) a proxy to such Stockholder or its designee to
exercise personally such holder's Stockholder Votes;
or
(ii) a proxy to a designated agent or other representative
of the management of VESTCOM to exercise such
Stockholder Votes;
(d) a statement that if no such instructions are received from the
Stockholder, the Stockholder Votes to which such Stockholder
is entitled will not be exercised;
(e) a form of direction whereby the Stockholder may so direct and
instruct the Depositary as contemplated herein; and
(f) a statement of (A) the time and date by which such
instructions must be received by the Depositary in order to be
binding upon it, which in the case of a VESTCOM Meeting shall
not be later than the close of business on the second Business
Day prior to such meeting, and (B) the method for revoking or
amending such instructions.
The materials referred to above are to be provided by VESTCOM to the
Depositary. For the purpose of determining Stockholder Votes to which a
Stockholder is entitled in respect of any such VESTCOM Meeting or
VESTCOM Vote, the number of Dividend Access Shares owned of record by
the Stockholder shall be determined at the close of business on the
record date established by VESTCOM or by applicable law for purposes of
determining stockholders entitled to vote at such VESTCOM Meeting or
VESTCOM Vote. VESTCOM will notify the Depositary in writing of any
decision of the VESTCOM Board of Directors with respect to the calling
of any such VESTCOM Meeting or VESTCOM Vote and shall provide all
necessary information and materials to the Depositary in each case
promptly and in any event in sufficient time to enable the Depositary
to perform its obligations contemplated by this section 3.4.
3.5 COPIES OF STOCKHOLDER INFORMATION. VESTCOM will deliver to the
Depositary copies of all proxy materials (including notices of VESTCOM
Meetings but excluding proxies to vote shares of VESTCOM Common Stock),
information statements, reports (including without limitation all
interim and annual financial statements) and other written
communications that are to be distributed from time to time to holders
of VESTCOM Common Stock in sufficient quantities and in sufficient time
so as to enable the Depositary to send those materials to each
Stockholder at the same time as such materials are first sent to
holders of VESTCOM Common Stock. The Depositary will mail or otherwise
send to each Stockholder, at the expense of VESTCOM, copies of all such
materials (and all materials specifically directed to the Stockholders
or to the Depositary for the benefit of the Stockholders by VESTCOM)
received by the Depositary from VESTCOM at the same time as such
materials are first sent to holders of VESTCOM Common Stock. The
Depositary will make copies of all such materials available for
inspection by any Stockholder at the Depositary's principal office in
the city of Montreal.
122
- 8 -
3.6 OTHER MATERIALS. Immediately after receipt by VESTCOM or any
stockholder of VESTCOM of any material sent or given generally to the
holders of VESTCOM Common Stock by or on behalf of a third party,
including without limitation, dissident proxy and information circulars
(and related information and materials) and tender and exchange offer
circulars (and related information and materials), VESTCOM shall use
its best efforts to obtain and deliver to the Depositary copies thereof
in sufficient quantities so as to enable the Depositary to forward such
materials (unless the same has been provided directly to Stockholders
by such third party) to each Stockholder as soon as practicable
thereafter. As soon as practicable after receipt thereof, the
Depositary will mail or otherwise send to each Stockholder, at the
expense of VESTCOM, copies of all such materials received by the
Depositary from VESTCOM. The Depositary will also make copies of all
such materials available for inspection by any Stockholder at the
Depositary's principal office in the city of Montreal.
3.7 LIST OF PERSONS ENTITLED TO VOTE. VESTCOM shall, (a) prior to each
annual, general and special VESTCOM Meeting, (b) prior to each VESTCOM
Vote and (c) forthwith upon each request made at any time by the
Depositary or the Stockholders in writing, cause NEWCO to prepare or
cause to be prepared a list (the "LIST") of the names and addresses of
the Stockholders arranged in alphabetical order and showing the number
of Dividend Access Shares held of record by each such Stockholder, in
each case at the close of business on the date specified by the
Depositary or the Stockholders in such request or, in the case of a
List prepared in connection with a VESTCOM Meeting or a VESTCOM Vote,
at the close of business on the record date established by VESTCOM or
pursuant to applicable law for determining the holders of VESTCOM
Common Stock entitled to receive notice of and/or to vote at such
VESTCOM Meeting or in connection with such VESTCOM Vote. Each such List
shall be delivered to the Depositary promptly after receipt by NEWCO of
such request or the record date for such meeting and, in any event,
within sufficient time as to enable the Depositary to perform its
obligations under this trust agreement. VESTCOM agrees to give NEWCO
written notice (with a copy to the Depositary) of the calling of any
VESTCOM Meeting or the holding of any VESTCOM Vote, together with the
record dates therefor, sufficiently prior to the date of the calling of
such meeting so as to enable NEWCO to comply with VESTCOM's requests
under this section 3.7.
3.8 ENTITLEMENT TO DIRECT VOTES. Any Stockholder named in a List prepared
in connection with any VESTCOM Meeting or VESTCOM Vote will be entitled
(a) to instruct the Depositary in the manner described in section 3
hereof with respect to the exercise of the Stockholder Votes to which
such Stockholder is entitled or (b) to attend (in the case of a VESTCOM
Meeting) such meeting personally and to exercise thereat as the proxy
of the Depositary, the Stockholder Votes to which such Stockholder is
entitled except, in each case, to the extent that such Stockholder has
transferred, upon exercise of exchange rights relating thereto, the
ownership of any Dividend Access Shares in respect of which such
Stockholder is entitled to Stockholder Votes after the close of
business on the record date for such meeting.
123
- 9 -
3.9 VOTING BY DEPOSITARY, AND ATTENDANCE OF DEPOSITARY REPRESENTATIVE, AT
VESTCOM MEETING.
(a) In connection with each VESTCOM Meeting, the Depositary shall
exercise, either in person or by proxy, in accordance with the
instructions received from a Stockholder pursuant to section
3.8 hereof, the Stockholder Votes as to which such Stockholder
is entitled to direct the vote (or any lesser number thereof
as may be set forth in the instructions); provided, however,
that such written instructions are received by the Depositary
from the Stockholder prior to the time and date fixed by it
for receipt of such instructions in the notice given by the
Depositary to the Stockholder pursuant to section 3.4 hereof.
(b) The Depositary shall cause such representatives as are
empowered by it to sign and deliver, on behalf of the
Depositary, proxies for Voting Rights enabling a Stockholder
to attend each VESTCOM Meeting. Upon submission by a
Stockholder (or its designee) of identification satisfactory
to the Depositary's representatives, and at the Stockholder's
request, such representatives shall sign and deliver to such
Stockholder (or its designee) a proxy to exercise personally
the Stockholder Votes as to which such Stockholder is
otherwise entitled hereunder to direct the vote, if such
Stockholder either (i) has not previously given the Depositary
instructions pursuant to section 3.8 hereof in respect of such
meeting, or (ii) submits to the Depositary's representatives
written revocation of any such previous instructions. At such
meeting, the Stockholder exercising such Stockholder Votes
shall have the same rights as the Depositary to speak at the
meeting in respect of any matter, question or proposition, to
vote by way of ballot at the meeting in respect of any matter,
question or proposition and to vote at such meeting by way of
a show of hands in respect of any matter, question or
proposition.
3.10 DISTRIBUTION OF WRITTEN MATERIALS. Any written materials to be
distributed by the Depositary to the Stockholders pursuant to this
trust agreement shall be delivered or sent by mail (or otherwise
communicated in the same manner as VESTCOM utilizes in communications
to holders of VESTCOM Common Stock and VESTCOM shall advise the
Depositary accordingly) to each Stockholder at its address as shown on
the books of NEWCO. VESTCOM shall cause NEWCO to provide or cause to be
provided to the Depositary for this purpose, on a timely basis and
without charge or other expense:
(a) current lists of the Stockholders; and
(b) upon the request of the Depositary, mailing labels to enable
the Depositary to carry out its duties under this trust
agreement.
The materials referred to above are to be provided by VESTCOM to the
Depositary, but shall be subject to review and comment by the
Depositary.
124
- 10 -
3.11 TERMINATION OF VOTING RIGHTS. All the rights of a Stockholder with
respect to the Stockholder Votes exercisable in respect of the Dividend
Access Shares held by such Stockholder, including the right to instruct
the Depositary as to the voting of or to vote personally such
Stockholder Votes, shall be surrendered by the Stockholder to VESTCOM
and such Stockholder Votes and the Voting Rights represented thereby
shall cease immediately upon the delivery by such Stockholder to NEWCO
or VESTCOM of the certificates representing such Dividend Access Shares
in connection with the exercise by the Stockholder of the Right of
Retraction, the Put Right or any other right of exchange provided in
the Dividend Access Share Provisions or the exercise by VESTCOM of the
Liquidation Call Right, the Redemption Call Right or the Retraction
Call Right (unless in any case NEWCO or VESTCOM shall not have
delivered the requisite shares of VESTCOM Common Stock and cheque, if
any, deliverable in exchange therefor to the Transfer Agent or the
Stockholders).
3.12 SAFEKEEPING OF CERTIFICATE. The certificates representing the Multiple
Voting Share shall at all times be held in safe keeping by the
Depositary or its agent.
3.13 REDEMPTION OF MULTIPLE VOTING SHARE. The Depositary as the holder of
record of the Multiple Voting Share, shall be entitled to do any
things, execute any documents and make any deliveries required or
useful to give full effect to the automatic redemption of the Multiple
Voting Share in accordance with the provisions of the Certificate of
Incorporation of VESTCOM once the Stockholders cease to hold any
Dividend Access Shares.
4
CONCERNING THE DEPOSITARY
4.1 POWERS AND DUTIES OF THE DEPOSITARY. The rights, powers and authorities
of the Depositary under this trust agreement, in its capacity as
Depositary of the Trust, shall be limited to:
(a) receipt and deposit of the Multiple Voting Share from VESTCOM
as Depositary for and on behalf of the Stockholders in
accordance with the provisions of this trust agreement;
(b) granting proxies and distributing materials to Stockholders as
provided in this trust agreement;
(c) voting the Stockholder Votes on behalf of the Stockholders in
accordance with the provisions of this trust agreement;
(d) endorsing and remitting the certificate representing a
Multiple Voting Share upon redemption thereof in accordance
with their provisions;
125
- 11 -
(e) taking action at the direction of a Stockholder or VESTCOM, as
the case may be, to enforce the obligations of VESTCOM or a
Stockholder, as the case may be, under this trust agreement;
and
(f) taking such other actions and doing such other things as are
specifically provided in this trust agreement.
In the exercise of such rights, powers and authorities the Depositary
shall have (and is granted) such incidental and additional rights,
powers and authorities not in conflict with any of the provisions of
this trust agreement as the Depositary, acting in good faith and in the
reasonable exercise of its discretion, may deem necessary, appropriate
or desirable to effect the purpose of the Trust. Any exercise of such
discretionary rights, powers and authorities by the Depositary shall be
final, conclusive and binding upon all persons. For greater certainty,
the Depositary shall have only those duties as are set out specifically
in this trust agreement. The Depositary in exercising its rights,
powers, duties and authorities hereunder shall act honestly and in good
faith with a view to the best interests of the Stockholders or of
VESTCOM, as the case may be, and shall exercise the care, diligence and
skill that a reasonably prudent Depositary would exercise in comparable
circumstances. The Depositary shall not be bound to give any notice or
do or take any act, action or proceeding by virtue of the powers
conferred on it hereby unless and until it shall be specifically
required to do so under the terms hereof; nor shall the Depositary be
required to take any notice of, or to do or to take any act, action or
proceeding as a result of any default or breach of any provision
hereunder, unless and until notified in writing of such default or
breach, which notice shall distinctly specify the default or breach
desired to be brought to the attention of the Depositary and in the
absence of such notice the Depositary may for all purposes of this
trust agreement conclusively assume that no default or breach has been
made in the observance or performance of any of the representations,
warranties, covenants, agreements or conditions contained herein.
4.2 NO CONFLICTS OF INTEREST. The Depositary represents to VESTCOM and the
Stockholders that at the date of execution and delivery of this trust
agreement, there exists no material conflict of interest in the role of
the Depositary as a fiduciary hereunder and the role of the Depositary
in any other capacity. The Depositary shall, within 90 days after it
becomes aware that such a material conflict of interest exists, either
eliminate such material conflict of interest or resign in the manner
and with the effect specified in Article 7 hereof. If, notwithstanding
the foregoing provisions of this section 4.2, the Depositary has such a
material conflict of interest, the validity and enforceability of this
trust agreement shall not be affected in any manner whatsoever by
reason only of the existence of such material conflict of interest. If
the Depositary contravenes the foregoing provisions of this section
4.2, any interested party may apply to the Superior Court of Quebec for
an order that the Depositary be replaced as Depositary hereunder. For
greater certainty, it is hereby provided that the Depositary shall not
be in conflict of interest by reason only of acting for and on behalf
of both the Stockholders and VESTCOM pursuant to this trust agreement.
126
- 12 -
4.3 DEALINGS WITH TRANSFER AGENTS, REGISTRARS, ETC. The Stockholders and
VESTCOM irrevocably authorize the Depositary, from time to time, to:
(a) consult, communicate and otherwise deal with the respective
registrars and transfer agents, and with any such subsequent
registrar or transfer agent, of the Dividend Access Shares and
VESTCOM Common Stock; and
(b) requisition, from time to time, from any such registrar or
transfer agent any information readily available from the
records maintained by it which the Depositary may reasonably
require for the discharge of its duties and responsibilities
under this trust agreement.
4.4 INDEMNIFICATION PRIOR TO THE CERTAIN ACTIONS BY DEPOSITARY. The
Depositary shall exercise any or all of the rights, duties, powers or
authorities vested in it by this trust agreement as Depositary for and
on behalf of the Stockholders at the request, order or direction of any
Stockholder upon such Stockholder furnishing to the Depositary
reasonable funding, security and indemnity against the costs, expenses
and liabilities that may be incurred by the Depositary therein or
thereby, provided that no Stockholder shall be obligated to furnish to
the Depositary any such funding, security or indemnity in connection
with the exercise by the Depositary of any of its rights, duties,
powers and authorities with respect to the Multiple Voting Share
pursuant to Article 3 hereof, subject to the provisions of section 4.13
hereof. None of the provisions contained in this trust agreement shall
require the Depositary to expend or risk its own funds or otherwise
incur financial liability in the exercise of any of its rights, powers,
duties or authorities unless given funds, furnished security and
indemnified as aforesaid.
4.5 ACTIONS BY STOCKHOLDERS. No Stockholder shall have the right to
institute any action, suit or proceeding or to exercise any other
remedy authorized by this trust agreement for the purpose of enforcing
any of its rights or for the execution of any trust or power hereunder
unless the Stockholder has requested the Depositary to take or
institute such action, suit or proceeding and furnished the Depositary
with the funding, security and indemnity referred to in section 4.4
hereof and the Depositary shall have failed to act within a reasonable
time thereafter. In such case, but not otherwise, a Stockholder shall
be entitled to take proceedings in any court of competent jurisdiction
such as the Depositary might have taken; it being understood and
intended that no one or more Stockholders shall have any right in any
manner whatsoever to affect, disturb or prejudice the rights hereby
created by any such action, or to enforce any right hereunder or under
the Voting Rights except subject to the conditions and in the manner
herein provided, and that all powers and trusts hereunder shall be
exercised and all proceedings at law shall be instituted, had and
maintained by the Depositary, except only as herein provided, and in
any event for the equal benefit of all Stockholders.
127
- 13 -
4.6 RELIANCE UPON DECLARATIONS. The Depositary shall not be considered to
be in contravention of any of its rights, powers, duties and
authorities hereunder if, when required, it acts and relies in good
faith upon lists, mailing labels, notices, statutory declarations,
certificates, opinions, reports or other papers or documents furnished
pursuant to the provisions hereof or required by the Depositary to be
furnished to it in the exercise of its rights, powers, duties and
authorities hereunder and such lists, mailing labels, notices,
statutory declarations, certificates, opinions, reports or other papers
or documents comply with the provisions of section 4.7 hereof, if
applicable, and with any other applicable provisions of this trust
agreement. The Depositary shall not be responsible in any manner
whatever for the sufficiency, correctness, genuineness or validity of
any such aforesaid documents or declarations relied upon or for the
form or execution of such instrument, or for the identity or authority
or right of any person or party executing same.
4.7 EVIDENCE AND AUTHORITY TO DEPOSITARY. VESTCOM shall furnish to the
Depositary evidence of compliance with the conditions provided for in
this trust agreement relating to any action or step required or
permitted to be taken by NEWCO and/or VESTCOM or the Depositary under
this trust agreement or as a result of any obligation imposed under
this trust agreement, including, without limitation, in respect of the
Voting Rights, the redemption of the Multiple Voting Share and the
taking of any other action to be taken by the Depositary at the request
of or on the application of the Stockholders and/or VESTCOM forthwith
if and when:
(a) such evidence is required by any other section of this trust
agreement to be furnished to the Depositary in accordance with
the terms of this section 4.7; or
(b) the Depositary, in the exercise of its rights, powers, duties
and authorities under this trust agreement, gives the
Stockholders and/or VESTCOM written notice requiring it to
furnish such evidence in relation to any particular action or
obligation specified in such notice.
In the case of VESTCOM, such evidence shall consist of an Officer's
Certificate of VESTCOM or a statutory declaration or a certificate made by
persons entitled to sign an Officer's Certificate stating that any such
condition has been complied with in accordance with the terms of this trust
agreement.
4.8 EXPERTS, ADVISERS AND AGENTS. The Depositary may:
(a) in relation to these presents act and rely on the opinion or
advice of or information obtained from or prepared by any
solicitor, auditor, accountant, appraiser, valuer, engineer or
other expert, whether retained by the Depositary or by NEWCO
and/or VESTCOM or otherwise, and may employ such assistants as
may be necessary to the proper determination and discharge of
its powers and duties and determination of its rights
hereunder and may pay proper and reasonable compensation for
all such legal and other advice or assistance as aforesaid;
and
128
- 14 -
(b) employ such agents and other assistants as it may reasonably
require for the proper determination and discharge of its
powers and duties hereunder, and may pay reasonable
remuneration for all services performed for it (and shall be
entitled to receive reasonable remuneration for all services
performed by it) in the discharge of the trusts hereof and
compensation for all disbursements, costs and expenses made or
incurred by it in the determination and discharge of its
duties hereunder and in the management of the Trust.
4.9 INVESTMENT OF MONEY HELD BY DEPOSITARY. Unless otherwise provided in
this trust agreement, any money held by or on behalf of the Depositary
which under the terms of this trust agreement may or ought to be
invested or which may be on deposit with the Depositary or which may be
in the hands of the Depositary may be invested and reinvested in the
name or under the control of the Depositary in securities in which,
under the laws of the Province of Quebec, trustees are authorized to
invest trust money, provided that such securities are stated to mature
within two years after their purchase by the Depositary. Pending the
investment of any money as herein before provided, such money may be
deposited in the name of the Depositary in any chartered bank in Canada
or in the deposit department of the Depositary or any other loan or
trust company authorized to accept deposits under the laws of Canada or
any province thereof at the rate of interest then current on similar
deposits.
4.10 DEPOSITARY NOT REQUIRED TO GIVE SECURITY. The Depositary shall not be
required to give any bond or security in respect of the execution of
the trusts, rights, duties, powers and authorities of this trust
agreement or otherwise in respect of these premises.
4.11 DEPOSITARY NOT BOUND TO ACT ON REQUEST. Except, as in this trust
agreement otherwise specifically provided, the Depositary shall not be
bound to act in accordance with any direction or request of VESTCOM or
of the directors thereof until a duly authenticated copy of the
instrument or resolution containing such direction or request shall
have been delivered to the Depositary, and the Depositary shall be
empowered to act and rely upon any such copy purporting to be
authenticated and believed by the Depositary to be genuine.
4.12 AUTHORITY TO CARRY ON BUSINESS. The Depositary represents to the
Stockholders and VESTCOM that at the date of execution and delivery by
it of this trust agreement it is authorized to carry on the business of
a trust company in the Province of Quebec but if, notwithstanding the
provisions of this section 4.12, it ceases to be so authorized to carry
on business, the validity and enforceability of this trust agreement
and the Voting Rights and the other rights granted in or resulting from
the Depositary being a party to this trust agreement shall not be
affected in any manner whatsoever by reason only of such event but the
Depositary shall, within 90 days after ceasing to be authorized to
carry on the business of a trust company in the Province of Quebec,
either become so authorized or resign in the manner and with the effect
specified in Article 7 hereof.
4.13 CONFLICTING CLAIMS. If conflicting claims or demands are made or
asserted with respect to any interest of any Stockholder in any
Dividend Access Shares, including any
129
- 15 -
disagreement between the heirs, representatives, successors or assigns
succeeding to all or any part of the interest of any Stockholder in any
Dividend Access Shares resulting in conflicting claims or demands being
made in connection with such interest, then the Depositary shall be
entitled, at its sole discretion, to refuse to recognize or to comply
with any such claim or demand. In so refusing, the Depositary may elect
not to exercise any Voting Rights or other rights subject to such
conflicting claims or demands and, in so doing, the Depositary shall
not be or become liable to any person on account of such election or
its failure or refusal to comply with any such conflicting claims or
demands. The Depositary shall be entitled to continue to refrain from
acting and to refuse to act until:
(a) the rights of all adverse claimants with respect to the Voting
Rights or other rights subject to such conflicting claims or
demands have been adjudicated by a final judgment of a court
of competent jurisdiction; or
(b) all differences with respect to the Voting Rights or other
rights subject to such conflicting claims or demands have been
conclusively settled by a valid written agreement binding on
all such adverse claimants, and the Depositary shall have been
furnished with an executed copy of such agreement.
If the Depositary elects to recognize any claim or comply with any
demand made by any such adverse claimant, it may in its discretion
require such claimant to furnish such surety bond or other security
satisfactory to the Depositary as it shall deem appropriate fully to
indemnify it as between all conflicting claims or demands.
4.14 ACCEPTANCE OF TRUST. The Depositary hereby accepts the Trust created
and provided for by and in this trust agreement and agrees to perform
the same upon the terms and conditions herein set forth and to hold all
rights, privileges and benefits conferred hereby and by law in trust
for VESTCOM and the various persons who shall from time to time be
Stockholders, subject to all the terms and conditions herein set forth.
5
COMPENSATION
5.1 FEES AND EXPENSES OF THE DEPOSITARY. The Stockholders agree to pay to
the Depositary for all of the services rendered by it under this trust
agreement the compensation set forth in Schedule 5.1 and will reimburse
the Depositary for all reasonable expenses (including but not limited
to taxes, compensation paid to experts, agents and advisors and travel
expenses) and disbursements, including the cost and expense of any suit
or litigation of any character and any proceedings before any
governmental agency reasonably incurred by the Depositary in connection
with its rights and duties under this trust agreement; provided that
the Stockholders shall have no obligation to reimburse the Depositary
for any expenses or disbursements paid, incurred or suffered by the
Depositary in any suit or
130
- 16 -
litigation in which the Depositary is determined to have acted in bad
faith or with negligence or willful misconduct.
6
INDEMNIFICATION AND LIMITATION OF LIABILITY
6.1 INDEMNIFICATION OF THE DEPOSITARY. The Stockholders solidarily agree to
indemnify and hold harmless the Depositary and each of its directors,
officers, employees and agents appointed and acting in accordance with
this trust agreement (collectively, the "INDEMNIFIED PARTIES") against
all claims, losses, damages, costs, penalties, fines and reasonable
expenses (including reasonable expenses of the Depositary's legal
counsel) which, without fraud, negligence, willful misconduct or bad
faith on the part of such Indemnified Party, may be paid, incurred or
suffered by the Indemnified Party by reason of or as a result of the
Depositary's acceptance or administration of the Trust, its compliance
with its duties set forth in this trust agreement, or any written or
oral instructions delivered to the Depositary by VESTCOM or a
Stockholder pursuant hereto. In no case shall the Stockholders be
liable under this indemnity for any claim against any of the
Indemnified Parties if such claim is incurred or suffered by reason of
or as a result of the fraud, negligence, willful misconduct or bad
faith of an Indemnified Party and unless the Stockholders shall be
notified by the Depositary of the written assertion of a claim or of
any action commenced against the Indemnified Parties, promptly after
any of the Indemnified Parties shall have received any such written
assertion of a claim or shall have been served with a summon or other
first legal process giving information as to the nature and basis of
the claim. Subject to (ii) below, the Stockholders shall be entitled to
participate at their own expense in the defense and, if the
Stockholders so elect at any time after receipt of such notice, any of
them may assume the defense of any suit brought to enforce any such
claim. The Depositary shall have the right to employ separate counsel
in any such suit and participate in the defense thereof but the fees
and expenses of such counsel shall be at the expense of the Depositary
unless: (i) the employment of such counsel has been authorized by the
Stockholders, such authorization not to be unreasonably withheld; or
(ii) the named parties to any such suit include both the Depositary and
the Stockholders and the Depositary shall have been advised by counsel
acceptable to the Stockholders and that there may be one or more legal
defenses available to the Depositary that are different from or in
addition to those available to the Stockholders and that an actual or
potential conflict of interests exists (in which case the Stockholders
shall not have the right to assume the defense of such suit on behalf
of the Depositary but shall be liable to pay the reasonable fees and
expenses of counsel for the Depositary). Such indemnification shall
survive the resignation or removal of the Depositary and the
termination of this trust agreement.
6.2 LIMITATION OF LIABILITY. The Depositary shall not be held liable for
any loss incurred on any investment of funds pursuant to this trust
agreement, except to the extent that such
131
- 17 -
loss is attributable to fraud, negligence, willful misconduct or bad
faith on the part of the Depositary.
7
CHANGE OF DEPOSITARY
7.1 RESIGNATION. The Depositary, or any depositary hereafter appointed, may
at any time resign by giving written notice of such resignation to
VESTCOM and the Stockholders specifying the date on which it desires to
resign, provided that such notice shall never be given less than 60
days before such desired resignation date unless VESTCOM otherwise
agrees and provided further that such resignation shall not take effect
until the date of the appointment of a successor depositary and the
acceptance of such appointment by the successor depositary. Upon
receiving such notice of resignation, VESTCOM and the Stockholders
shall promptly jointly appoint a successor depositary by written
instrument in duplicate, one copy of which shall be delivered to the
resigning depositary and one copy to the successor depositary. Failing
agreement by VESTCOM and the Stockholders as to the choice of a
successor depositary within ten days of the resignation of the
Depositary, or failing acceptance by a successor depositary, a
successor depositary may be appointed by an order of the Superior Court
of Quebec upon application of one or more of the parties hereto.
7.2 REMOVAL. The Depositary, or any depositary hereafter appointed, may be
removed with or without cause, at any time on 60 days' prior notice by
written instrument executed by VESTCOM and NEWCO, in duplicate, one
copy of which shall be delivered to the Depositary so removed and one
copy to the successor depositary. Any successor depositary shall be
appointed in accordance with the terms of Section 7.1.
7.3 SUCCESSOR DEPOSITARY. Any successor depositary appointed as provided
under this trust agreement shall execute, acknowledge and deliver to
VESTCOM and to its predecessor depositary an instrument accepting such
appointment. Thereupon the resignation or removal of the predecessor
depositary shall become effective and such successor depositary,
without any further act, deed or conveyance, shall become vested with
all the rights, powers, duties and obligations of its predecessor under
this trust agreement, with like effect as if originally named as
depositary in this trust agreement. However, on the written request of
VESTCOM or of the successor depositary, the depositary ceasing to act
shall, upon payment of any amounts then due it pursuant to the
provisions of this trust agreement, execute and deliver an instrument
transferring to such successor depositary all the rights and powers of
the depositary so ceasing to act. Upon the request of any such
successor depositary, VESTCOM and such predecessor depositary shall
execute any and all instruments in writing for more fully and certainly
vesting in and confirming to such successor depositary all such rights
and powers.
132
- 18 -
7.4 NOTICE OF SUCCESSOR DEPOSITARY. Upon acceptance of appointment by a
successor depositary as provided herein, VESTCOM shall cause to be
mailed notice of the succession of such depositary hereunder to each
Stockholder specified in a List. If VESTCOM shall fail to cause such
notice to be mailed within 10 days after acceptance of appointment by
the successor depositary, the successor depositary shall cause such
notice to be mailed at the expense of VESTCOM.
8
AMENDMENTS AND SUPPLEMENTAL TRUST AGREEMENTS
8.1 AMENDMENTS, MODIFICATIONS, ETC. This trust agreement may not be amended
or modified except by an agreement in writing executed by VESTCOM, the
Depositary and the Stockholders.
8.2 MINISTERIAL AMENDMENTS. Notwithstanding the provisions of section 8.1
hereof, VESTCOM and the Depositary may in writing, at any time and from
time to time, without the approval of the Stockholders, amend or modify
this trust agreement for the purposes of:
(a) adding to the covenants of any or all of the parties hereto
for the protection of the Stockholders hereunder;
(b) making such amendments or modifications not inconsistent with
this trust agreement as may be necessary or desirable with
respect to matters or questions which, in the opinion of the
VESTCOM Board of Directors and in the opinion of the
Depositary and its counsel, having in mind the best interests
of the Stockholders as a whole, it may be expedient to make,
provided that the VESTCOM Board of Directors and the
Depositary and its counsel shall be of the opinion that such
amendments and modifications will not be prejudicial to the
interests of the Stockholders as a whole; or
(c) making such changes or corrections which, on the advice of
counsel to VESTCOM and the Depositary, are required for the
purpose of curing or correcting any ambiguity or defect or
inconsistent provision or clerical omission or mistake or
manifest error, provided that the Depositary and its counsel
and the VESTCOM Board of Directors shall be of the opinion
that such changes or corrections will not be prejudicial to
the interests of the Stockholders as a whole.
8.3 CHANGES IN CAPITAL OF VESTCOM AND NEWCO. At all times after the
occurrence of any event, as a result of which either VESTCOM Common
Stock or the Dividend Access Shares or both are in any way changed,
this trust agreement shall forthwith be amended and modified as
necessary in order that it shall apply with full force and effect,
mutatis mutandis, to all new securities into which VESTCOM Common Stock
or the Dividend
133
- 19 -
Access Shares or both are so changed and the parties hereto shall
execute and deliver a supplemental trust agreement giving effect to and
evidencing such necessary amendments and modifications.
8.4 EXECUTION OF SUPPLEMENTAL TRUST AGREEMENTS. No amendment to or
modification or waiver of any of the provisions of this trust agreement
otherwise permitted hereunder shall be effective unless made in writing
and signed by all of the parties hereto. From time to time VESTCOM
(when authorized by a resolution of the VESTCOM Board of Directors) and
the Depositary may, subject to the provisions of these presents, and
they shall, when so directed by these presents, execute and deliver by
their proper officers, trust agreements or other instruments
supplemental hereto, which thereafter shall form part hereof, for any
one or more of the following purposes:
(a) evidencing the succession of any successor depositary in
accordance with the provisions of Article 7;
(b) making any additions to, deletions from or alterations of the
provisions of this trust agreement or the Voting Rights which,
in the opinion of the Depositary and its counsel, will not be
prejudicial to the interests of the Stockholders as a whole or
are in the opinion of counsel to the Depositary necessary or
advisable in order to incorporate, reflect or comply with any
legislation the provisions of which apply to VESTCOM, NEWCO,
the Depositary or this trust agreement; and
(c) for any other purposes not inconsistent with the provisions of
this trust agreement, including without limitation to make or
evidence any amendment or modification to this trust agreement
as contemplated hereby, provided that, in the opinion of the
Depositary and its counsel, the rights of the Depositary and
the Stockholders as a whole will not be prejudiced thereby.
9
TERMINATION
9.1 TERM. The Trust created by this trust agreement shall continue until
the earliest to occur of the following events:
(a) no outstanding Dividend Access Shares are held by any
Stockholder; and
(b) VESTCOM elects in writing to terminate the Trust and such
termination is approved in writing by all of the Stockholders.
9.2 SURVIVAL. It is agreed that the provisions of Articles 5 and 6 hereof
shall survive any such termination of this trust agreement.
134
- 20 -
10
MISCELLANEOUS
10.1 LEGENDED SHARE CERTIFICATES. VESTCOM will cause NEWCO to cause each
certificate representing Dividend Access Shares to bear an appropriate
legend notifying the Stockholders of their right to instruct the
Depositary with respect to the exercise of the Voting Rights with
respect to the Dividend Access Shares held by a Stockholder.
10.2 SEVERABILITY. If any provision of this trust agreement is held to be
invalid, illegal or unenforceable, the validity, legality or
enforceability of the remainder of this trust agreement shall not in
any way be affected or impaired thereby and this trust agreement shall
be carried out as nearly as possible in accordance with its original
terms and conditions.
10.3 ENUREMENT. This trust agreement shall be binding upon and enure to the
benefit of the parties hereto and their respective successors and
permitted assigns.
10.4 NOTICES TO PARTIES. All notices and other communications between the
parties hereunder shall be in writing and shall be deemed to have been
given if delivered personally or by confirmed telecopy to the parties
at the following addresses (or at such other address for such party as
shall be specified in like notice);
(a) if to VESTCOM at:
Vestcom International, Inc.
0000 Xxxxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000-0000
Attention: Xxxx Xxxxxx, President
(b) if to NEWCO at:
0000 XxXxxx Xxxxxxx Xxxxxx
0xx Xxxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: The Manager, Corporate Trust Department
Telecopier: (000) 000-0000
(c) if to the Depositary at:
135
- 21 -
Any notice or other communication given personally shall be deemed to
have been given and received upon delivery thereof and if given by
telecopy shall be deemed to have been given and received on the date of
receipt thereof unless such day is not a Business Day in which case it
shall be deemed to have been given and received upon the immediately
following Business Day.
10.5 NOTICE OF STOCKHOLDERS. Any and all notices to be given and any
documents to be sent to any Stockholders may be given or sent to the
address of such holder shown on the register of holders of Dividend
Access Shares in any manner permitted by the NBCA from time to time in
force in respect of notices to shareholders and shall be deemed to be
received (if given or sent in such manner) at the time specified in
such Act, the provisions of which Act shall apply mutatis mutandis to
notices or documents as aforesaid sent to such holders.
10.6 RISK OF PAYMENTS BY POST. Whenever payments are to be made or documents
are to be sent to any Stockholder by the Depositary or by VESTCOM or by
such Stockholder to the Depositary or to VESTCOM, the making of such
payment or sending of such document sent through the post shall be at
the risk of VESTCOM, in the case of payments made or documents sent by
the Depositary or VESTCOM or the Stockholder, in the case of payments
made or documents sent by the Stockholder.
10.7 COUNTERPARTS. This trust agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
10.8 JURISDICTION. This trust agreement shall be governed by, construed and
enforced in accordance with the laws of the Province of Quebec and the
laws of Canada applicable therein.
10.9 LANGUAGE. The parties confirm their wish that this agreement and all
documents contemplated hereby be in the English language only. Les
parties confirment leur volonte que la presente convention et les
documents y afferent soient en langue anglaise seulement.
IN WITNESS WHEREOF, the parties hereto have caused this trust agreement
to be duly executed as of the date first above written.
VESTCOM INTERNATIONAL, INC.
By:
---------------------------
Name:
Title:
MONTREAL TRUST COMPANY
136
- 22 -
By:
---------------------------
Name:
Title:
By:
---------------------------
Name:
Title:
----------------------------------------
XXXXXX XXXXX
----------------------------------------
XXXXXXX XXXXX
----------------------------------------
XXXXXX APRIL
137
SCHEDULE 5.1
INITIAL FEE: $2,500, payable upon signing
ANNUAL FEE: $3,000
138
ANNEX IV TO SHARE PURCHASE AGREEMENT
PROVISIONS ATTACHING TO DIVIDEND ACCESS SHARES
The Dividend Access Shares in the capital of the Corporation
shall have the following rights, privileges, restrictions and conditions:
ARTICLE 1
INTERPRETATION
1.1 For the purposes of these share provisions:
"ACQUISITION OF CONTROL" for purposes of these share provisions shall
be deemed to have occurred if:
(i) Any person, firm or corporation acquires directly or indirectly the
Beneficial Ownership (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) of any voting security of VESTCOM and immediately after
such acquisition, the acquirer has Beneficial Ownership of voting securities
representing 50% or more of the total voting power of all the then-outstanding
voting securities of VESTCOM;
(ii) the individuals (A) who, as of the Consummation Date (as defined
in the Share Purchase Agreement) constitute the Board of Directors of VESTCOM
(the "ORIGINAL DIRECTORS") or (B) who thereafter are elected to the Board of
Directors of Vestcom (the "VESTCOM BOARD") and whose election, or nomination for
election, to the Vestcom Board was approved by a vote of at least 2|3 of the
Original Directors then still in office (such Directors being called "ADDITIONAL
ORIGINAL DIRECTORS") or (C) who are elected to the Vestcom Board and whose
election or nomination for election to the Vestcom Board was approved by a vote
of at least 2|3 of the Original Directors and Additional original Directors then
still in office, cease for any reason to constitute a majority of the members of
the Vestcom Board;
(iii) The stockholders of VESTCOM shall approve a merger,
consolidation, recapitalization or reorganization of VESTCOM or consummation of
any such transaction if stockholder approval is not sought or obtained, other
than any such transaction which would result in at least 75% of the total voting
power represented by the voting securities of the surviving entity outstanding
immediately after such transaction being Beneficially Owned by holders of
outstanding voting securities of VESTCOM immediately prior to the transaction,
with the voting power of each such continuing holder relative to such other
continuing holders being not altered substantially in the transaction; or
(iv) The stockholders of VESTCOM shall approve a plan of complete
liquidation of VESTCOM or an agreement for the sale or disposition by the
Corporation of all or a substantial portion of VESTCOM's assets (i.e. 50% or
more in value of the total assets of VESTCOM).
139
"AFFILIATE" of any person means any other person directly or indirectly
controlled by, or under common control of, that person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control of"), as applied to any person, means
the possession by another person, directly or indirectly, of the power to direct
or cause the direction of the management and policies of that first mentioned
person, whether through the ownership of voting securities, by contract or
otherwise.
"AUTOMATIC REDEMPTION DATE" means the date for the automatic redemption
by the Corporation of Dividend Access Shares pursuant to Article 7 of these
share provisions, which date shall be [-], 2002, unless (a) such date shall be
extended at any time or from time to time to a specified later date by the Board
of Directors or (b) such date shall be accelerated at any time to a specified
earlier date by the Board of Directors (A) if at such time there are less than
such number as represents 15% of the Dividend Access Shares initially issued to
the holders of Dividend Access Shares (other than Dividend Access Shares held by
VESTCOM and its Affiliates and as such number of shares may be adjusted as
deemed appropriate by the Board of Directors to give effect to any subdivision
or consolidation of or stock dividend on the Dividend Access Shares, any issue
or distribution of rights to acquire Dividend Access Shares or securities
exchangeable for or convertible into Dividend Access Shares, any issue or
distribution of other securities or rights or evidences of indebtedness or
assets, or any other capital reorganization or other transaction affecting the
Dividend Access Shares), or (B) if at such time there is an Acquisition of
Control, in each case upon at least thirty (30) days' prior written notice of
any such extension or acceleration, as the case may be, to the registered
holders of the Dividend Access Shares, in which case the Automatic Redemption
Date shall be such later or earlier date.
"AUTOMATIC REDEMPTION" has the meaning ascribed thereto in Section 7.1
of these share provisions.
"BOARD OF DIRECTORS" means the Board of Directors of the Corporation.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
when banks are not open for business in New Jersey.
"COMMON SHARES" means the voting common shares of the Corporation.
"CORPORATION" means 504087 N.B. Inc., a corporation formed under the
laws of the Province of NEW BRUNSWICK.
"CURRENT MARKET PRICE" means, in respect of a VESTCOM Common Share on
any date, the Canadian Dollar Equivalent of the average of the closing prices of
VESTCOM Common Shares on the Nasdaq National Market System on each of the thirty
(30) consecutive trading days ending five (5) trading days before such date, or,
if the VESTCOM Common Shares are not then quoted on the Nasdaq National Market
System on such other stock exchange or automated quotation system on which the
VESTCOM Common Shares are listed or quoted, as the case may be, as may be
selected by the Board of Directors for such purpose; provided, however, that if
there is no public distribution or trading activity of VESTCOM Common Shares
during such
2
140
period, then the Current Market Price of a VESTCOM Common Share shall be
determined by the Board of Directors of VESTCOM based upon the advice of such
qualified independent financial advisors as the Board of Directors of VESTCOM
may deem to be appropriate, and provided further that any such selection,
opinion or determination by the Board of Directors shall be conclusive and
binding. If the VESTCOM Common Shares are quoted on more than one recognized
stock exchange in the United States then the Current Market Price shall be the
average of the closing prices on each such exchange determined as provided
above.
"DIVIDEND ACCESS SHARES" mean the Dividend Access Shares of the
Corporation having the rights, privileges, restrictions and conditions set forth
herein.
"LIQUIDATION AMOUNT" has the meaning ascribed thereto in Section 5.1 of
these share provisions.
"LIQUIDATION CALL RIGHT" has the meaning ascribed thereto in the Share
Purchase Agreement.
"LIQUIDATION DATE" has the meaning ascribed thereto in Section 5.1 of
these share provisions.
"NBCA" means the Business Corporations Act (New Brunswick).
"PUT RIGHT" has the meaning ascribed thereto in the Share Purchase
Agreement.
"REDEMPTION CALL RIGHT" has the meaning ascribed thereto in the Share
Purchase Agreement.
"REDEMPTION CALL PURCHASE PRICE" has the meaning ascribed thereto in
the Share Purchase Agreement.
"REDEMPTION PRICE" has the meaning ascribed thereto in Section 7.1 of
these share provisions.
"RETRACTED SHARES" has the meaning ascribed thereto in Section 6.1(a)
of these share provisions.
"RETRACTION CALL RIGHT" has the meaning ascribed thereto in the Share
Purchase Agreement.
"RETRACTION DATE" has the meaning ascribed thereto in Section 6.1(b) of
these share provisions.
"RETRACTION PRICE" has the meaning ascribed thereto in Section 6.1 of
these share provisions.
3
141
"RETRACTION REQUEST" has the meaning ascribed thereto in Section 6.1 of
these share provisions.
"SHARE PURCHASE AGREEMENT" means the share purchase agreement by and
among VESTCOM, the Corporation, Lirpaco Inc., Xxxxxx Xxxxx, Xxxxxxx Xxxxx and
Xxxxxx April.
"SUPPORT AGREEMENT" means the Support Agreement between VESTCOM and the
Corporation.
"VESTCOM" means VESTCOM International, Inc., a corporation organized
and existing under the laws of the State of New Jersey, and any successor
corporation.
"VESTCOM COMMON SHARES" mean the shares of common stock of VESTCOM with
a par value of U.S. US$0.01 per share, having voting rights of one vote per
share, and any other securities into which such shares may be changed.
"VESTCOM DIVIDEND DECLARATION DATE" means the date on which the Board
of Directors of VESTCOM declares any dividend on the VESTCOM Common Shares.
ARTICLE 2
RANKING OF DIVIDEND ACCESS SHARES
2.1 The Dividend Access Shares shall be entitled to a preference, as
provided in Articles 3 and 5, over the Common Shares and any other shares
ranking junior to the Dividend Access Shares with respect to the payment of
dividends and the distribution of assets in the event of the liquidation,
dissolution or winding-up of the Corporation, whether voluntary or involuntary,
or any other distribution of the assets of the Corporation among its
shareholders for the purpose of winding up its affairs.
ARTICLE 3
DIVIDENDS
3.1 A holder of a Dividend Access Share shall be entitled to receive
and the Board of Directors shall, subject to applicable law, on each VESTCOM
Dividend Declaration Date, declare a dividend on each Dividend Access Share (a)
in the case of a cash dividend declared on the VESTCOM Common Shares, in an
amount in cash (in U.S. dollars) for each Dividend Access Share equal to the
cash dividend declared on each VESTCOM Common Share or (b) in the case of a
stock dividend declared on the VESTCOM Common Shares to be paid in VESTCOM
Common Shares, in such number of Dividend Access Shares for each Dividend Access
Share as is equal to the number of VESTCOM Common Shares to be paid on each
VESTCOM Common Share or (c) in the case of a dividend declared on the VESTCOM
Common Shares in property other than cash or VESTCOM Common Shares, in such type
and amount of property for each Dividend Access Share as is the same as or
economically equivalent to (to be determined by the
4
142
Board of Directors as contemplated by Section 2.6 of the Support Agreement) the
type and amount of property declared as a dividend on each VESTCOM Common Share.
Such dividends shall be paid out of money, assets or property of the Corporation
properly applicable to the payment of dividends, or out of authorized but
unissued shares of the Corporation. Any dividend which should have been declared
on the Dividend Access Shares pursuant to this Section 3.1 but was not so
declared due to the provisions of applicable law shall be declared and paid by
the Corporation on a subsequent date or dates determined by the Board of
Directors.
3.2 Cheques of the Corporation payable at par and in U.S. dollars at
any branch of the bankers of the Corporation shall be issued in respect of any
cash dividends contemplated by Section 3.1(a) hereof and the sending of such a
cheque to each holder of a Dividend Access Share shall satisfy the cash dividend
represented thereby unless the cheque is not paid on presentation. Certificates
registered in the name of the registered holder of Dividend Access Shares shall
be issued or transferred in respect of any stock dividends contemplated by
Section 3.1(b) hereof and the sending of such a certificate to each holder of a
Dividend Access Share shall satisfy the stock dividend represented thereby. Such
other type and amount of property in respect of any dividends contemplated by
Section 3.1(c) hereof shall be issued, distributed or transferred by the
Corporation in such manner as it shall determine and the issuance, distribution
or transfer thereof by the Corporation to each holder of a Dividend Access Share
shall satisfy the dividend represented thereby. No holder of a Dividend Access
Share shall be entitled to recover by action or other legal process against the
Corporation any dividend that is represented by a cheque that has not been duly
presented to the Corporation's bankers for payment or that otherwise remains
unclaimed for a period of three (3) years from the date on which such dividend
was payable.
3.3 The record date for the determination of the holders of Dividend
Access Shares entitled to receive payment of, and the payment date for, any
dividend declared on the Dividend Access Shares under Section 3.1 hereof shall
be the same dates as the record date and payment date, respectively, for the
corresponding dividend declared on the VESTCOM Common Shares provided, however,
that if such date is not a day when banks are open for business in Quebec,
Canada, it shall be the immediately following day when banks are open for
business in Quebec, Canada.
3.4 If on any payment date for any dividends declared on the Dividend
Access Shares under Section 3.1 hereof the dividends are not paid in full on all
of the Dividend Access Shares then outstanding, any such dividends that remain
unpaid shall be paid on a subsequent date or dates determined by the Board of
Directors on which the Corporation shall have sufficient moneys, assets or
property properly applicable to the payment of such dividends.
5
143
ARTICLE 4
CERTAIN RESTRICTIONS
4.1 So long as any of the Dividend Access Shares are outstanding, the
Corporation shall not at any time without, but may at any time with, the
approval of the holders of the Dividend Access Shares given as specified in
Section 10.2 of these share provisions:
(a) pay any dividends on the Common Shares or any other shares
ranking junior to the Dividend Access Shares, other than stock
dividends payable in Common Shares or any such other shares
ranking junior to the Dividend Access Shares, as the case may
be;
(b) redeem, or purchase or make any capital distribution in
respect of Common Shares or any other shares ranking junior to
the Dividend Access Shares;
(c) redeem or purchase any other shares of the Corporation ranking
equally with the Dividend Access Shares with respect to the
payment of dividends or on any liquidation distribution; or
(d) issue any other shares of the Corporation ranking superior to
the Dividend Access Shares with respect to the payment of
dividends or on any liquidation distribution.
The restrictions in Sections 4.1(a), 4.1(b) and 4.1(c) above
shall not apply if all dividends on the outstanding Dividend Access Shares
corresponding to dividends declared following the initial date of issue of
Dividend Access Shares on the VESTCOM Common Shares shall have been declared on
the Dividend Access Shares and paid in full.
ARTICLE 5
DISTRIBUTION ON LIQUIDATION
5.1 In the event of the liquidation, dissolution or winding-up of the
Corporation or any other distribution of the assets of the Corporation among its
shareholders for the purpose of winding up its affairs, a holder of Dividend
Access Shares shall be entitled, subject to applicable law, to receive from the
assets of the Corporation in respect of each Dividend Access Share held by such
holder on the effective date (the "LIQUIDATION DATE") of such liquidation,
dissolution or winding-up, before any distribution of any part of the assets of
the Corporation among the holders of the Common Shares or any other shares
ranking junior to the Dividend Access Shares, an amount per share equal to (a)
the Current Market Price of a VESTCOM Common Share on the last Business Day
prior to the Liquidation Date, which shall be satisfied in full by the
Corporation causing to be delivered to such holder one (1) VESTCOM Common Share,
plus (b) an additional amount equivalent to the full amount of all declared and
unpaid dividends on each such Dividend Access Share and all dividends declared
on VESTCOM Common Shares which have not been declared on such Dividend Access
Shares in accordance with section 3.1 of these share provisions (collectively
the "LIQUIDATION AMOUNT"), provided that if the record date for any such
declared
6
144
and unpaid dividends occurs on or after the Liquidation Date, the Liquidation
Amount shall not include such additional amount equivalent to such dividends.
5.2 On or after the Liquidation Date and subject to the exercise by
VESTCOM of the Liquidation Call Right, the Corporation shall cause to be
delivered to the holders of the Dividend Access Shares the Liquidation Amount
(less any tax required to be deducted and withheld therefrom by the Corporation)
for each such Dividend Access Share upon presentation and surrender of the
certificates representing such Dividend Access Shares, together with such other
documents and instruments as may be required to effect a transfer of Dividend
Access Shares under the NBCA and the by-laws of the Corporation and such
additional documents and instruments as the Corporation may reasonably require,
at any office and in any manner whatsoever as may be specified by the
Corporation by notice to the holders of the Dividend Access Shares. Payment of
the total Liquidation Amount for such Dividend Access Shares shall be made by
the Corporation, or on behalf of the Corporation by an authorized agent, by
delivery to each holder at the address of the holder recorded in the securities
register of the Corporation or by holding for pick up by the holder at any
office as may be specified by the Corporation by notice to the holders of
Dividend Access Shares, certificates representing VESTCOM Common Shares (which
shares shall be duly issued as fully paid and non-assessable and shall be free
and clear of any lien, claim, encumbrance, security interest or adverse claim)
registered in the name of the holder and a cheque of the Corporation payable at
par and in U.S. dollars at any branch of the bankers of the Corporation in
respect of the amount equivalent to the full amount of all declared and unpaid
dividends and all dividends declared on VESTCOM Common Shares which have not
been declared on such Dividend Access Shares in accordance with Section 3.1 of
these share provisions comprising part of the total Liquidation Amount (less any
tax required to be deducted and withheld therefrom by the Corporation) without
interest. On and after the Liquidation Date, the holders of the Dividend Access
Shares shall cease to be holders of such Dividend Access Shares and shall not be
entitled to exercise any of the rights of holders in respect thereof, other than
the right to receive their proportionate part of the total Liquidation Amount,
unless payment of the total Liquidation Amount for such Dividend Access Shares
shall not be made upon presentation and surrender of share certificates in
accordance with the foregoing provisions, in which case the rights of the
holders shall remain unaffected until the total Liquidation Amount has been paid
in the manner hereinbefore provided. The Corporation shall have the right at any
time on or after the Liquidation Date to deposit or cause to be deposited the
total Liquidation Amount in respect of the Dividend Access Shares represented by
certificates that have not at the Liquidation Date been surrendered by the
holders thereof with an authorized agent of the Corporation including, without
limitation, any chartered bank or trust company in Canada. Upon such deposit
being made, the rights of the holders of Dividend Access Shares after such
deposit shall be limited to receiving their proportionate part of the total
Liquidation Amount so deposited (less any tax required to be deducted and
withheld therefrom) without interest for such Dividend Access Shares against
presentation and surrender of the said certificates held by them, respectively,
in accordance with the foregoing provisions. In the event such payment or
deposit of the total Liquidation Amount is made pursuant to the provisions of
this Section 5.2, the holders of the Dividend Access Shares shall thereafter be
considered and deemed for all purposes to be the holders of the VESTCOM Common
Shares delivered to them. To the extent that the amount of tax required to be
deducted or withheld from any payment to a holder of Dividend Access Shares
7
145
exceeds the cash portion of such payment, the Corporation is hereby authorized
to sell or otherwise dispose of at fair market value such portion of the
property then payable to the holder as is necessary to provide sufficient funds
to the Corporation in order to enable it to comply with such deduction or
withholding requirement and the Corporation shall give an accounting to the
holder with respect thereto and any balance of such proceeds of sale.
5.3 After the Corporation has satisfied its obligations to pay the
holders of the Dividend Access Shares the Liquidation Amount per Dividend Access
Share pursuant to Section 5.1 of these share provisions, such holders shall not
be entitled to share in any further distribution of the assets of the
Corporation.
ARTICLE 6
RETRACTION OF DIVIDEND ACCESS SHARES BY HOLDER
6.1 A holder of Dividend Access Shares shall be entitled at any time,
subject to applicable law and subject to the exercise by VESTCOM of the
Retraction Call Right, to require the Corporation to redeem any or all of the
Dividend Access Shares registered in the name of such holder for an amount per
share equal to (a) the Current Market Price of a VESTCOM Common Share on the
last Business Day prior to the Retraction Date, which shall be satisfied in full
by the Corporation causing to be delivered to such holder one (1) VESTCOM Common
Share for each Dividend Access Share presented and surrendered by the holder,
plus (b) an additional amount equivalent to the full amount of all declared and
unpaid dividends thereon and all dividends declared on VESTCOM Common Shares
which have not been declared on such Dividend Access Shares in accordance with
section 3.1 of these share provisions (collectively the "RETRACTION PRICE"),
provided that if the record date for any such declared and unpaid dividends
occurs on or after the Retraction Date, the Retraction Price shall not include
such additional amount equivalent to such dividends. When not exercised for all
the Dividend Access Shares held by a holder, the right of retraction provided
herein may be exercised only with respect to an aggregate minimum number of
Dividend Access Shares to be redeemed equal to 10,000 shares. To effect such
retraction, the holder shall present and surrender, at the registered office of
the Corporation or at any other office and in any manner whatsoever as may be
specified by the Corporation by notice to the holders of Dividend Access Shares,
the certificate or certificates representing the Dividend Access Shares which
the holder desires to have the Corporation redeem, together with such other
documents and instruments as may be required to effect a transfer of Dividend
Access Shares under the NBCA and the by-laws of the Corporation and such
additional documents and instruments as the Corporation may reasonably require,
and together with a duly executed statement (the "RETRACTION REQUEST") in the
form of Schedule A hereto or in such other form as may be acceptable to the
Corporation:
(a) specifying that the holder desires to have all or any number
specified therein of the Dividend Access Shares represented by such certificate
or certificates (the "RETRACTED SHARES") redeemed by the Corporation;
8
146
(b) stating the Business Day on which the holder desires to have the
Corporation redeem the Retracted Shares ( the "RETRACTION DATE"), provided that
the Retraction Date shall be not less than ten (10) Business Days nor more than
twenty (20) Business Days after the date on which the Retraction Request is
received by the Corporation and further provided that, in the event that no such
Business Day is specified by the holder in the Retraction Request, the
Retraction Date shall be deemed to be the tenth Business Day after the date on
which the Retraction Request is received by the Corporation; and
(c) acknowledging the Retraction Call Right in favor of VESTCOM.
6.2 Subject to the exercise by VESTCOM of the Retraction Call Right,
upon receipt by the Corporation in the manner specified in Section 6.1 hereof of
a certificate or certificates representing the number of Dividend Access Shares
which the holder desires to have the Corporation redeem, together with a duly
executed and completed Retraction Request, and provided that the Retraction
Request is not revoked by the holder in the manner specified in Section 6.6, the
Corporation shall redeem the Retracted Shares effective at the close of business
on the Retraction Date. If only a part of the Dividend Access Shares represented
by any certificate are redeemed (or purchased by VESTCOM pursuant to the
Retraction Call Right), a new certificate for the balance of such Dividend
Access Shares shall be issued to the holder at the expense of the Corporation.
6.3 On or after the Retraction Date and subject to the exercise by
VESTCOM of the Retraction Call Right, the Corporation shall cause to be
delivered to the relevant holder, at the address of the holder recorded in the
securities register of the Corporation or at the address specified in the
holder's Retraction Request or by holding for pick up by the holder at any
office as may be specified by the Corporation by notice to the holders of
Dividend Access Shares, by or on behalf of the Corporation, certificates
representing the VESTCOM Common Shares (which shares shall be duly issued as
fully paid and non-assessable and shall be free and clear of any lien, claim,
encumbrance, security interest or adverse claim) registered in the name of the
holder and a cheque of the Corporation payable at par and in U.S. dollars at any
branch of the bankers of the Corporation in respect of the additional amount
equivalent to the full amount of all declared and unpaid dividends and all
dividends declared on VESTCOM Common Shares which have not been declared on such
Retracted Shares in accordance with section 3.1 of these share provisions
comprising part of the total Retraction Price (less any tax required to be
deducted and withheld therefrom by the Corporation) and delivery of such
certificates and cheque by or on behalf of the Corporation, as the case may be,
shall be deemed to be payment of and shall satisfy and discharge all liability
for the total Retraction Price, to the extent that the same is represented by
such share certificates and cheque (less any tax required and in fact deducted
and withheld therefrom and remitted to the proper tax authority), unless such
cheque is not paid on due presentation. To the extent that the amount of tax
required to be deducted or withheld from any payment to a holder of Dividend
Access Shares exceeds the cash portion of such payment, the Corporation is
hereby authorized to sell or otherwise dispose of at fair market value such
portion of the property then payable to the holder as is necessary to provide
sufficient funds to the Corporation in order to enable it to comply with such
deduction or withholding requirement and shall give an accounting to the holder
with respect thereto and any balance of such proceeds of sale.
9
147
6.4 On and after the Retraction Date, the holder of the Retracted
Shares shall cease to be a holder of such Retracted Shares and shall not be
entitled to exercise any of the rights of a holder in respect thereof, other
than the right to receive his proportionate part of the total Retraction Price,
unless payment of the total Retraction Price shall not be made upon presentation
and surrender of certificates in accordance with the foregoing provisions, in
which case the rights of such holder shall remain unaffected until the total
Retraction Price has been paid in the manner hereinbefore provided. On and after
the Retraction Date, provided that presentation and surrender of certificates
and payment of the total Retraction Price has been made in accordance with the
foregoing provisions, the holder of the Retracted Shares so redeemed by the
Corporation shall thereafter be considered and deemed for all purposes to be a
holder of the VESTCOM Common Shares delivered to it.
6.5 Notwithstanding any other provision of this Article 6, the
Corporation shall not be obligated to redeem Retracted Shares specified by a
holder in a Retraction Request to the extent that such redemption of Retracted
Shares would be contrary to solvency requirements or other provisions of
applicable law. If the Corporation believes that on any Retraction Date it would
not be permitted by any of such provisions to redeem the Retracted Shares
tendered for redemption on such date, and provided that VESTCOM shall not have
exercised the Retraction Call Right with respect to the Retracted Shares, the
Corporation shall only be obligated to redeem Retracted Shares specified by a
holder in a Retraction Request to the extent of the maximum number that may be
so redeemed (rounded down to a whole number of shares) as would not be contrary
to such provisions and shall notify the holder at least two (2) Business Days
prior to the Retraction Date as to the number of Retracted Shares which will not
be redeemed by the Corporation. In any case in which the redemption by the
Corporation of Retracted Shares would be contrary to solvency requirements or
other provisions of applicable law, the Corporation shall redeem Retracted
Shares in accordance with Section 6.2 of these share provisions on a pro rata
basis and shall issue to each holder of Retracted Shares a new certificate, at
the expense of the Corporation, representing the Retracted Shares not redeemed
by the Corporation pursuant to Section 6.2 hereof.
6.6 A holder of Retracted Shares may, by notice in writing given by the
holder to the Corporation before the close of business on the Business Day
immediately preceding the Retraction Date, withdraw its Retraction Request in
which event such Retraction Request shall be null and void and, for greater
certainty, the revocable offer constituted by the Retraction Request to sell the
Retracted Shares to VESTCOM shall be deemed to have been revoked.
ARTICLE 7
REDEMPTION OF DIVIDEND ACCESS SHARES BY THE CORPORATION
7.1 Subject to applicable law, and subject to the exercise by VESTCOM
of the Redemption Call Right, the Corporation shall on the Automatic Redemption
Date redeem (the "AUTOMATIC REDEMPTION") the whole of the then outstanding
Dividend Access Shares for an amount per share equal to (a) the Current Market
Price of a VESTCOM Common Share on the
10
148
last Business Day prior to the Automatic Redemption Date, which shall be
satisfied in full by the Corporation causing to be delivered to each holder of
Dividend Access Shares one (1) VESTCOM Common Share for each Dividend Access
Share held by such holder, plus (b) an additional amount equivalent to the full
amount of all declared and unpaid dividends thereon and all dividends declared
on VESTCOM Common Shares which have not been declared on such Dividend Access
Shares in accordance with section 3.1 of these share provisions (collectively
the "REDEMPTION PRICE"), provided that if the record date for any such declared
and unpaid dividends occurs on or after the Redemption Date, the Redemption
Price shall not include such additional amount equivalent to such dividends.
7.2 In any case of any redemption of Dividend Access Shares under this
Article 7, the Corporation shall, at least fifteen (15) days before the
Automatic Redemption Date, send or cause to be sent to each holder of Dividend
Access Shares to be redeemed a notice in writing of the redemption by the
Corporation or the purchase by VESTCOM under the Redemption Call Right, as the
case may be, of the Dividend Access Shares held by such holder. Such notice
shall set out the formula for determining the Redemption Price or the Redemption
Call Purchase Price, as the case may be, the Redemption Date and, if applicable,
particulars of the Redemption Call Right. On or after the Automatic Redemption
Date and subject to the exercise by VESTCOM of the Redemption Call Right, the
Corporation shall cause to be delivered to the holders of the Dividend Access
Shares to be redeemed the Redemption Price (less any tax required to be deducted
and withheld therefrom by the Corporation) for each such Dividend Access Share
upon presentation and surrender of the certificates representing such Dividend
Access Shares, together with such other documents and instruments as may be
required to effect a transfer of Dividend Access Shares under the NBCA and the
by-laws of the Corporation and such additional documents and instruments as the
Corporation may reasonably require, at any office and in any manner whatsoever
as may be specified by the Corporation in such notice. Payment of the total
Redemption Price for such Dividend Access Shares shall be made by the
Corporation, or on behalf of the Corporation by an authorized agent, by delivery
to each holder at the address of the holder recorded in the securities register
of the Corporation or by holding for pick up by the holder at any office as may
be specified by the Corporation in such notice, certificates representing
VESTCOM Common Shares (which shares shall be duly issued as fully paid and
non-assessable and shall be free and clear of any lien, claim, encumbrance,
security interest or adverse claim) registered in the name of the holder and a
cheque of the Corporation payable at par in U.S. dollars at any branch of the
bankers of the Corporation in respect of the additional amount equivalent to the
full amount of all declared and unpaid dividends and all dividends declared on
VESTCOM Common Shares which have not been declared on such Dividend Access
Shares in accordance with Section 3.1 of these share provisions comprising part
of the total Redemption Price (less any tax required to be deducted and withheld
therefrom by the Corporation) without interest. On and after the Automatic
Redemption Date, the holders of the Dividend Access Shares called for redemption
shall cease to be holders of such Dividend Access Shares and shall not be
entitled to exercise any of the rights of holders in respect thereof, other than
the right to receive their proportionate part of the total Redemption Price,
unless payment of the total Redemption Price for such Dividend Access Shares
shall not be made upon presentation and surrender of certificates in accordance
with the foregoing provisions, in which case the rights of the holders shall
remain unaffected until the total Redemption Price has been paid in the manner
11
149
hereinbefore provided. The Corporation shall have the right at any time after
the sending of notice of its intention to redeem Dividend Access Shares as
aforesaid to deposit or cause to be deposited the total Redemption Price of the
Dividend Access Shares so called for redemption, or of such of the said Dividend
Access Shares represented by certificates that have not at the date of such
deposit been surrendered by the holders thereof in connection with such
redemption, with an authorized agent of the Corporation including, without
limitation, any chartered bank or trust company in Canada named in such notice.
Upon the later of such deposit being made and the Automatic Redemption Date, the
Dividend Access Shares in respect whereof such deposit shall have been made
shall be redeemed and the rights of the holders thereof after such deposit or
Automatic Redemption Date, as the case may be, shall be limited to receiving
their proportionate part of the total Redemption Price so deposited (less any
tax required to be deducted and withheld therefrom by the Corporation), without
interest for such Dividend Access Shares against presentation and surrender of
the said certificates held by them, respectively, in accordance with the
foregoing provisions. In the event such payment or deposit of the total
Redemption Price is made pursuant to the provisions of this Section 7.2, the
holders of the Dividend Access Shares shall thereafter be considered and deemed
for all purposes to be holders of the VESTCOM Common Shares delivered to them.
To the extent that the amount of tax required to be deducted or withheld from
any payment to a holder of Dividend Access Shares exceeds the cash portion of
such payment, the Corporation is hereby authorized to sell or otherwise dispose
of at fair market value such portion of the property then payable to the holder
as is necessary to provide sufficient funds to the Corporation in order to
enable it to comply with such deduction or withholding requirement and shall
give an accounting to the holder with respect thereto and any balance of such
proceeds of sale.
ARTICLE 8
PURCHASE FOR CANCELLATION
8.1 Subject to applicable law and the articles of the Corporation, the
Corporation may at any time and from time to time purchase for cancellation all
or any part of the outstanding Dividend Access Shares at any price by tender to
all the holders of record of Dividend Access Shares then outstanding at any
price per share together with an amount equal to all declared and unpaid
dividends thereon. If in response to an invitation for tenders under the
provisions of this Section 8.1, more Dividend Access Shares are tendered at a
price or prices acceptable to the Corporation than the Corporation is prepared
to purchase, the Dividend Access Shares to be purchased by the Corporation shall
be purchased as nearly as may be pro rata according to the number of shares
tendered by each holder who submits a tender to the Corporation, provided that
when shares are tendered at different prices, the pro rating shall be effected
(disregarding fractions) only with respect to the shares tendered at the price
at which more shares were tendered than the Corporation is prepared to purchase
after the Corporation has purchased all the shares tendered at lower prices. If
part only of the Dividend Access Shares represented by any certificate shall be
purchased, a new certificate for the balance of such shares shall be issued at
the expense of the Corporation.
12
150
ARTICLE 9
VOTING RIGHTS
9.1 Except as required by applicable law and the provisions of Sections
10.1, 11.1 and 12.2, the holders of the Dividend Access Shares shall not be
entitled as such to receive notice of or to attend any meeting of the
shareholders of the Corporation or to vote at any such meeting.
ARTICLE 10
AMENDMENT AND APPROVAL
10.1 The rights, privileges, restrictions and conditions attaching to
the Dividend Access Shares may be added to, changed or removed but only with the
approval of the holders of the Dividend Access Shares given as hereinafter
specified.
10.2 Any approval given by the holders of the Dividend Access Shares to
add to, change or remove any right, privilege, restriction or condition
attaching to the Dividend Access Shares or any other matter requiring the
approval or consent of the holders of the Dividend Access Shares shall be deemed
to have been sufficiently given if it shall have been given in accordance with
applicable law subject to a minimum requirement that such approval be evidenced
by (i) a resolution passed by not less than two thirds of the votes cast on such
resolution by the holders of the Dividend Access Shares, and (ii) a separate
resolution passed by not less than 50% of the votes cast on such separate
resolution by the holders of Dividend Access Shares other than VESTCOM and its
Affiliates, at separate meetings of holders of Dividend Access Shares and
holders of Dividend Access Shares other than VESTCOM and its Affiliates duly
called and held in each case at which the holders of at least 50% of the
outstanding Dividend Access Shares (not including Dividend Access Shares held by
VESTCOM or its Affiliates) at that time are present or represented by proxy;
provided that if at any such meeting the holders of at least 50% of the
outstanding Dividend Access Shares at that time are not present or represented
by proxy within one-half hour after the time appointed for such meeting then the
meeting shall be adjourned to such date not less than ten (10) days thereafter
and to such time and place as may be designated by the Chairman of such meeting.
At such adjourned meeting the holders of Dividend Access Shares entitled to vote
at the meeting and present or represented by proxy thereat may transact the
business for which the meeting was originally called and a resolution passed
thereat by the affirmative vote of not less than two-thirds of the votes
entitled to vote on the resolution cast on such resolution at such meeting shall
constitute the approval or consent of the holders of the Dividend Access Shares
or the holders of Dividend Access Shares other than VESTCOM and its Affiliates,
as the case may be.
13
151
ARTICLE 11
RECIPROCAL CHANGES, ETC. IN RESPECT OF VESTCOM COMMON SHARES
11.1 (a) If VESTCOM:
(i) issues or distributes VESTCOM Common Shares
(or securities exchangeable for or
convertible into or carrying rights to
acquire VESTCOM Common Shares) to the
holders of all or substantially all of the
then outstanding VESTCOM Common Shares by
way of stock dividend or other distribution,
other than an issue of VESTCOM Common Shares
(or securities exchangeable for or
convertible into or carrying rights to
acquire VESTCOM Common Shares) to holders of
VESTCOM Common Shares who exercise an option
to receive dividends in VESTCOM Common
Shares (or securities exchangeable for or
convertible into or carrying rights to
acquire VESTCOM Common Shares) in lieu of
receiving cash dividends; or
(ii) issues or distributes rights, options or
warrants to the holders of all or
substantially all of the then outstanding
VESTCOM Common Shares entitling them to
subscribe for or to purchase VESTCOM Common
Shares (or securities exchangeable for or
convertible into or carrying rights to
acquire VESTCOM Common Shares); or
(iii) issues or distributes to the holders of all
or substantially all of the then outstanding
VESTCOM Common Shares (A) shares or
securities of VESTCOM of any class other
than VESTCOM Common Shares (other than
shares convertible into or exchangeable for
or carrying rights to acquire VESTCOM Common
Shares), (B) rights, options or warrants
other than those referred to in Section
11.1(a)(ii) above, (C) evidences of
indebtedness of VESTCOM or (D) assets of
VESTCOM;
the Corporation will issue or distribute simultaneously to the
holders of the Dividend Access Shares, the economic equivalent
on a per share basis of such rights, options, securities,
shares, evidences of indebtedness or other assets, such
economic equivalent to be determined as provided in paragraph
2.6(d) of the Support Agreement.
(b) If VESTCOM:
(i) subdivides, redivides or changes the then outstanding
VESTCOM Common Shares into a greater number of
VESTCOM Common Shares; or
14
152
(ii) reduces, combines or consolidates or change the then
outstanding VESTCOM Common Shares into a lesser
number of VESTCOM Common Shares; or
(iii) reclassifies or otherwise changes the VESTCOM Common
Shares or effects an amalgamation, merger,
reorganization or other transaction affecting the
VESTCOM Common Shares;
the Corporation will make the same or an economically
equivalent change simultaneously to, or in the rights of the
holders of, the Dividend Access Shares, such economic
equivalent to be determined as provided in paragraph 2.6 (d)
of the Support Agreement. The Support Agreement further
provides in part that the foregoing provisions of the Support
Agreement shall not be changed without the approval of the
holders of the Dividend Access Shares given in accordance with
Section 10.2 of these share provisions.
11.2 Pursuant to the Share Purchase Agreement, the initial holders
of Dividend Access Shares are given a Put Right to exchange their Dividend
Access Shares for VESTCOM Common Shares upon the occurrence of certain
circumstances.
ARTICLE 12
ACTIONS BY THE CORPORATION UNDER SUPPORT AGREEMENT
12.1 The Corporation will take all such actions and do all such
things as shall be necessary or advisable to perform and comply with and to
ensure performance and compliance by VESTCOM with all provisions of the Support
Agreement as well as the Liquidation Call Right, the Redemption Call Right, the
Retraction Call Right and the Put Right contained in the Share Purchase
Agreement applicable to the Corporation and VESTCOM, respectively, in accordance
with the respective terms thereof including, without limitation, taking all such
actions and doing all such things as shall be necessary or advisable to enforce
to the fullest extent possible for the direct benefit of the Corporation and the
holders of Dividend Access Shares all rights and benefits in favour of the
Corporation and such holders under or pursuant to such agreements.
12.2 The Corporation shall not propose, agree to or otherwise give
effect to any amendment to, or waiver or forgiveness of its rights or
obligations under, the Support Agreement, the Put Right, the Redemption Call
Right and the Retraction Call Right contained in the Share Purchase Agreement
without the approval of the holders of the Dividend Access Shares given in
accordance with Section 10.2 of these share provisions other than such
amendments, waivers and/or forgiveness as may be necessary or advisable for the
purposes of:
(a) adding to the covenants of the other party or parties to such
agreement for the protection of the Corporation or the holders
of Dividend Access Shares thereunder; or
15
153
(b) making such provisions or modifications not inconsistent with
such agreement as may be necessary with respect to matters or
questions arising thereunder which, in the opinion of the
Board of Directors, it may be expedient to make, provided that
the Board of Directors shall be of the opinion, after
consultation with counsel and based on a legal opinion to be
addressed to the holders of the Dividend Access Shares, that
such provisions and modifications will not be prejudicial to
the interests of the holders of the Dividend Access Shares; or
(c) making such changes in or corrections to such agreement which,
on the advice of counsel to the Corporation, are required for
the purpose of curing or correcting any ambiguity or defect or
inconsistent provision or clerical omission or mistake or
manifest error contained therein, provided that the Board of
Directors shall be of the opinion, after consultation with
counsel, that such changes or corrections will not be
prejudicial to the interests of the holders of the Dividend
Access Shares.
ARTICLE 13
LEGEND
13.1 The certificates evidencing the Dividend Access Shares shall
contain or have affixed thereto a legend, in form and on terms approved by the
Board of Directors, with respect to the provisions of the Share Purchase
Agreement relating to the Liquidation Call Right, the Redemption Call Right, the
Retraction Call Right and the Put Right.
ARTICLE 14
NOTICES
14.1 Any notice, request or other communication to be given to VESTCOM
and/or the Corporation by a holder of Dividend Access Shares shall be in writing
and shall be valid and effective if given by mail (postage prepaid) or by
telecopy or by delivery to:
(a) if to the Corporation at:
[-]
(b) if to VESTCOM at:
0000 Xxxxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000-00000
X.X.X.
Attention: Xxxx Xxxxxx, Esq., President
Telecopier: [-]
together in all cases with a copy to,
16
154
Xxxxxxxxxx, Sandler, Kohl, Xxxxxx & Xxxxxx, P.A.
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
X.X.X.
Attention: Xxxx Xxxxxxxxxx, Esq.
Telecopier: (000) 000-0000
-and-
Stikeman, Xxxxxxx
0000 Xxxx-Xxxxxxxx xxxx. Xxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: Xxxx X. Xxxxxxx, Esq.
Telecopier: (000) 000-0000
-and-
Xxxxxxx, Xxxxxxxx & Xxxxxxxx
0000 XxXxxx Xxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: Xxxxxxx Xxxxxxx, Esq.
Telecopier: (000) 000-0000
Any such notice, request or other communication, if given by
mail, telecopy or delivery, shall only be deemed to have been given and received
upon actual receipt thereof by the Corporation.
14.2 Any presentation and surrender by a holder of Dividend Access
Shares to the Corporation of certificates representing Dividend Access Shares in
connection with the liquidation, dissolution or winding up of the Corporation or
the retraction or redemption of Dividend Access Shares shall be made by
registered mail (postage prepaid) or by delivery to the Corporation at the above
address or to such other office as may be specified by the Corporation, in each
case addressed to the attention of the President of the Corporation unless
otherwise specified by the Corporation. Any such presentation and surrender of
certificates, if given by mail (postage prepaid) or by delivery, shall only be
deemed to have been made and to be effective upon actual receipt thereof by the
Corporation. Any such presentation and surrender of certificates made by
registered mail shall be at the sole risk of the holder mailing the same.
17
155
14.3 Any notice, request or other communication to be given to a holder
of Dividend Access Shares by or on behalf of the Corporation shall be in writing
and shall be valid and effective if given by mail (postage prepaid) or by
delivery to the address of the holder recorded in the securities register of the
Corporation or, in the event of the address of any such holder not being so
recorded, then at the last known address of such holder. Any such notice,
request or other communication, if given by mail (postage prepaid) or by
delivery, shall only be deemed to have been made and to be effective upon actual
receipt thereof by a holder of Dividend Access Shares. Accidental failure or
omission to give any notice, request or other communication to one or more
holders of Dividend Access Shares shall not invalidate or otherwise alter or
affect any action or proceeding to be taken by the Corporation pursuant thereto.
18
156
SCHEDULE A
NOTICE OF RETRACTION
To the Corporation and VESTCOM International, Inc.
This notice is given pursuant to Article 6 of the Dividend
Access Share provisions (the "Share Provisions") attaching to the share(s)
represented by this certificate and all capitalized words and expressions used
in this notice which are defined in the Share Provisions have the meanings
ascribed to such words and expressions in such Share Provisions.
The undersigned hereby notifies the Corporation that, subject
to the Retraction Call Right referred to below, the undersigned desires to have
the Corporation redeem in accordance with Article 6 of the Share Provisions
(please complete):
/ / all share(s) represented by this certificate; or
_______ share(s) only (Minimum of - shares).
The undersigned hereby notifies the Corporation that the
Retraction Date shall be: ____________________
NOTE: The Retraction Date must be a Business Day and must not be less than ten
(10) Business Days nor more than twenty (20) Business Days after the date upon
which this notice is received by the Corporation. In the event that no such
Business Day is specified above, the Retraction Date shall be deemed to be the
tenth Business Day after the date on which this notice is received by the
Corporation.
The undersigned acknowledges the Retraction Call Right of
VESTCOM International, Inc. to purchase all but no less than all the Retracted
Shares from the undersigned and that this notice shall be deemed to be a
revocable offer by the undersigned to sell the Retracted Shares to VESTCOM
International, Inc. in accordance with the Retraction Call Right on the
Retraction Date for the Retraction Price. If VESTCOM International, Inc.
determines not to exercise the Retraction Call Right, the Corporation will
notify the undersigned of such fact as soon as possible. This notice of
retraction, and offer to sell the Retracted Shares to VESTCOM International,
Inc., may be revoked and withdrawn by the undersigned by notice in writing given
to the Corporation at any time before the close of business on the Business Day
immediately preceding the Retraction Date.
The undersigned acknowledges that the shares of VESTCOM Stock
to be issued to the undersigned as a result hereof are subject to certain resale
restrictions as set forth in that certain purchase agreement dated ____________,
1997 by and among VESTCOM, the Corporation, Lirpaco Inc., Xxxxxx Xxxxx, Xxxxxxx
Xxxxx and Xxxxxx April.
157
The undersigned hereby represents and warrants to the
Corporation and VESTCOM International, Inc. that the undersigned has good title
to, and owns, the share(s) represented by this certificate to be acquired by the
Corporation or VESTCOM International, Inc., as the case may be, free and clear
of all liens, claims and encumbrances.
(Date) (Signature of Shareholder)
(Guarantee of Signature)
/ / Please check box if the securities and any cheque(s) resulting from the
retraction or purchase of the Retracted Shares are to be held for pick-up by the
shareholder, in the case of securities, at any office as specified by the
Corporation from time to time and, in the case of any cheque(s), at the
principal payment office of [-] in Montreal, respectively, failing which the
securities and any cheque(s) will be mailed to the last address of the
shareholder as it appears on the register of the Corporation.
NOTE: This panel must be completed and this certificate, together with such
additional documents as the Corporation may require, must be deposited
with the Corporation. The securities and any cheque(s) resulting from
the retraction or purchase of the Retracted Shares will be issued and
registered in, and made payable to, respectively, the name of the
shareholder as it appears on the register of the Corporation and the
securities and cheque(s) resulting from such retraction or purchase
will be delivered to such shareholder as indicated above, unless the
form appearing immediately below is duly completed.
Name of Person in Whose Name Securities or Cheque(s) Are To Be Registered,
Issued or Delivered (please print)
Street Address or P.O. Box
Signature of Shareholder
City - Province Signature Guaranteed by
NOTE: If the notice of retraction is for less than all of the share(s)
represented by this certificate, a certificate representing the remaining shares
of the Corporation will be issued and registered in the name of the shareholder
as it appears on the register of the Corporation, unless the share transfer
power on the share certificate is duly completed in respect of such shares.
2
158
ANNEX V TO SHARE PURCHASE AGREEMENT
FORM OF
SUPPORT AGREEMENT
MEMORANDUM OF AGREEMENT made as of the ___th day of ___, 1997.
B E T W E E N: VESTCOM INTERNATIONAL, INC., a corporation subsisting under
the laws of the State of New Jersey,
(hereinafter referred to as "VESTCOM"),
AND 504087 N.B. INC., a company subsisting under the laws of
the Province of New Brunswick,
(hereinafter referred to as the "COMPANY"),
WHEREAS pursuant to a share purchase agreement dated as of
February ___, 1997, by and among VESTCOM, the Company, Lirpaco Inc., Xxxxxx
Xxxxx, Xxxxxxx Xxxxx and Xxxxxx April (the "STOCKHOLDERS") (such agreement being
hereinafter referred to as the "PURCHASE AGREEMENT"), the parties agreed that on
the Closing Date (as such term is defined in the Purchase Agreement), VESTCOM
and the Company would execute and deliver a Support Agreement substantially in
the form set forth in Exhibit V to the Purchase Agreement;
AND WHEREAS pursuant to the articles of incorporation of the
Company the capital of the Company was authorized to consist of (i) a class of
voting common shares (the "COMMON SHARES") and (ii) a class of non-voting
shares, the provisions attaching thereto being set forth in Annex IV to the
Purchase Agreement (the "DIVIDEND ACCESS SHARES");
AND WHEREAS the above-mentioned articles of incorporation set
forth the rights, privileges, restrictions and conditions (collectively the
"SHARE PROVISIONS") attaching to the Dividend Access Shares;
AND WHEREAS VESTCOM is the registered and beneficial owner of
all of the issued and outstanding Common Shares of the Company;
AND WHEREAS the parties hereto desire to make appropriate
provision and to establish a procedure whereby VESTCOM will take certain actions
and make certain payments and deliveries necessary to ensure that the Company
will be able to make certain payments and to deliver or cause to be delivered
shares of common stock of VESTCOM ("VESTCOM COMMON SHARES") in satisfaction of
the obligations of the Company under the Share Provisions with respect to the
payment and satisfaction of dividends, Liquidation Amounts, Retraction Prices
and Redemption Prices, all in accordance with the Share Provisions;
159
NOW THEREFORE in consideration of the respective covenants and agreements
provided in this agreement and for other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties agree as
follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINED TERMS. Each term denoted herein by initial capital letters
and not otherwise defined herein shall have the meaning ascribed thereto in the
Share Provisions, unless the context requires otherwise.
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC. The division of this
agreement into articles, sections and paragraphs and the insertion of headings
are for convenience of reference only and shall not affect the construction or
interpretation of this agreement.
1.3 NUMBER, GENDER, ETC. Words importing the singular number only shall
include the plural and vice versa. Words importing the use of any gender shall
include all genders.
1.4 DATE FOR ANY ACTION. In the event that any date on or by which any
action is required or permitted to be taken under this agreement is not a
Business Day, such action shall be required or permitted to be taken on or by
the next succeeding Business Day. For the purposes of this agreement, a
"BUSINESS DAY" means any day other than a Saturday, Sunday or a day when banks
are not open for business in New Jersey.
ARTICLE 2
COVENANTS OF VESTCOM AND THE COMPANY
2.1 FUNDING OF THE COMPANY. So long as any Dividend Access Shares which
are registered in the name of holders other than VESTCOM or any of its
Affiliates are outstanding, VESTCOM will:
(a) not declare or pay any dividend on VESTCOM Common Shares
unless (i) the Company will have sufficient assets, funds and
other property available to enable the due declaration and the
due and punctual payment in accordance with applicable law, of
an equivalent dividend on the Dividend Access Shares and (ii)
the Company shall simultaneously declare or pay, as the case
may be, an equivalent dividend on the Dividend Access Shares,
in each case in accordance with the Share Provisions;
(b) cause the Company to declare simultaneously with the
declaration of any dividend on VESTCOM Common Shares an
equivalent dividend on the Dividend Access Shares and, when
such dividend is paid on VESTCOM Common Shares, cause the
Company to pay simultaneously therewith such equivalent
dividend on the Dividend Access Shares, in each case in
accordance with the Share Provisions;
2
160
(c) advise the Company sufficiently in advance of the declaration
by VESTCOM of any dividend on VESTCOM Common Shares and take
all such other actions as are necessary, in cooperation with
the Company, to ensure that the respective declaration date,
record date and payment date for a dividend on the Dividend
Access Shares shall be the same as the record date,
declaration date and payment date for the corresponding
dividend on VESTCOM Common Shares;
(d) take all such actions and do all such things as are necessary
to enable and permit the Company, in accordance with
applicable law, to pay and otherwise perform its obligations
with respect to the satisfaction of the Liquidation Amount in
respect of each issued and outstanding Dividend Access Share
upon the liquidation, dissolution or winding-up of the
Company, including without limitation all such actions and all
such things as are necessary to enable and permit the Company
to cause to be delivered VESTCOM Common Shares to the holders
of Dividend Access Shares in accordance with the provisions of
Article 5 of the Share Provisions;
(e) take all such actions and do all such things as are necessary
to enable and permit the Company, in accordance with
applicable law, to pay and otherwise perform its obligations
with respect to the satisfaction of the Retraction Price and
the Redemption Price, including without limitation all such
actions and all such things as are necessary to enable and
permit the Company to cause to be delivered VESTCOM Common
Shares to the holders of Dividend Access Shares, upon the
redemption of the Dividend Access Shares in accordance with
the provisions of Article 6 or Article 7 of the Share
Provisions, as the case may be; and
(f) generally take all such actions and do all such things as are
necessary to enable and permit the Company to have the
financial reserves required so that it does not become
insolvent and to avoid any liquidation or dissolution of the
Company.
2.2 RESERVATION OF VESTCOM COMMON SHARES. VESTCOM hereby represents,
warrants and covenants that it has irrevocably reserved for issuance and will at
all times keep available, free from preemptive and other rights, out of its
authorized and unissued capital stock such number of VESTCOM Common Shares (or
other shares or securities into which VESTCOM Common Shares may be reclassified
or changed as contemplated by section 2.6 hereof) (a) as is equal to the sum of
(i) the number of Dividend Access Shares issued and outstanding from time to
time and (ii) the number of Dividend Access Shares issuable upon the exercise of
all rights to acquire Dividend Access Shares outstanding from time to time and
(b) as are now and may hereafter be required to enable and permit the Company to
meet its obligations hereunder and under the Share Provisions.
2.3 NOTIFICATION OF CERTAIN EVENTS. In order to assist VESTCOM to
comply with its obligations hereunder, the Company will give VESTCOM notice of
each of the following events at the time set forth below (it being however
agreed that failure to give such notices shall not relieve VESTCOM of any of its
obligations hereunder):
3
161
(a) in the event of any determination by the Board of Directors of
the Company to institute voluntary liquidation, dissolution or
winding up proceedings with respect to the Company or to
effect any other distribution of the assets of the Company
among its shareholders for the purpose of winding up its
affairs, at least (sixty) 60 days prior to the proposed
effective date of such liquidation, dissolution, winding up or
other distribution; the Company hereby confirms that it will
not institute voluntary liquidation, dissolution or winding-up
proceedings or otherwise voluntarily distribute its assets
before the Automatic Redemption Date;
(b) immediately, upon the earlier of (i) receipt by the Company of
notice of, and (ii) the Company otherwise becoming aware of,
any threatened or instituted claim, suit, petition or other
proceedings with respect to the involuntary liquidation,
dissolution or winding up of the Company or to effect any
other distribution of the assets of the Company among its
shareholders for the purpose of winding up its affairs;
(c) immediately, upon receipt by the Company of a Retraction
Request;
(d) at least one hundred and thirty (130) days prior to any
accelerated Automatic Redemption Date (other than an
accelerated Automatic Redemption Date pursuant to an
Acquisition of Control) determined by the Board of Directors
of the Company in accordance with the Share Provisions; and
(e) as soon as practicable upon the issuance by the Company of any
Dividend Access Shares or rights to acquire Dividend Access
Shares.
2.4 DELIVERY OF VESTCOM COMMON SHARES. In furtherance of its
obligations under sections 2.1(d) and 2.1(e) hereof, upon notice from the
Company of any event which requires the Company to cause VESTCOM Common Shares
to be delivered to any holder of Dividend Access Shares, VESTCOM shall forthwith
deliver the requisite VESTCOM Common Shares to or to the order of the former
holder of the surrendered Dividend Access Shares, as the Company shall direct.
All such VESTCOM Common Shares shall be duly issued as fully paid and
non-assessable and shall be free and clear of any Lien (as defined in the
Purchase Agreement). In consideration of the delivery of each such VESTCOM
Common Share by VESTCOM, the Company shall issue to VESTCOM, or as VESTCOM shall
direct, such number of Common Shares of the Company as is equal to the fair
value of such VESTCOM Common Shares.
2.5 QUALIFICATION OF VESTCOM COMMON SHARES. It is agreed that the
Dividend Access Shares and the VESTCOM Common Shares issuable in exchange
thereof have not and will not be registered under the Securities Act of 1933, as
amended.
2.6 ECONOMIC EQUIVALENCE.
(a) VESTCOM represents and warrants that if it:
(i) issues or distributes VESTCOM Common Shares (or
securities exchangeable for or convertible into or
carrying rights to acquire
4
000
XXXXXXX Xxxxxx Shares) to the holders of all or
substantially all of the then outstanding VESTCOM
Common Shares by way of stock dividend or other
distribution, other than an issue of VESTCOM Common
Shares (or securities exchangeable for or convertible
into or carrying rights to acquire VESTCOM Common
Shares) to holders of VESTCOM Common Shares who
exercise an option to receive dividends in VESTCOM
Common Shares (or securities exchangeable for or
convertible into or carrying rights to acquire
VESTCOM Common Shares) in lieu of receiving cash
dividends; or
(ii) issues or distributes rights, options or warrants to
the holders of all or substantially all of the then
outstanding VESTCOM Common Shares entitling them to
subscribe for or to purchase VESTCOM Common Shares
(or securities exchangeable for or convertible into
or carrying rights to acquire VESTCOM Common Shares);
or
(iii) issues or distributes to the holders of all or
substantially all of the then outstanding VESTCOM
Common Shares (A) shares or securities of VESTCOM of
any class other than VESTCOM Common Shares (other
than shares convertible into or exchangeable for or
carrying rights to acquire VESTCOM Common Shares),
(B) rights, options or warrants other than those
referred to in section 2.6(a)(ii) above, (C)
evidences of indebtedness of VESTCOM or (D) assets of
VESTCOM;
it will ensure that (i) the Company is able under applicable
law to issue or distribute the economic equivalent on a per
share basis of such rights, options, securities, shares,
evidences of indebtedness or other assets simultaneously to
holders of the Dividend Access Shares, and (ii) the Company
shall issue or distribute such rights, options, securities,
shares, evidences of indebtedness or other assets or economic
equivalents simultaneously to holders of the Dividend Access
Shares;
(b) VESTCOM represents and warrants that if it:
(i) subdivides, redivides or changes the then outstanding
VESTCOM Common Shares into a greater number of
VESTCOM Common Shares; or
(ii) reduces, combines or consolidates or changes the then
outstanding VESTCOM Common Shares into a lesser
number of VESTCOM Common Shares; or
(iii) reclassifies or otherwise changes VESTCOM Common
Shares or effects an amalgamation, merger,
reorganization or other transaction affecting VESTCOM
Common Shares;
it will cause its Common Shares to be voted in favour of any
resolution required to enable the Company under applicable law
to simultaneously make the same or an
5
163
economically equivalent change to, or in the rights of the
holders of, the Dividend Access Shares;
(c) VESTCOM will ensure that the record date for any event
referred to in section 2.6(a) or 2.6(b) above, or (if no
record date is applicable for such event) the effective date
for any such event, is not less than twenty (20) Business Days
after the date on which such event is declared or announced by
VESTCOM (with simultaneous notice thereof to be given by
VESTCOM to the Company);
(d) the Board of Directors of the Company shall determine, in good
faith and in its sole discretion (with the assistance of such
reputable and qualified independent financial advisors and/or
other experts as the Board may require), economic equivalence
for the purposes of any event referred to in section 2.6(a) or
2.6(b) above and each such determination shall be conclusive
and binding on VESTCOM. In making each such determination, the
following factors shall, without excluding other factors
determined by the Board to be relevant, be considered by the
Board of Directors of the Company:
(i) in the case of any stock dividend or other
distribution payable in VESTCOM Common Shares, the
number of such shares issued in proportion to the
number of VESTCOM Common Shares previously
outstanding;
(ii) in the case of the issuance or distribution of any
rights, options or warrants to subscribe for or
purchase VESTCOM Common Shares (or securities
exchangeable for or convertible into or carrying
rights to acquire VESTCOM Common Shares), the
relationship between the exercise price of each such
right, option or warrant and the current market value
(as determined by the Board of Directors of the
Company in the manner above contemplated) of a
VESTCOM Common Share;
(iii) in the case of the issuance or distribution of any
other form of property (including without limitation
any shares or securities of VESTCOM of any class
other than VESTCOM Common Shares, any rights, options
or warrants other than those referred to in section
2.6(d)(ii) above, any evidences of indebtedness of
VESTCOM or any assets of VESTCOM), the relationship
between the fair market value (as determined by the
Board of Directors of the Company in the manner above
contemplated) of such property to be issued or
distributed with respect to each outstanding VESTCOM
Common Share and the current market value (as
determined by the Board of Directors of the Company
in the manner above contemplated) of a VESTCOM Common
Share; and
(iv) in the case of any subdivision, redivision or change
of the then outstanding VESTCOM Common Shares into a
greater number of VESTCOM Common Shares or the
reduction, combination or consolidation or change of
the then outstanding VESTCOM Common Shares into a
lesser number
6
164
of VESTCOM Common Shares or any amalgamation, merger,
reorganization or other transaction affecting VESTCOM
Common Shares, the effect thereof upon the then
outstanding VESTCOM Common Shares.
For purposes of the foregoing determinations, the current
market value of any security listed and traded or quoted on a
securities exchange shall be the weighted average of the
closing prices of such security during a period of 30
consecutive trading days ending five (5) trading days before
the date of determination on the principal securities exchange
on which such securities are listed and traded or quoted;
provided, however, that if, in the opinion of the Board of
Directors of the Company, the public distribution or trading
activity of such securities during such period does not create
a market which reflects the fair value of such securities,
then the current market value thereof shall be determined by
the Board of Directors of the Company, in good faith and in
its sole discretion (with the assistance of such reputable and
qualified independent financial advisors and/or other experts
as the board may require), and provided further that any such
determination by the board shall be conclusive and binding on
VESTCOM.
2.7 VESTCOM NOT TO VOTE DIVIDEND ACCESS SHARES. VESTCOM covenants and
agrees that it will not, and will cause its subsidiaries and Affiliates not to,
exercise any voting rights which may be exercisable by holders of Dividend
Access Shares from time to time pursuant to the Share Provisions or pursuant to
the provisions of the NBCA (or any successor or other corporate statute by which
the Company may in the future be governed) with respect to any Dividend Access
Shares held by it or by its subsidiaries or Affiliates in respect of any matter
considered at any meeting of holders of Dividend Access Shares.
2.8 DUE PERFORMANCE. On and after the Closing Date, VESTCOM shall duly
and timely perform, and shall cause the Company to duly and timely perform, all
of its respective obligations provided for in the Purchase Agreement.
2.9 VOLUNTARY DISSOLUTION. VESTCOM agrees not to cause or approve a
voluntary dissolution of the Company prior to the Automatic Redemption Date
without the prior consent in writing of all of the Stockholders.
ARTICLE 3
GENERAL
3.1 TERM. This agreement shall come into force and be effective as of
the date hereof and shall terminate and be of no further force and effect upon
the date on which no Dividend Access Shares (or securities or rights convertible
into or exchangeable for or carrying rights to acquire Dividend Access Shares)
are held by any party other than VESTCOM and any of its Affiliates (other than
the Stockholders who shall not for this purpose be considered Affiliates of
VESTCOM).
3.2 CHANGES IN CAPITAL OF VESTCOM AND THE COMPANY. Notwithstanding the
provisions of section 3.4, at all times after the occurrence of any event
effected pursuant to
7
165
section 2.6 or 2.7 hereof, as a result of which either VESTCOM Common Shares or
the Dividend Access Shares or both are in any way changed, this agreement shall
forthwith be amended and modified as necessary in order that it shall apply with
full force and effect, mutatis mutandis, to all new securities into which
VESTCOM Common Shares or the Dividend Access Shares or both are so changed and
the parties hereto shall execute and deliver an agreement in writing giving
effect to and evidencing such necessary amendments and modifications.
3.3 SEVERABILITY. If any provision of this agreement is held to be
invalid, illegal or unenforceable, the validity, legality or enforceability of
the remainder of this agreement shall not in any way be affected or impaired
thereby and this agreement shall be carried out as nearly as possible in
accordance with its original terms and conditions.
3.4 AMENDMENTS, MODIFICATIONS, ETC. This agreement may not be amended
or modified except by an agreement in writing executed by the Company and
VESTCOM and approved by the holders of the Dividend Access Shares in accordance
with section 10.2 of the Share Provisions.
3.5 AMENDMENTS. Notwithstanding the provisions of section 3.4, the
parties to this agreement may in writing, at any time and from time to time,
without the approval of the holders of the Dividend Access Shares, amend or
modify this agreement for the purposes of:
(a) adding to the covenants of any of the parties for the
protection of the holders of the Dividend Access Shares;
(b) making such amendments or modifications not inconsistent with
this agreement as may be necessary with respect to matters or
questions which, in the determination of the senior management
of each of the Company and VESTCOM, it may be expedient to
make, provided that each such senior management shall be of
the opinion that such amendments or modifications will not be
prejudicial to the interests of the holders of the Dividend
Access Shares; or
(c) making such changes or corrections which, on the advice of
counsel to the Company and VESTCOM, are required for the
purpose of curing or correcting any ambiguity or defect or
inconsistent provision or clerical omission or mistake or
manifest error, provided that the boards of directors of each
of the Company and VESTCOM shall be of the opinion that such
changes or corrections will not be prejudicial to the
interests of the holders of the Dividend Access Shares.
3.6 MEETING TO CONSIDER AMENDMENTS. The Company, at the request of
VESTCOM, shall call a meeting or meetings of the holders of the Dividend Access
Shares for the purpose of considering any proposed amendment or modification
requiring approval pursuant to section 3.4 hereof. Any such meeting or meetings
shall be called and held in accordance with the by-laws of the Company, the
Share Provisions and all applicable laws.
3.7 AMENDMENTS ONLY IN WRITING. No amendment to or modification or
waiver of any of the provisions of this agreement otherwise permitted hereunder
shall be effective unless made in writing and signed by all of the parties
hereto.
8
166
3.8 ENUREMENT. This agreement shall be binding upon and enure to the
benefit of the parties hereto, to the holders of Dividend Access Shares and to
their respective successors and assigns.
3.9 NOTICES TO PARTIES. All notices and other communications between
the parties shall be in writing and shall be deemed to have been given if
delivered personally or by confirmed telecopy to the parties at the following
addresses (or at such other address for either such party as shall be specified
in like notice):
(a) if to VESTCOM at:
0000 Xxxxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000-00000
X.X.X.
Attention: Xxxx Xxxxxx, Esq., President
Telecopier: [-]
(b) if to the Company at:
[-]
together in all cases with a copy to,
Xxxxxxxxxx, Sandler, Kohl, Xxxxxx & Xxxxxx, P.A.
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
X.X.X.
Attention: Xxxx Xxxxxxxxxx, Esq.
Telecopier: (000) 000-0000
-and-
9
167
Stikeman, Xxxxxxx
0000 Xxxx-Xxxxxxxx Xxxx. Xxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: Xxxx X. Xxxxxxx, Esq.
Telecopier: (000) 000-0000
-and-
Xxxxxxx Xxxxxxxx & Xxxxxxxx
0000 Xxxxxx XxXxxx Xxxxxxx
00xx Xxxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: Xxxxxxx Xxxxxxx, Esq.
Telecopier: (000) 000-0000
Any notice or other communication given personally shall be
deemed to have been given and received upon delivery thereof and if given by
telecopy shall be deemed to have been given and received on the date of
confirmed receipt thereof unless such day is not a Business Day in which case it
shall be deemed to have been given and received upon the immediately following
Business Day.
3.10 COUNTERPARTS. This agreement may be executed in counterparts, each
of which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
3.11 JURISDICTION. This agreement shall be construed and enforced in
accordance with the laws of the Province of Quebec and the laws of Canada
applicable therein.
3.12 ATTORNMENT. VESTCOM agrees that any action or proceeding arising
out of or relating to this agreement may be instituted in the courts of Quebec,
waives any objection which it may have now or hereafter to the venue of any such
action or proceeding, irrevocably submits to the non-exclusive jurisdiction of
the said courts in any such action or proceeding, agrees to be bound by any
judgment of the said courts and not to seek, and hereby waives, any review of
the merits of any such judgment by the courts of any other jurisdiction.
10
168
IN WITNESS WHEREOF, the parties hereto have caused this
agreement to be duly executed as of the date first above written.
VESTCOM INTERNATIONAL, INC.
By:
[-]
504087 N.B. INC.
By:
[-]
11
169
ANNEX VI TO SHARE PURCHASE AGREEMENT
PROVISIONS ATTACHING TO MULTIPLE VOTING SHARE
The Multiple Voting Share in the capital of the Corporation
shall have the following rights, privileges, restrictions and conditions:
ARTICLE 1
INTERPRETATION
1.1 For the purposes of these share provisions:
"ACT" means the [NEW JERSEY COMPANIES ACT].
"AUTOMATIC REDEMPTION DATE" means the date for the automatic redemption
by NEWCO of Dividend Access Shares held by holders of Multiple Voting Shares
pursuant to Article 7 of the share provisions of NEWCO.
"BOARD OF DIRECTORS" means the Board of Directors of the Corporation.
"COMMON SHARES" means the shares of the voting common stock of the
Corporation.
"CORPORATION" means Vestcom International, Inc., a corporation formed
under the laws of the State of New Jersey.
"DIVIDEND ACCESS SHARES" mean the Dividend Access Shares of NEWCO
having the rights, privileges, restrictions and conditions set forth in the
articles of NEWCO.
"MULTIPLE VOTING SHARE" means the Multiple Voting Share of the
Corporation having the rights, privileges, restrictions and conditions set forth
herein.
"NEWCO" means [-].
"SHARE PURCHASE AGREEMENT" means the share purchase agreement by and
among VESTCOM, the Corporation, Lirpaco Inc., Xxxxxx Xxxxx, Xxxxxxx Xxxxx and
Xxxxxx April.
"TRUSTEE" shall mean the trustee appointed under the Voting Trust
Agreement attached as Annex III to the Share Purchase Agreement and executed
pursuant thereto and any successor trustee as provided therein.
170
ARTICLE 2
VOTING RIGHTS
2.1 The Multiple Voting Share shall entitle the Trustee to a number of
votes equal to the number of Dividend Access Shares held by Xxxxxx Xxxxx,
Xxxxxxx Xxxxx and Xxxxxx April on the applicable record date at all meetings of
the shareholders of the Corporation at which holders of Common Shares are
entitled to vote (except meetings at which only holders of another specified
class of shares (other than Common Shares) are entitled to vote pursuant to the
provisions hereof or pursuant to the provisions of the Act).
ARTICLE 3
DIVIDENDS
3.1 The holder of the Multiple Voting Share shall not be entitled to
receive any dividends.
ARTICLE 4
RANKING OF MULTIPLE VOTING SHARES
4.1 The Multiple Voting Share shall be entitled to a preference, as
provided in Article 5, over the Common Shares and any other shares ranking
junior to the Multiple Voting Share with respect to the distribution of assets
in the event of the liquidation, dissolution or winding-up of the Corporation,
whether voluntary or involuntary.
ARTICLE 5
DISTRIBUTION ON LIQUIDATION
5.1 In the event of the liquidation, dissolution or winding-up of the
Corporation or any other distribution of the assets of the Corporation among its
shareholders for the purpose of winding up its affairs, the holder of the
Multiple Voting Share shall be entitled, subject to applicable law, to receive
from the assets of the Corporation in respect of the Multiple Voting Share held
by such holder on the effective date (the "LIQUIDATION DATE") of such
liquidation, dissolution or winding-up, before any distribution of any part of
the assets of the Corporation among the holders of the Common Shares or any
other shares ranking junior to the Multiple Voting Share, an amount per share
equal to (a) the monetary consideration received by the Corporation upon the
issuance of such share (denominated in the currency in which such consideration
was paid to the Corporation) (hereinafter the "LIQUIDATION AMOUNT").
5.2 On or after the Liquidation Date, the Corporation shall cause to be
delivered to the holder of the Multiple Voting Share the Liquidation Amount
(less any tax required to be deducted and withheld therefrom by the Corporation)
for such Multiple Voting Share upon presentation and surrender of the
certificate representing such Multiple Voting Share, together with such other
2
171
documents and instruments as may be required to effect a transfer of Multiple
Voting Share under the Act and the by-laws of the Corporation and such
additional documents and instruments as the Corporation may reasonably require,
at any office and in any manner whatsoever as may be specified by the
Corporation by notice to the holder of the Multiple Voting Share. Payment of the
total Liquidation Amount for such Multiple Voting Share shall be made by the
Corporation, or on behalf of the Corporation by an authorized agent, by delivery
to each holder at the address of the holder recorded in the securities register
of the Corporation or by holding for pick up by the holder at any office as may
be specified by the Corporation by notice to the holder of the Multiple Voting
Share, a cheque of the Corporation payable at par at any branch of the bankers
of the Corporation in respect of the amount of the Liquidation Amount (less any
tax required to be deducted and withheld therefrom by the Corporation) without
interest. On and after the Liquidation Date, the holder of the Multiple Voting
Share shall cease to be a holder of such Multiple Voting Share and shall not be
entitled to exercise any of the rights of holder in respect thereof, other than
the right to receive the total Liquidation Amount, unless payment of the total
Liquidation Amount for such Multiple Voting Share shall not be made upon
presentation and surrender of the share certificate in accordance with the
foregoing provisions, in which case the rights of the holder shall remain
unaffected until the total Liquidation Amount has been paid in the manner
hereinbefore provided. The Corporation shall have the right at any time on or
after the Liquidation Date to deposit or cause to be deposited the total
Liquidation Amount in respect of the Multiple Voting Share represented by a
certificate that has not at the Liquidation Date been surrendered by the holder
thereof with an authorized agent of the Corporation including, without
limitation, any chartered bank or trust company in Canada. Upon such deposit
being made, the rights of the holder of the Multiple Voting Share after such
deposit shall be limited to receiving the total Liquidation Amount so deposited
(less any tax required to be deducted and withheld therefrom) without interest
for such Multiple Voting Share against presentation and surrender of the said
certificate held by it, in accordance with the foregoing provisions.
5.3 After the Corporation has satisfied its obligations to pay the
holder of the Multiple Voting Share the Liquidation Amount pursuant to Section
5.1 of these share provisions, such holder shall not be entitled to share in any
further distribution of the assets of the Corporation.
ARTICLE 6
REDEMPTION OF MULTIPLE VOTING SHARE BY THE CORPORATION
6.1 Subject to applicable law, the Corporation shall on the Automatic
Redemption Date redeem (the "AUTOMATIC REDEMPTION") the then outstanding
Multiple Voting Shares for an amount per share equal to the Liquidation Amount
(hereinafter in this Article 6 the "REDEMPTION PRICE").
6.2 In any case of any redemption of Multiple Voting under this Article
6, the Corporation shall, at least fifteen (15) days before the Automatic
Redemption Date, send or cause to be sent to the holder of the Multiple Voting
Share to be redeemed a notice in writing of the redemption by the Corporation,
of the Multiple Voting Share held by such holder. Such notice shall set out the
Redemption Price and the Redemption Date. On or after the Automatic
3
172
Redemption Date, the Corporation shall cause to be delivered to the holder of
the Multiple Voting Share to be redeemed the Redemption Price (less any tax
required to be deducted and withheld therefrom by the Corporation) for such
Multiple Voting Share upon presentation and surrender of the certificate
representing such Multiple Voting Share, together with such other documents and
instruments as may be required to effect a transfer of the Multiple Voting Share
under the Act and the by-laws of the Corporation and such additional documents
and instruments as the Corporation may reasonably require, at any office and in
any manner whatsoever as may be specified by the Corporation in such notice.
Payment of the total Redemption Price for such Multiple Voting Share shall be
made by the Corporation, or on behalf of the Corporation by an authorized agent,
by delivery to the holder at the address of the holder recorded in the
securities register of the Corporation or by holding for pick up by the holder
at any office as may be specified by the Corporation in such notice, a cheque of
the Corporation payable at par at any branch of the bankers of the Corporation
in respect of the amount of the Redemption Price (less any tax required to be
deducted and withheld therefrom by the Corporation) without interest. On and
after the Automatic Redemption Date, the holder of the Multiple Voting Share
called for redemption shall cease to be a holder of such Multiple Voting Share
and shall not be entitled to exercise any of the rights of holder in respect
thereof, other than the right to receive the total Redemption Price, unless
payment of the total Redemption Price for such Multiple Voting Share shall not
be made upon presentation and surrender of the certificate in accordance with
the foregoing provisions, in which case the rights of the holder shall remain
unaffected until the total Redemption Price has been paid in the manner
hereinbefore provided. The Corporation shall have the right at any time after
the sending of notice of its intention to redeem the Multiple Voting Share as
aforesaid to deposit or cause to be deposited the total Redemption Price of the
Multiple Voting Share so called for redemption represented by a certificate that
has not at the date of such deposit been surrendered by the holder thereof in
connection with such redemption, with an authorized agent of the Corporation
including, without limitation, any chartered bank or trust company in Canada
named in such notice. Upon the later of such deposit being made and the
Automatic Redemption Date, the Multiple Voting Share in respect whereof such
deposit shall have been made shall be redeemed and the rights of the holder
thereof after such deposit or Automatic Redemption Date, as the case may be,
shall be limited to receiving the total Redemption Price so deposited (less any
tax required to be deducted and withheld therefrom by the Corporation), without
interest for such Multiple Voting Share against presentation and surrender of
the said certificate held by it, in accordance with the foregoing provisions.
ARTICLE 7
AMENDMENT AND APPROVAL
7.1 The rights, privileges, restrictions and conditions attaching to
the Multiple Voting Share may be added to, changed or removed but only with the
approval of the holder of the Multiple Voting Share.
4
173
ANNEX VII
STOCKHOLDERS AND STOCK OWNERSHIP OF
VESTCOM
The stockholders and stock ownership of VESTCOM is as follows:
Name Shares of VESTCOM Common Stock (pre-merger)
---------------------------------------- -------------------------------------------
Xxxxx XxXxxxxxxx(1) 197,837
Xxxx Xxxxxx(2) 630,890
Xxxxxx Xxxxx 50,878
Xxxxxx X. Xxxxxxx, III 19,569
Xxxxxx Xxxxx 13,699
Xxxxxx X. Xxxxxxxxx 7,827
Xxxxxxx Xxxx 1,956
Xxxxxx X. Xxxxxx 3,914
Xxxxxx Xxxxxxx 1,956
Xxxxxxxxxxx & Co., Inc. 229,773
Opco, Senior Executive Partnership, L.P. 57,443
Xxxxxxx Xxxxx 38,296
Xxxx Xxxxxxxx(3) 27,436
Xxxxxx Xxxxx 13,718
(1) Includes 25,000 shares purchased by members of Xx. XxXxxxxxxx'x family.
(2) Includes 200,000 shares purchased by trusts for the benefit of Xx. Xxxxxx'x
children.
(3) Includes 27,436 shares purchased by Xxxxx Xxxx Limited Partnership.
174
ANNEX VIII
OPINION OF COUNSEL TO VESTCOM
The STOCKHOLDERS, shall have received an opinion from Xxxxxxxxxx,
Sandler, Kohl, Xxxxxx & Xxxxxx, P.A., dated the Closing Date, in form and
substance reasonably satisfactory to the STOCKHOLDERS, substantially to the
effect that:
(i) VESTCOM and NEWCO have been duly organized and are validly
existing in good standing under the laws of their respective
states of incorporation;
(ii) the Share Purchase Agreement and the Support Agreement
have been duly authorized, executed and delivered by VESTCOM
and NEWCO and constitute valid and binding agreements of
VESTCOM and NEWCO enforceable in accordance with their terms,
except as such enforceability may be subject to bankruptcy,
moratorium, insolvency, reorganization, arrangement and other
similar laws relating to or affecting the rights of creditors
generally and except (X) as the same may be subject to the
effect of general principles of equity and (Y) that no opinion
need be expressed as to the enforceability of indemnification
provisions included herein;
(iii) the Voting Trust Agreement has been duly authorized,
executed and delivered by VESTCOM and constitutes a valid and
binding agreement of VESTCOM enforceable in accordance with
its terms, except as such enforceability may be subject to
bankruptcy, moratorium, insolvency, reorganization,
arrangement and other similar laws relating to or affecting
the rights of creditors generally and except (X) as the same
may be subject to the effect of general principles of equity
and (Y) that no opinion need be expressed as to the
enforceability of indemnification provisions included herein;
175
(iv) the shares of VESTCOM Stock to be received by the
STOCKHOLDERS on the Consummation Date shall be duly
authorized, fully paid and non-assessable; and
(v) to the knowledge of such counsel, no notice to, consent,
authorization, approval or order of any court or governmental
agency or body or of any other third party is required in
connection with the execution, delivery or consummation of the
Share Purchase Agreement, the Support Agreement or the Voting
Trust Agreement by VESTCOM or NEWCO except for such notices,
consents, authorizations, approvals or orders as already have
been made or obtained.
2
176
ANNEX X
OPINION OF COUNSEL TO THE STOCKHOLDERS AND THE COMPANY
VESTCOM shall have received an opinion from counsel to the COMPANY and
the STOCKHOLDERS, dated the Closing Date, in form and substance reasonably
satisfactory to VESTCOM and its underwriters, substantially to the effect that:
(i) Each of the COMPANY and the COMPANY'S Subsidiaries has
been duly incorporated and is validly existing or subsisting in good
standing under the laws of its respective state of incorporation and
has the corporate power and authority to own and lease its respective
properties and to conduct its respective businesses as currently being
conducted;
(ii) Each of the COMPANY and the COMPANY'S Subsidiaries are
duly qualified to do business as foreign corporations in each of the
jurisdictions where, to such counsel's knowledge, they own or lease
properties and where the failure to so qualify would have a Material
Adverse Effect on the COMPANY. Each of the COMPANY and the COMPANY'S
Subsidiaries has the required authorities and permits to carry on its
business in each of the jurisdictions in which they conduct business as
set forth in Schedule 5.1;
(iii) the authorized and outstanding capital stock of the
COMPANY and the COMPANY'S Subsidiaries is as represented by the
STOCKHOLDERS and the COMPANY in this Agreement and each share of such
stock has been duly authorized and validly issued, is fully paid and
nonassessable and was not issued in violation of the pre-emptive rights
of any stockholder;
(iv) neither the COMPANY nor the COMPANY'S Subsidiaries have
any outstanding options, warrants, calls, conversion rights or other
commitments of any kind to issue or sell any of their capital stock;
(v) this Agreement has been duly authorized, executed and
delivered by the COMPANY and each STOCKHOLDER and all corporate action
required to be taken by the board of directors of the COMPANY and all
action required to be taken by the
177
STOCKHOLDERS have been duly taken. This Agreement constitutes a valid
and binding agreement of the COMPANY and each STOCKHOLDER enforceable
against the COMPANY and each STOCKHOLDER in accordance with its terms,
except as such enforceability may be subject to bankruptcy, moratorium,
insolvency, reorganization, arrangement and other similar laws relating
to or affecting the rights of creditors generally and except (X) as the
same may be subject to the effect of general principles of equity and
(Y) that no opinion need be expressed as to the enforceability of
indemnification provisions included herein;
(vi) based solely on a search in relevant filing offices of
Uniform Commercial Code financing statements, to the knowledge of such
counsel, except as set forth on a schedule to such opinion, the assets
and personal property owned by the COMPANY or the COMPANY'S
Subsidiaries are not subject to any liens or encumbrances except as set
forth on Schedules 5.10, 5.14 and 5.16 or as permitted by Section
7.3(vi);
(vii) assuming the due authorization, execution and delivery
of the Certificate of Merger by VESTCOM, and assuming the proper filing
of the Certificate of Merger with the Secretary of State of the State
of NEWCO'S incorporation, the Merger shall become effective under the
laws of the state of NEWCO'S incorporation. Upon the Effective Time of
the Merger, there will be no outstanding stock of the COMPANY and, no
former shareholder of the COMPANY will be entitled to any rights as a
dissenting shareholder;
(viii) except to the extent set forth on Schedules 5.10, 5.21
and 5.28, to the knowledge of such counsel, (a) neither the COMPANY nor
the COMPANY'S Subsidiaries is in violation of any order with respect to
the COMPANY or the COMPANY'S Subsidiaries issued by any court or agency
(wherever located) of which such counsel is aware and (b) there are no
claims, actions, suits or proceedings pending, or threatened against or
affecting the COMPANY, the COMPANY'S Subsidiaries or any STOCKHOLDER,
at law or in equity, or before or by any federal, state, municipal or
2
178
other governmental department, commission, board, bureau, agency or
instrumentality wherever located;
(ix) except to the extent set forth on Schedule 5.15, to the
knowledge of such counsel, neither the COMPANY nor the COMPANY'S
Subsidiaries is in default, nor has received any notice of default,
under any of the contracts or agreements listed on Schedule 5.12, 5.15
or 5.18;
(x) to the knowledge of such counsel, no notice to, consent,
authorization, approval or order of any court or governmental agency or
body or of any other third party is required in connection with the
execution, delivery or consummation of this Agreement by the COMPANY or
by any STOCKHOLDER except for such notices, consents, authorizations,
approvals or orders as already have been made or obtained ;
(xi) the execution, delivery and performance of this Agreement
by the COMPANY, the compliance by the COMPANY with the provisions
thereof and the consummation of the transactions contemplated thereby
will not (i) violate or result in any breach of any of the terms or
provisions of the COMPANY'S or the COMPANY'S Subsidiaries' respective
Articles of Incorporation or By-laws, (ii) conflict with or result in
any breach of or default under any lease, instrument, license, permit,
contract or any other agreement listed on Schedule 5.12 or 5.15, except
to the extent specifically set forth in Schedule 5.12 or 5.15, or (iii)
contravene any provision of any ____ State or Federal law, statute,
rule or regulation; and
(xii) to the knowledge of such counsel, NEWCO is a corporation
duly formed, validly existing and in good standing under the laws of
the state of its incorporation.
Such opinion may include reasonable and standard exceptions. Furthermore, in
giving such opinions, such counsel may rely on opinions of local counsel,
reasonably acceptable to VESTCOM and its counsel, provided such opinions are
attached to counsel's opinion, and counsel states that reliance on such opinions
is reasonable under the circumstances. Such opinions shall also provide that (a)
Xxxxxxxxxx, Sandler, Kohl, Xxxxxx & Xxxxxx may rely upon
3
179
such opinions in rendering any opinion to VESTCOM'S underwriters as if such
opinions were addressed to such firm and (b) VESTCOM'S underwriters may rely
upon such opinions in connection with the sale by VESTCOM to VESTCOM'S
underwriters of VESTCOM Common Stock pursuant to the underwriting agreement
between VESTCOM and VESTCOM'S underwriters as if such opinions were addressed to
them.
For purposes of such opinion, "knowledge" of counsel shall mean (with
respect to matters of fact) that after an examination of documents made
available to counsel by the COMPANY and the COMPANY'S Subsidiaries and after
inquiry of officers of the COMPANY and the COMPANY'S Subsidiaries, but without
any judgment or litigation searches or any other independent factual
investigation, counsel has no reason to believe that statements made to such
counsel's "knowledge" are factually incorrect. "Knowledge" shall furthermore
refer only to then current actual knowledge of members of counsel's firm who
have worked on matters for the COMPANY and the COMPANY'S Subsidiaries.
4