EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MDC COMMUNICATIONS CORPORATION,
AGI ACQUISITION CO.
AND
ARTISTIC GREETINGS INCORPORATED
DATED AS OF DECEMBER 21, 1997
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
Section 1.01. The Merger .....................................................2
Section 1.02. Effective Time .................................................2
Section 1.03. Certificate of Incorporation and By-Laws of
Surviving Corporation.........................................2
Section 1.04. Directors and Officers of Surviving Corporation.................2
Section 1.05. Closing ........................................................3
Section 1.06. Further Assurances..............................................3
Section 1.07. Conversion of Shares............................................4
Section 1.08. Stock Options ..................................................4
Section 1.09. Stockholders' Meeting; Proxy Statement..........................5
Section 1.10. Dissenting Shares...............................................6
Section 1.11. Payment for Shares..............................................6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO
Section 2.01. Organization ...................................................8
Section 2.02. Authority Relative to This Agreement............................9
Section 2.03. No Violations, Etc..............................................9
Section 2.04. Proxy Statement................................................10
Section 2.05. Financing .....................................................10
Section 2.06. Brokers .......................................................11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.01. Organization and Qualification.................................11
Section 3.02. Authority Relative to This Agreement...........................11
Section 3.03. No Violations, Etc.............................................12
Section 3.04. Board Recommendation...........................................13
Section 3.05. State Antitakeover Statutes....................................13
Section 3.06. Fairness Opinion...............................................13
Section 3.07. Proxy Statement................................................13
Section 3.08. Finders or Brokers.............................................14
Section 3.09. SEC Filings ...................................................14
Section 3.10. Financial Statements...........................................15
Section 3.11. Absence of Undisclosed Liabilities.............................15
Section 3.12. Absence of Changes or Events...................................16
Section 3.13. Capitalization ................................................17
Section 3.14. Litigation ....................................................18
Section 3.15. Insurance .....................................................18
Section 3.16. Compliance with Law............................................18
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Section 3.17. Employee Benefits..............................................19
Section 3.18. Taxes .........................................................20
Section 3.19. Contracts .....................................................21
Section 3.20. Related Party Transactions.....................................22
Section 3.21. Real Property .................................................22
Section 3.22. Environmental Matters..........................................22
Section 3.23. Intellectual Property..........................................23
ARTICLE IV
COVENANTS
Section 4.01. Conduct of Business of the Company.............................25
Section 4.02. Other Potential Bidders........................................28
Section 4.03. Access to Information..........................................29
Section 4.04. Commercially Reasonable Efforts; Other Actions.................30
Section 4.05. Public Announcements...........................................31
Section 4.06. Notification of Certain Matters................................31
Section 4.07. Indemnification................................................31
Section 4.08. Expenses ......................................................32
Section 4.09. Resignation of Directors.......................................32
Section 4.10. Asset Purchase Agreement.......................................32
ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF PARENT,
NEWCO AND THE COMPANY
Section 5.01. Conditions to Obligations of Parent, Newco and the Company.....33
Section 5.02. Conditions to Obligations of Parent and Newco..................33
Section 5.03. Conditions to Obligations of Company...........................34
ARTICLE VI
TERMINATION; AMENDMENT, WAIVER
Section 6.01. Termination ...................................................34
Section 6.02. Effect of Termination..........................................36
Section 6.03. Certain Payments...............................................37
Section 6.04. Amendment .....................................................38
Section 6.05. Extension; Waiver..............................................38
ARTICLE VII
DEFINITIONS
Section 7.01. Terms Defined in This Agreement................................39
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ARTICLE VIII
MISCELLANEOUS
Section 8.01. Waiver of Compliance; Consents.................................40
Section 8.02. Survivability; Investigations..................................40
Section 8.03. Notices .......................................................40
Section 8.04. Assignment; No Third Party Beneficiaries.......................41
Section 8.05. Governing Law .................................................42
Section 8.06. Counterparts ..................................................42
Section 8.07. Severability ..................................................42
Section 8.08. Interpretation ................................................42
Section 8.09. Entire Agreement...............................................42
Signatures .................................................................S-1
Exhibits
Exhibit 1...........................................Asset Purchase Agreement
Exhibit 2...........................................Stockholders Agreement
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of December 21, 1997 (the
"Agreement"), by and among MDC Communications Corporation, an Ontario
corporation ("Parent"), AGI Acquisition Co., a Delaware corporation ("Newco"),
which is an indirect wholly owned Subsidiary of Parent, and Artistic Greetings
Incorporated, a Delaware corporation (the "Company"). Newco and the Company are
hereinafter sometimes collectively referred to as the "Constituent
Corporations."
RECITALS
WHEREAS, the Board of Directors of the Company (the "Board") has, in light
of and subject to the terms and conditions set forth herein, (i) determined that
the Merger (as defined below) is fair to the stockholders of the Company and in
the best interests of such stockholders and (ii) approved and adopted this
Agreement and the transactions contemplated hereby (including the transactions
contemplated by the Asset Purchase Agreement (as defined herein)) and resolved
to recommend approval and adoption by the stockholders of the Company of this
Agreement and the Asset Purchase Agreement;
WHEREAS, contemporaneously herewith, the Company is entering into an Asset
Purchase Agreement, dated as of even date herewith, with Artistic Direct
Incorporated (together with any other asset purchase agreement substantially in
the form of Exhibit 1 hereto and providing for the payment of cash consideration
of at least $9 million and the assumption of the Assumed Liabilities (as defined
therein), the "Asset Purchase Agreement"), pursuant to which the Company has
agreed to sell (the "Asset Sale") certain assets relating to the personalized
product and catalog businesses of the Company (the "P&C Business") for the
consideration set forth therein and the assumption of certain liabilities
relating to the P&C Business, on the terms and conditions more fully described
therein; and
WHEREAS, the Board of Directors and the shareholders of Newco have, in
light of and subject to the terms and conditions set forth herein, approved and
adopted this Agreement and the transactions contemplated hereby.
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NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.01. The Merger. (a) In accordance with the provisions of this
Agreement and the Delaware General Corporation Law (the "Delaware Act"), at the
Effective Time (as hereinafter defined), Newco shall be merged (the "Merger")
with and into the Company, and the Company shall be the surviving corporation
(hereinafter sometimes called the "Surviving Corporation") and shall continue
its corporate existence under the laws of the State of Delaware. The name of the
Surviving Corporation shall be "the Company". At the Effective Time the separate
existence of Newco shall cease.
(b) The Merger shall have the effects on Newco and the Company as
constituent corporations of the Merger as provided under the Delaware Act.
Section 1.02. Effective Time. The Merger shall become effective at the time
of filing of, or at such later time specified in, a certificate of merger, in
the form required by and executed in accordance with the Delaware Act, with the
Secretary of State of the State of Delaware in accordance with the provisions of
the Delaware Act (the "Certificate of Merger"). The date and time when the
Merger shall become effective is herein referred to as the "Effective Time."
Section 1.03. Certificate of Incorporation and By-Laws of Surviving
Corporation. The Certificate of Incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be amended as of the Effective
Time so that Article Four of such Certificate is amended to read in its entirety
as follows: "The total number of shares of stock which the Corporation shall
have authority to issue is 1,000 shares, all of one class of Common Stock having
a par value of $.01 per share, and each share of Common Stock shall be entitled
to one vote on all matters as to which such stock is entitled to vote.". As so
amended, the Certificate of Incorporation of the Company shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided therein
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or by law. The By-Laws of Newco, as in effect immediately prior to the Effective
Time, shall be the By-Laws of the Surviving Corporation until thereafter amended
as provided therein, by the Certificate of Incorporation or by law.
Section 1.04. Directors and Officers of Surviving Corporation. The
directors of Newco immediately prior to the Effective Time will be the initial
directors of the Surviving Corporation, and the officers of the Company
immediately prior to the Effective Time will be the initial officers of the
Surviving Corporation, in each case until their successors are elected and
qualified.
Section 1.05. Closing. (a) Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
the provisions of Section 6.01, and subject to satisfaction or waiver of the
provisions of Article V hereof, the closing (the "Closing") of this Agreement
shall take place at the offices of Xxxxxxx Xxxxxxx & Xxxxxxxx, 000 Xxxxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx, at 10:00 a.m. local time as soon as practicable but
no later than the second business day after the satisfaction or waiver of the
conditions set forth in Sections 5.01, 5.02 and 5.03 hereof, or at such other
place, time and date as the parties may mutually agree. The date and time of
such Closing are herein referred to as the "Closing Date." For purposes of this
Agreement "business day" shall mean any day except Saturday, Sunday and any day
which shall be in New York City a legal holiday or a day on which banking
institutions in New York or Toronto are authorized or required by law or other
government action to close.
(b) At the Closing, Parent, Newco and the Company shall cause a Certificate
of Merger to be executed and filed with the Secretary of State of the State of
Delaware as provided in the Delaware Act, and shall take any and all other
lawful actions and do any and all other lawful things to cause the Merger to
become effective.
Section 1.06. Further Assurances. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of the Constituent Corporations acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with,
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the Merger or otherwise to carry out this Agreement, the officers and directors
of the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of each of the Constituent Corporations or otherwise, all
such deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of each of the Constituent Corporations or otherwise, all
such other actions and things as may be necessary or desirable to vest, perfect
or confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
Section 1.07. Conversion of Shares. (a) Each share (a "Share") of Common
Stock, par value $.10 per share (the "Common Stock"), of the Company issued and
outstanding immediately prior to the Effective Time (other than (i) Shares held
in the Company's treasury, (ii) Shares held by Parent, Newco or any other
subsidiary of Parent and (iii) Dissenting Shares (as defined in Section 1.10
hereof)) shall, at the Effective Time, by virtue of the Merger and without any
action on the part of Newco, the Company or the holder thereof, be cancelled and
extinguished and be converted into the right to receive, pursuant to Section
1.11, $5.70 per Share in cash (the "Merger Consideration"), payable to the
holder thereof, without interest thereon, upon the surrender of the certificate
formerly representing such Share, less any required withholding of taxes;
provided that, in the event the aggregate cash consideration net of fees,
expenses and other direct costs (including any break-up or termination fee and
liquidated damages, if any) received by the Company pursuant to the Asset
Purchase Agreement exceeds $9,000,000, the Merger Consideration with respect to
each such Share shall be increased to include the pro rata portion of the amount
by which such consideration exceeds $9,000,000. At the Effective Time, each
outstanding share of the common stock, par value $.01 per share, of Newco shall
be converted into a share of common stock, par value $.01 per share, of the
Surviving Corporation.
(b) Each Share held in the treasury of the Company and each Share held by
Parent, Newco or any subsidiary of Parent, or the Company immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on the
part of Newco, the Company or the holder thereof, be cancelled, retired and
cease to exist and no payment shall be made with respect thereto.
Section 1.08. Stock Options. (a) Prior to the consummation of the Merger,
the Board shall use its best efforts
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to cause the terms of all outstanding stock options heretofore granted under any
stock option plan of the Company (collectively, the "Stock Plans") to be
adjusted to provide that, at the Effective Time, each stock option outstanding
immediately prior to the consummation of the Merger shall be cancelled and the
holder thereof shall be entitled to receive as soon as practicable thereafter
from the Company in consideration for such cancellation a cash payment of an
amount equal to (i) the excess, if any, of (A) the Merger Consideration over (B)
the exercise price per share of Common Stock subject to such stock option,
multiplied by (ii) the number of shares of Common Stock for which such stock
option shall not theretofore have been exercised.
(b) All amounts payable pursuant to Section 1.08(a) shall be subject to any
required withholding of taxes and shall be paid without interest.
(c) Prior to the consummation of the Merger, the Board of Directors (or, if
appropriate, any committee administering the Stock Plans) shall adopt such
resolutions or take such actions as are commercially reasonable, subject, if
necessary, to obtaining consents of the holders thereof, to carry out the terms
of this Section 1.08 and to provide that, on and after the Effective Time, no
officer, director or employee of the Company shall have any right to acquire any
interest in, any equity security of the Company or any of its subsidiaries.
Section 1.09. Stockholders' Meeting; Proxy Statement. (a) The Company,
acting through the Board, shall in accordance with applicable law and the
Company's Certificate of Incorporation and By-Laws:
(i) duly call, give notice of, convene and hold a special meeting of
its stockholders (the "Special Meeting") to be held as soon as practicable
following the date of this Agreement for the purpose of considering and
taking action upon this Agreement and the Asset Purchase Agreement and the
transactions contemplated hereby and thereby;
(ii) subject to its fiduciary duties as determined in good faith by a
majority of the Board, based upon the written opinion of outside counsel,
include in the Proxy Statement (as amended or supplemented, the "Proxy
Statement") required to be distributed to holders of Common Stock in
connection with the Merger the recommendation of the Board that the
stockholders of the Company vote in fa-
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vor of the approval and adoption of this Agreement and the Asset Purchase
Agreement and the transactions contemplated hereby and thereby and the
written opinion of PaineWebber Incorporated (the "Financial Adviser") that
the cash consideration to be received by the stockholders of the Company
pursuant to the Merger is fair, from a financial point of view, to such
stockholders; and
(b) The Company shall prepare and file with the Securities and Exchange
Commission (the "SEC") the Proxy Statement and shall use all reasonable efforts
to respond promptly to any comments made by the SEC with respect to the Proxy
Statement and any preliminary version thereof, have the Proxy Statement cleared
by the SEC and cause the Proxy Statement to be mailed to the Company's
stockholders at the earliest practicable time. The Company shall give Parent and
its counsel the opportunity to review the Proxy Statement prior to its being
filed with the SEC and shall consult with Parent and its counsel regarding
comments made by the SEC.
At such meeting, Parent, Newco and their affiliates will vote all Shares
owned by them (or with respect to which such entities exercise voting control)
in favor of approval and adoption of this Agreement and the transactions
contemplated hereby.
Section 1.10. Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, Shares outstanding immediately prior to the Effective Time and
held by a holder who has not voted in favor of the Merger or consented thereto
in writing and who has demanded appraisal for such Shares in accordance with
Section 262 of the Delaware Act ("Dissenting Shares") shall not be converted
into a right to receive the Merger Consideration, unless such holder fails to
perfect or withdraws or loses his right to appraisal, in which case such Shares
shall be treated as if they had been converted as of the Effective Time into a
right to receive the Merger Consideration, without interest thereon. The Company
shall give Parent and Newco prompt notice of any demands received by the Company
for appraisal of Shares and, prior to the Effective Time, Parent and Newco shall
have the right to direct all negotiations and proceedings with respect to such
demands. Prior to the Effective Time, the Company shall not, except with the
prior written consent of Parent or Newco, make any payment with respect to, or
settle or offer to settle, any such demands.
Section 1.11. Payment for Shares. (a) Prior to the Effective Time, Parent
and Newco shall designate a bank or
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trust company reasonably acceptable to the Company to act as exchange agent in
connection with the Merger (the "Exchange Agent"). At or prior to the Effective
Time, Parent or Newco will provide the Exchange Agent with the funds necessary
to make the payments contemplated by Section 1.07(a) hereof (the "Exchange
Fund"). Such funds shall be invested by the Exchange Agent as directed by Newco
or, after the Effective Time, the Surviving Corporation, provided that such
investments shall be in obligations of or guaranteed by the United States of
America, in commercial paper obligations rated A-1 or P-1 or better by Xxxxx'x
Investors Service, Inc. or Standard & Poor's Corporation, respectively, or in
certificates of deposit, bank repurchase agreements or banker's acceptances of
commercial banks with capital exceeding $500 million. Any net profit resulting
from, or interest or income produced by, such investments will be payable to the
Surviving Corporation or Parent, as Parent directs.
(b) Promptly after the Effective Time, the Exchange Agent shall mail to
each record holder, as of the Effective Time, of an outstanding certificate or
certificates which immediately prior to the Effective Time represented Shares
(the "Certificates") a form letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent) and
instructions for use in effecting the surrender of the Certificates for payment
therefor. Upon surrender to the Exchange Agent of a Certificate, together with a
duly executed letter of transmittal and any other required documents, the holder
of such Certificate shall receive in exchange therefor (as promptly as
practicable) the Merger Consideration, without any interest thereon, less any
required withholding of taxes, and such Certificate shall forthwith be
cancelled. If payment is to be made to a person other than the person in whose
name a Certificate so surrendered is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer, that the signatures on the Certificate or
any related stock power shall be properly guaranteed and that the person
requesting such payment shall either pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of the
Certificate so surrendered or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
in accordance with the provisions of this Section 1.11(b), each Certificate
(other than Certificates representing Shares held in the Company's treasury or
by Parent or Newco, or by any subsidiary of Parent or Newco,
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and other than Certificates representing Dissenting Shares) shall represent for
all purposes only the right to receive for each Share represented thereby the
Merger Consideration.
(c) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of the Shares which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be cancelled
and exchanged for the consideration provided for, and in accordance with the
procedures set forth, in this Article I.
(d) From and after the Effective Time, the holders of Certificates
evidencing ownership of Shares outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such Shares except as
otherwise provided herein or by applicable law. Such holders shall have no
rights, after the Effective Time, with respect to such Shares except to
surrender such Certificates in exchange for cash pursuant to this Agreement or
to perfect any rights of appraisal as a holder of Dissenting Shares that such
holders may have pursuant to Section 262 of the Delaware Act.
(e) Any portion of the Exchange Fund (including the proceeds of any
investment thereof) that remains unclaimed by the stockholders of the Company
for six months after the Effective Time shall be repaid to the Surviving
Corporation. Any stockholders of the Company who have not theretofore complied
with this Article I shall thereafter look only to the Surviving Corporation
(subject to abandoned property, escheat or other similar laws) only as general
creditors for payment of their claims for the Merger Consideration for each
Share such stockholders hold, without any interest.
(f) Notwithstanding anything to the contrary in this Section 1.11, none of
the Exchange Agent, Parent or the Surviving Corporation shall be liable to a
holder of a Certificate formerly representing Shares for any amount properly
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF PARENT AND NEWCO
Each of Parent and Newco jointly and severally represents and warrants to
the Company as follows:
Section 2.01. Organization. Parent is a corporation duly organized, validly
existing and in good standing under the laws of Ontario. Newco is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Newco has not engaged in any business since it was
incorporated other than in connection with the transactions contemplated by this
Agreement. Parent owns directly or indirectly all of the outstanding capital
stock of Newco.
Section 2.02. Authority Relative to This Agreement. Each of Parent and
Newco has full corporate power and authority to execute and deliver this
Agreement and to consummate the Merger and the other transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
Merger and the other transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of each of Parent and Newco and by Parent
as the sole stockholder of Newco and no other corporate proceedings on the part
of Parent or Newco are necessary to authorize this Agreement or to consummate
the Merger or the other transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by each of Parent and Newco and,
assuming the due authorization, execution and delivery hereof by the Company,
constitutes a valid and binding agreement of each of Parent and Newco,
enforceable against each of them in accordance with its terms, except to the
extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally or by general equitable or fiduciary principles.
Section 2.03. No Violations, Etc. (a) Assuming that all filings, permits,
authorizations, consents and approvals have been duly made or obtained as
contemplated by this Section 2.03, the execution and delivery of this Agreement
and the consummation by Parent and Newco of the Merger and the other
transactions contemplated hereby will not (i) violate any provision of the
Certificate of Incorporation or By-Laws or similar organizational document of
either Parent or Newco,
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(ii) assuming that all consents, approvals and authorizations contemplated by
clause (b) below have been obtained and all filings described in such clause
have been made, violate any statute, rule, regulation, order or decree of any
public body or authority by which Parent, Newco or any of their properties is
bound, or (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default under, any license,
franchise, permit, indenture, agreement or other instrument to which Parent or
Newco is a party, or by which Parent, Newco or any of their properties is bound,
excluding from the foregoing clauses (ii) and (iii) violations, breaches and
defaults which, either individually or in the aggregate, would not materially
impair the ability of Parent or Newco to consummate the Merger or the other
transactions contemplated hereby or have a material adverse effect on the
business, operations, assets or financial condition of Parent and its
subsidiaries taken as a whole.
(b) No filing or registration with, or authorization, consent or approval
of, or notification to any governmental entity is required by Parent or Newco in
connection with the execution and delivery of this Agreement or the consummation
by Parent and Newco of the Merger and the other transactions contemplated
hereby, except (i) in connection with the applicable requirements of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) in connection, or in compliance, with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act") or the Exchange Act, (iii) the filing of
appropriate merger documents as required by the Delaware Act, (iv) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under the corporation, takeover or blue sky laws of
various states and (v) such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made, either individually or in the aggregate, would not materially impair the
ability of Parent or Newco to consummate the Merger and the other transactions
contemplated hereby or have a material adverse effect on the business,
operations, assets or financial condition of Parent and its subsidiaries taken
as a whole.
Section 2.04. Proxy Statement. None of the information supplied by Parent
or Newco in writing for inclusion in the Proxy Statement will, at the respective
times that the Proxy Statement or any amendments or supplements thereto are
filed with the SEC and are first published or sent or given to holders of
Shares, and, at the time that it or any amendment or
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supplement thereto is mailed to the Company's stockholders, at the time of the
Stockholders' Meeting or at the Effective Time, contain any statement which, at
the time and in the light of the circumstances under which it is made, is false
or misleading with respect to any material fact, or which omits to state any
material fact necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier Proxy Statement
which has become false or misleading.
Section 2.05. Financing. Parent or Newco, at the Effective Time, will have
sufficient funds available to consummate the Merger.
Section 2.06. Brokers. Except for Xxxxxx Xxxx (a true and correct copy of
whose engagement agreement has been provided to the Company), no broker, finder
or investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by and on behalf of Parent or Newco.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Newco that, except as
disclosed in the disclosure statement (the "Disclosure Statement"), dated the
date hereof, from the Company to Parent:
Section 3.01. Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. The Company is duly qualified as a foreign corporation
to do business, and is in good standing, in each jurisdiction where the
character of its properties owned or leased or the nature of its activities
makes such qualification necessary, except for failures to be so qualified or in
good standing which would not, individually or in the aggregate, have a Material
Adverse Effect or prevent or materially delay the consummation of the Merger.
When used in connection with the Company, the term "Material Adverse Effect"
means any change or effect that is or is reasonably likely to
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be materially adverse to the business, operations, assets, financial condition
or results of operations of the Company. The Company is not in violation of any
of the provisions of its Restated Certificate of Incorporation or By-laws. The
Company has previously delivered to Parent accurate and complete copies of the
Company's Restated Certificate of Incorporation and By-laws, as currently in
effect.
Section 3.02. Authority Relative to This Agreement. The Company has full
corporate power and authority to execute and deliver this Agreement and to
consummate the Merger and the other transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the Merger and
the other transactions contemplated hereby have been duly and validly authorized
by the Board of Directors of the Company and no other corporate proceedings on
the part of the Company are necessary to authorize this Agreement or to
consummate the Merger and the other transactions contemplated hereby (other
than, with respect to the Merger and the sale of assets contemplated by the
Asset Purchase Agreement, the approval of a majority of the outstanding shares
of Common Stock (the "Requisite Vote") at the Special Meeting or any adjournment
thereof). This Agreement has been duly and validly executed and delivered by the
Company and, assuming the due authorization, execution and delivery hereof by
Parent and Newco, constitutes a legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except to
the extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally or by general equitable or fiduciary principles.
Section 3.03. No Violations, Etc. Except for the filings of the Certificate
of Merger, filings required under the Securities Act and the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), filings required under and in
compliance with the HSR Act and as set forth on Schedule 3.03 hereto, no filing
with, notification to and no permit, authorization, consent or approval of, any
public body is necessary for the consummation by the Company of the Merger or
the other transactions contemplated hereby, excluding from the foregoing
permits, authorizations, consents, approvals and notices which (i) if not
obtained, made or given, either individually or in the aggregate, would not
materially impair the ability of the Company to consummate the Merger or the
other transactions contemplated hereby or have a Material Adverse Effect or (ii)
are required in connection with the transactions contemplated by the Asset
Purchase Agreement. Neither the execution and deliv-
-13-
ery of this Agreement nor the consummation of the Merger or the other
transactions contemplated hereby nor compliance by the Company with any of the
provisions hereof will (i) subject to obtaining the approval of a majority of
the outstanding shares of Common Stock at the Special Meeting or any adjournment
thereof if and to the extent required by the Delaware Act, conflict with or
result in any breach of any provision of the Restated Certificate of
Incorporation or By-Laws of the Company, (ii) other than as set forth on
Schedule 3.03 hereto or as required in connection with the transactions
contemplated by the Asset Purchase Agreement, result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation, acceleration,
redemption or repurchase or result in the loss of a material benefit) under, any
of the terms, conditions or provisions of any (x) note, bond, mortgage,
indenture, or deed of trust or (y) license, lease, agreement or other instrument
or obligation to which the Company is a party or by which any of them or any of
their properties or assets may be bound or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or any
of its properties or assets, excluding from the foregoing clauses (ii) and (iii)
violations, breaches or defaults which, either individually or in the aggregate,
would not materially impair the Company's ability to consummate the Merger or
the other transactions contemplated hereby or have a Material Adverse Effect.
Section 3.04. Board Recommendation. The Board has approved and adopted this
Agreement, the Merger and the other transactions contemplated hereby, determined
that the consideration to be received by the holders of shares of Common Stock
pursuant to the Merger is fair to the holders of such Shares and recommended
that the holders of such Shares approve and adopt this Agreement, the Merger and
the other transactions contemplated hereby.
Section 3.05. State Antitakeover Statutes. The Company or the Board, as
applicable, has granted all approvals and taken all other steps necessary to
exempt the Merger and the other transactions contemplated hereby from the
requirements and provisions of Section 203 of the Delaware Act and any other
state antitakeover statute or regulation such that none of the provisions of
such Section 203 or any other "business combination," "moratorium," "control
share," or other state antitakeover statute or regulation (x) prohibits or
restricts the Company's ability to perform its obligations under this Agreement
or its ability to consummate the Merger and the other transac-
-14-
tions contemplated hereby, (y) would have the effect of invalidating or voiding
this Agreement, or (z) would subject Parent or Newco to any material impediment
or condition in connection with the exercise of any of their respective rights
under this Agreement.
Section 3.06. Fairness Opinion. The Company has received the opinion of the
Financial Adviser to the effect that as of the date hereof the cash
consideration to be received by the stockholders of the Company pursuant to the
Merger is fair, from a financial point of view, to such stockholders.
Section 3.07. Proxy Statement. The Proxy Statement will comply as to form
in all material respects with applicable federal securities laws, except that no
representation is made by the Company with respect to information supplied by
Newco or Parent for inclusion in the Proxy Statement. The information supplied
by the Company in writing for inclusion in the Proxy Statement will not, at the
respective times that the Proxy Statement or any amendments or supplements
thereto are filed with the SEC and are first published or sent or given to
holders of Shares, contain any statement which, at the time and in the light of
the circumstances under which it is made, is false or misleading with respect to
any material fact, or which omits to state any material fact necessary in order
to make the statements therein not false or misleading or necessary to correct
any statement in any earlier Proxy Statement which has become false or
misleading.
Section 3.08. Finders or Brokers. Except for the Financial Adviser, the
Company has not employed any investment banker, broker, finder or intermediary
in connection with the transactions contemplated hereby who might be entitled to
a fee or any commission the receipt of which is conditioned upon consummation of
the Merger or the Asset Sale. The Company has heretofore furnished to Parent a
complete and correct copy of all agreements between the Company and the
Financial Adviser pursuant to which such firm would be entitled to any payment
relating to the transactions contemplated hereby.
Section 3.09. SEC Filings. (a) The Company has filed with the SEC all
required forms, reports and documents required to be filed by it with the SEC
since December 31, 1995 (collectively, the "Company SEC Reports"), all of which
complied as to form when filed in all material respects with the applicable
provisions of the Securities Act and the Exchange Act, as the case may be. None
of the Company SEC Reports (including all exhibits and schedules thereto and
documents in-
-15-
corporated by reference therein) contained when filed or (except to the extent
revised or superseded by a subsequent filing with the SEC) contains any untrue
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(b) The Company will deliver to Parent as soon as they become available
true and complete copies of any report or statement mailed by it to its
securityholders generally or filed by it with the SEC, in each case subsequent
to the date hereof and prior to the Effective Time. As of their respective
dates, such reports and statements (excluding any information therein provided
by Parent or Newco, as to which the Company makes no representation) will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading and will
comply in all material respects with all applicable requirements of law. The
audited financial statements and unaudited interim financial statements of the
Company to be included or incorporated by reference in such reports and
statements will be prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis throughout the periods
involved and will fairly present the financial position of the Company as of the
dates thereof and the results of operations and cash flow for the periods then
ended (subject, in the case of any unaudited interim financial statements, to
normal year-end adjustments and to the extent they may not include footnotes or
may be condensed or summary statements).
Section 3.10. Financial Statements. The audited financial statements and
unaudited interim financial statements of the Company included or incorporated
by reference in the Company's forms, reports and documents filed with the SEC
since December 31, 1995 have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved, and fairly present the financial position of the
Company as of the dates thereof and the results of operations and cash flows for
the periods then ended (subject, in the case of any unaudited interim financial
statements, to normal year-end adjustments and to the extent they may not
include footnotes or may be condensed or summary statements) and such audited
financial statements have been certified as such (without exception) by the
Company's independent auditors.
-16-
Section 3.11. Absence of Undisclosed Liabilities. The Company has no
liabilities or obligations of any nature, whether absolute, accrued, unmatured,
contingent or otherwise, or any unsatisfied judgments or any leases of
personalty or realty or unusual or extraordinary commitments, except the
liabilities recorded on the balance sheet of the Company at December 31, 1996
and the notes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1996, and except for liabilities or obligations
incurred in the ordinary course of business and consistent with past practice
since December 31, 1996 and those that would not individually or in the
aggregate have a Material Adverse Effect.
Section 3.12. Absence of Changes or Events. Since December 31, 1996:
(a) there has not been any direct or indirect redemption, purchase or
other acquisition of any shares of capital stock of the Company, or any
declaration, setting aside or payment of any dividend or other distribution
by the Company in respect of its capital stock, other than the payment made
by the Company with respect to 500,000 shares of Common Stock put to the
Company by Valcheck Company on June 30, 1997;
(b) except in the ordinary course of business and consistent with past
practice, the Company has not incurred any indebtedness for borrowed money,
or assumed, guaranteed, endorsed or otherwise as an accommodation become
responsible for the obligations of any other individual, firm or
corporation, made any loans or advances to any other individual, firm or
corporation or entered into any commitment or transaction material to the
Company taken as a whole;
(c) there has not been any material change in the accounting methods,
principles or practices of the Company;
(d) there has not been any damage, destruction or loss, whether or not
covered by insurance, except for such as would not, individually or in the
aggregate, have a Material Adverse Effect;
(e) there has been no change in the business, operations, assets or
financial condition of the Company that has had or will have a Material
Adverse Effect;
-17-
(f) there has not been any revaluation by the Company of any of its
material assets, including but not limited to writing down the value of
inventory or writing off notes or accounts receivable, in any case, other
than in the ordinary course of business and in connection with the
revaluation of certain fixed assets as set forth in the Disclosure
Statement;
(g) there has not been any increase in or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including without limitation the granting of stock
options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan or agreement or
arrangement, or any other increase in the compensation payable or to become
payable to any present or former directors, officers or key employees of
the Company, except for increases in base compensation in the ordinary
course of business consistent with past practice, or any employment,
consulting or severance agreement or arrangement entered into with any such
present or former directors, officers or key employees; or
(h) there has not been any agreement by the Company to (i) do any of
the things described in the preceding clauses (a) through (g) other than as
expressly contemplated or provided for in this Agreement or (ii) take,
whether in writing or otherwise, any action which, if taken prior to the
date of this Agreement, would have made any representation or warranty in
this Article III untrue or incorrect.
Section 3.13. Capitalization. The authorized capital stock of the Company
consists of 10,000,000 shares of Common Stock. As of the date hereof, there are
6,538,802 shares of Common Stock outstanding of which 695,396 shares of Common
Stock held in the Company's treasury. As of the date hereof, no shares of Common
Stock were reserved for issuance upon the exercise of outstanding options and
options which may be granted under the Stock Plans of the Company, all of which
options and plans are listed and described in Schedule 3.13 hereto (the "Common
Stock Equivalents"), and the number of shares issuable upon exercise of all such
options is as previously disclosed to Parent by the Company. Except as set forth
above and except for the Common Stock Equivalents there are not outstanding any
shares of capital stock or other voting securities, any existing options,
warrants, calls, subscriptions, or other rights or other agreements or
commitments obligating the
-18-
Company to issue, transfer or sell any shares of capital stock or voting
securities of the Company or any other securities convertible into or
exchangeable for or evidencing the right to subscribe for any such shares. There
are no outstanding stock appreciation rights with respect to the capital stock
of the Company. All issued and outstanding shares of Common Stock are duly
authorized and validly issued, fully paid, nonassessable and free of preemptive
rights with respect thereto. The Company has no subsidiaries. There are no
outstanding obligations of the Company to repurchase, redeem or otherwise
acquire any shares of capital stock. The Company does not own, directly or
indirectly, any capital stock or other ownership interest in any corporation,
partnership, joint venture, limited liability company or other entity which is
material to the business of the Company.
Section 3.14. Litigation. There is no (i) claim, action, suit,
investigation or proceeding pending or, to the knowledge of the Company,
threatened against or relating to the Company before any court or governmental
or regulatory authority or body or arbitration tribunal, or (ii) outstanding
judgment, order, writ, injunction or decree, or application, request or motion
therefor, of any court, governmental agency or arbitration tribunal in a
proceeding to which the Company or any of its assets was or is a party except,
in the case of clauses (i) and (ii) above, such as would not, individually or in
the aggregate, either prevent or materially delay the Company's ability to
consummate the Merger or the other transactions contemplated hereby or have a
Material Adverse Effect.
Section 3.15. Insurance. Schedule 3.15 hereto lists all material insurance
policies in force on the date hereof covering the businesses, properties and
assets of the Company and all claims against such policies. All such policies
are currently in effect and true and complete copies of all such policies have
been delivered to Parent. The Company has not received notice of the
cancellation of any of such insurance in effect on the date of this Agreement.
As of the date hereof, there are no material claims by the Company under any
such policy or instrument as to which any insurance company is denying liability
or defending under a reservation of rights clause. To the Company's best
knowledge, all necessary notifications of claims have been made to insurance
carriers other than those which would not have a Material Adverse Effect.
Section 3.16. Compliance with Law. The Company has not violated or failed
to comply with any statute, law, ordinance, regulation, rule or order of any
foreign, federal, state
-19-
or local government or any other governmental department or agency, or any
judgment, decree or order of any court, applicable to its business or operations
except where any such violation or failure to comply would not, individually or
in the aggregate, have a Material Adverse Effect. The Company has all permits,
licenses and franchises from governmental agencies required to conduct its
businesses as now being conducted, except for such permits, licenses and
franchises the absence of which would not, individually or in the aggregate,
have a Material Adverse Effect or prevent or materially delay the consummation
of the Merger.
Section 3.17. Employee Benefits. (a) Schedule 3.17 contains a true and
complete list of each "employee benefit plan" (within the meaning of section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), including, without limitation, multiemployer plans within the meaning
of ERISA section 3(37)), stock purchase, stock option, severance, employment,
change-in-control, fringe benefit, collective bargaining, bonus, incentive,
deferred compensation and all other employee benefit plans, agreements,
programs, policies or other arrangements, whether or not subject to ERISA, under
which any employee or former employee of the Company has any present or future
right to benefits or under which the Company has any present or future material
liability, other than any such plan or plans that, individually or in the
aggregate, do not provide for any payment or payments or unrecorded liabilities
in excess of $50,000.
(b) With respect to each Company Plan, the Company has delivered or made
available to Parent a current, accurate and complete copy (or, to the extent no
such copy exists, an accurate description) thereof and, to the extent
applicable: (i) any related trust agreement or other funding instrument; (ii)
the most recent determination letter, if applicable; (iii) any summary plan
description for a Company Plan; and (iv) for the most recent year (A) the Form
5500 and attached schedules, (B) audited financial statements and (C) actuarial
valuation reports;
(c) Except to the extent not reasonably expected to have a Material Adverse
Effect: (i) each Company Plan has been established and administered in
accordance with its terms, and in compliance with the applicable provisions of
ERISA, the Code and other applicable laws, rules and regulations; (ii) each
Company Plan which is intended to be qualified within the meaning of Code
section 401(a) has received a favorable determination letter as to its
qualification, and nothing has occurred,
-20-
whether by action or failure to act, that could reasonably be expected to cause
the loss of such qualification; (iii) no event has occurred and no condition
exists that would subject the Company to any material tax, fine, lien, penalty
or other liability imposed by ERISA, the Code or other applicable laws, rules
and regulations; (iv) for each Company Plan with respect to which a Form 5500
has been filed, no material change has occurred with respect to the matters
covered by the most recent Form since the date thereof; and (v) no "reportable
event" (as such term is defined in ERISA section 4043), "prohibited transaction"
(as such term is defined in ERISA section 406 and Code section 4975) or
"accumulated funding deficiency" (as such term is defined in ERISA section 302
and Code section 412 (whether or not waived)) has occurred with respect to any
Company Plan within the last five years for which has resulted or is reasonably
likely to result in any material liability that remains unsatisfied;
(d) Except as set forth in the Disclosure Statement, with respect to each
of the Company Plans that is not a multiemployer plan within the meaning of
section 4001(a)(3) of ERISA but is subject to Title IV of ERISA, as of the
Closing Date, the assets of each such Company Plan are at least equal in value
to the present value of the accrued benefits (vested and unvested) of the
participants in such Company Plan on a termination and projected benefit
obligation basis, based on the actuarial methods and assumptions indicated in
the most recent actuarial valuation reports;
(e) Except to the extent not reasonably expected to have a Material Adverse
Effect: with respect to any Company Plan, (i) no actions, suits or claims (other
than routine claims for benefits in the ordinary course) are pending or
threatened, (ii) no facts or circumstances exist that could give rise to any
such actions, suits or claims, and (iii) no written or oral communication has
been received from the PBGC in respect of any Company Plan subject to Title IV
of ERISA concerning the funded status of any such plan or any transfer of assets
and liabilities from any such plan in connection with the transactions
contemplated herein; and
(f) Except as set forth in the Disclosure Statement, no Company Plan exists
that could result in the payment to any present or former employee of the
Company of any money or other property or accelerate or provide any other rights
or benefits to any present or former employee of the Company as a result of the
transaction contemplated by this Agreement, whether or not such payment would
constitute a parachute payment within the
-21-
meaning of Code section 280G and whether or not some other future event is
required to trigger payment or otherwise result in liability to the Company.
Section 3.18. Taxes. Except as set forth in the Disclosure Statement, the
Company and any consolidated, combined, unitary or aggregate group for tax
purposes of which the Company or any former subsidiary is or was a member has
(x) timely filed (or there have been filed on its behalf) with the appropriate
governmental authorities all Tax Returns (as hereinafter defined) required to be
filed by it on or prior to the date hereof, and (y) duly paid in full or made
provision in accordance with United States GAAP (or there has been paid or
provision has been made on its behalf) for the payment of all Taxes (as
hereinafter defined) for all periods ending through the date hereof, except for
any such filings or payments which would not, individually or in the aggregate
have a Material Adverse Effect.
"Taxes" shall mean any and all taxes, charges, fees, levies or other
assessments, including, without limitation, income, gross receipts, excise, real
or personal property, sales, withholding, social security, occupation, use,
service, service use, license, net worth, payroll, franchise, transfer and
recording taxes, fee and charges, imposed by the Service or any taxing authority
(whether domestic or foreign including, without limitation, any state, county,
local or foreign government or any subdivision or taxing agency thereof
(including a United States possession)), whether computed on a separate,
consolidated, unitary, combined or any other basis; and such term shall include
any interest whether paid or received, fines, penalties or additional amounts
attributable to, or imposed upon, or with respect to, any such taxes, charges,
fees, levies or other assessments. "Tax Return" shall mean any report, return,
document, declaration or other information or filing required to be supplied to
any taxing authority or Jurisdiction (foreign or domestic) with respect to
Taxes, including, without limitation, information returns, any documents with
respect to or accompanying payments of estimated Taxes, or with respect to or
accompanying requests for the extension of time in which to file any such
report, return, document declaration or other information.
Section 3.19. Contracts. Each note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which the
Company is a party or by which any of it or any of its properties or assets may
be bound (collectively, the "Contracts") is legally valid and binding
-22-
against the Company and, to the Company's best knowledge, each other party
thereto and in full force and effect, except where failure to be legally valid
and binding and in full force and effect would not, individually or in the
aggregate, have a Material Adverse Effect, and there are not defaults thereunder
by the Company and, to the Company's best knowledge, any other party thereto,
except those defaults that would not have a Material Adverse Effect on the
Company. The Company has previously made available for inspection by Newco or
its representatives all material Contracts listed on Schedule 3.19.
Section 3.20. Related Party Transactions. Except as set forth in the
Disclosure Statement or in the Company SEC Documents, no director, officer,
partner, employee, "affiliate" or "associate" (as such terms are defined in Rule
12b-2 under the Exchange Act) of the Company has borrowed money from or has
outstanding any indebtedness or other similar obligations to the Company.
Section 3.21. Real Property. The Company has sufficient title or leaseholds
to real property to conduct its business as currently conducted with only such
exceptions as individually or in the aggregate would not have a Material Adverse
Effect.
Section 3.22. Environmental Matters. Except as would not result in a
Material Adverse Effect, and except as disclosed in the Disclosure Statement:
(i) The Company holds all Environmental Permits (as defined below),
and the Company is in compliance with all Environmental Laws;
(ii) As of the date hereof, there are no Environmental Claims (as
defined below) pending or, to the knowledge of the Company, threatened
against the Company;
(iii) The Company is not a party to any consent decree, order or
agreement which requires performance of any response or corrective action
to address any Hazardous Material or any violation of Environmental Law;
(iv) To the knowledge of the Company, there are no (A) underground
storage tanks, (b) polychlorinated biphenyls, (C) friable asbestos or
asbestos-containing materials, (D) sumps, (E) surface impoundments, (F)
landfills, or (G) sewers or septic systems present at any facility
currently owned or leased by the Company that is expected
-23-
to give rise to liability of the Company under any Environmental Laws;
(v) To the knowledge of the Company, there are no events or
conditions, including without limitation the release, threatened release,
emission, discharge, generation, treatment, storage or disposal of
Hazardous Materials (as defined below), that would reasonably be expected
to give rise to liability of the Company under any Environmental Laws;
(vi) The Company has not assumed by contract any liabilities or
obligations under any Environmental Laws; and
(vii) For purposes of this Agreement, the following terms shall have
the following meanings:
"Environmental Claim" means any written notice, claim, demand, suit,
complaint, proceeding or other communication by any person alleging
liability or potential liability (including without limitation liability or
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resource damages, property damage, personal injury,
fines or penalties) under any Environmental Laws, including without
limitation any liability resulting from the presence, discharge, emission,
release or threatened release of any Hazardous Materials at any location,
whether or not owned, leased or operated by the Company.
"Environmental Laws" means all applicable foreign, federal, state and
local statutes, rules, regulations, ordinances, common law, orders and
decrees relating in any manner to pollution or protection of the
environment, including without limitation the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Solid Waste Disposal
Act, the Clean Air Act, the Clean Water Act, the Toxic Substances Control
Act, the Emergency Planning and Community-Right-to-Know Act, the
Occupational Safety and Health Act and the Safe Drinking Water Act, all as
amended.
"Environmental Permits" means all permits, licenses, registrations and
other governmental authorizations required under Environmental Laws for the
Company to conduct its operations and businesses.
-24-
"Hazardous Materials" means all hazardous or toxic substances, wastes,
materials or chemicals, petroleum (including crude oil or any fraction
thereof) and petroleum products, asbestos and asbestos-containing
materials, pollutants, contaminants and all other materials and substances
regulated by any Environmental Law.
Section 3.23. Intellectual Property. Schedule 3.23 sets forth a list of all
material registered and material unregistered Intellectual Property (as defined
below) owned by the Company and used in the conduct of its business and all
agreements granting any right to use or practice any right relating to the
Intellectual Property currently used in the conduct of the Company's business
(the "Licenses") as of the date hereof. Except as set forth in the Disclosure
Statement (i) the Company is the sole owner of all of its rights under the
Licenses free and clear of any liens, claims, encumbrances or interests; (ii)
the Company is the sole owner of, or has a valid right to use pursuant to a
License, all patents and patent applications, registered and unregistered
trademarks, service marks, trade names, trade dress, logos, company names and
other source or business identifiers, including all goodwill associated
therewith, the names, likenesses and other attributes of individuals, registered
and unregistered copyrights, computer programs and databases, trade secrets,
proprietary technology, know-how, industrial designs and other confidential
information and any pending applications for any of the foregoing (collectively,
the "Intellectual Property") currently used in the conduct of the Company's
business, free and clear of any liens, claims, encumbrances or interests; (iii)
to the Company's best knowledge, the present operations of the Company do not,
and its past operations did not, infringe upon, violate, interfere or conflict
with the rights of others with respect to any Intellectual Property, and no
claim is pending or, to the Company's best knowledge, threatened, to this
effect; (iv) to the Company's best knowledge, none of the Intellectual Property
is invalid or unenforceable, or has not been used or enforced or has failed to
be used or enforced in a manner that would result in the abandonment,
cancellation or unenforceability of any of the Intellectual Property and no
claim is pending or, to the Company's best knowledge, threatened, to this
effect; (v) no License provision or any other contract, agreement or
understanding to which the Company is a party would prevent the continued use by
the Company (as currently used by the Company) of any Intellectual Property
following the consummation of the transactions contemplated hereby; (vi) to the
Company's best knowledge, no person is infringing upon or otherwise violating
-25-
any Intellectual Property or License; and (vii) there are no claims pending or,
to the Company's best knowledge, threatened in connection with any License, in
all cases in clauses (i) through (vii) of this Section 3.23 with only such
exceptions as would not, individually or in the aggregate, have a Material
Adverse Effect.
ARTICLE IV
COVENANTS
Section 4.01. Conduct of Business of the Company. Except as set forth in
the Disclosure Statement and as expressly agreed to in writing by Parent, during
the period from the date of this Agreement to the Effective Time, the Company
will conduct its operations according to its ordinary and usual course of
business consistent with past practice, and will use all commercially reasonable
efforts to preserve intact its business organization, to keep available the
services of its officers and employees and to maintain satisfactory
relationships with suppliers, distributors, customers and others having business
relationships with it and will take no action which would adversely affect its
ability to consummate the Merger or the other transactions contemplated hereby.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in this Agreement or the Asset Purchase Agreement, prior to
the Effective Time, the Company will not, without the prior written consent of
Parent and except as disclosed in the Disclosure Statement:
(a) amend its Restated Certificate of Incorporation (or other
applicable charter document) or By-Laws;
(b) authorize for issuance, issue, sell, deliver, grant any options
for, or otherwise agree or commit to issue, sell or deliver any shares of
any class of capital stock of the Company or any securities convertible
into or exchangeable or exercisable for shares of any class of capital
stock or any other ownership interest (including, but not limited to, stock
appreciation rights or phantom stock) of the Company, other than pursuant
to and in accordance with the terms of the Common Stock Equivalents
outstanding on the date hereof and listed on Schedule 3.13;
-26-
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock or purchase, redeem or otherwise acquire any shares of its
own capital stock;
(d) (i) create, incur, assume, maintain or permit to exist any
long-term debt or any short-term debt for borrowed money other than under
existing lines of credit and except for short-term debt incurred in the
ordinary course of business and consistent with past practice; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
person; or (iii) make any loans, advances or capital contributions to, or
investments in, any other person in excess of $50,000 in the aggregate
(other than investments in marketable securities made in the ordinary
course of business of the Company and consistent with past practice);
(e) except as may be required by law, enter into, adopt or amend or
terminate any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, performance unit,
stock equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement,
trust, plan, fund or other arrangement for the benefit or welfare of any
current or former director, officer or employee in any manner, or (except
for normal increases in salary or wages of employees who are not officers
of the Company in the ordinary course of business consistent with past
practice that, in the aggregate, do not result in a material increase in
benefits or compensation expense to the Company, and as required under
existing agreements) increase in any manner the compensation or fringe
benefits of any current or former director, officer or employee or grant
any severance or termination pay or pay any benefit not required by any
plan, agreement, trust, fund, policy and arrangement as in effect as of the
date hereof;
(f) except for sales of inventory in the ordinary course of business
and consistent with past practice, sell, transfer, lease or otherwise
dispose of, or encumber, or agree to sell, transfer, lease, or otherwise
dispose of or encumber, any assets, properties, real, personal or mixed not
in excess of $50,000 individually;
-27-
(g) enter into any agreements, commitments or contracts, except
agreements, commitments or contracts either (i) for the purchase, sale or
lease of goods or services in the ordinary course of business and
consistent with past practice or (ii) which do not, individually, relate to
the making of payments or the provision of services for consideration in
excess of $50,000 over the term of any such agreement, commitment or
contract;
(h) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into any agreement in principle
or an agreement with respect to, any plan of liquidation or dissolution,
any acquisition (by merger, consolidation or acquisition of assets or
securities or any disposition of any assets or securities) of any
corporation, partnership or other business organization or division thereof
or any change in its capitalization, or any entry into a material contract
or any amendment or modification of any material contract or any release or
relinquishment of any material contract rights not in the ordinary course
of business and consistent with past practice or modify or amend the
contracts between the parties referred to in paragraph 15 of the Disclosure
Letter;
(i) except as previously approved by the Board of Directors of the
Company prior to the date hereof and as identified to Parent prior to the
date hereof, authorize or commit to make capital expenditures in any
calendar month in excess of $100,000; provided, however, that amounts not
authorized or committed in any calendar month may be carried forward to
future calendar months;
(j) permit any material insurance policy naming the Company as a
beneficiary or a loss payee to be cancelled, terminated or materially
altered;
(k) maintain its books and records in a manner not in the ordinary
course of business and consistent with past practice;
(l) enter into any hedging, option, derivative or other similar
transaction;
(m) change any assumption underlying, or method of calculating, any
bad debt, contingency, provision or other reserve;
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(n) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, contingent or otherwise), other than the payment,
discharge or satisfaction of liabilities in the ordinary course of business
and consistent with past practice;
(o) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
practices or principles used by it;
(p) make any material tax election or settle or compromise any
material federal, state, local or foreign tax liability;
(q) settle or compromise any pending or threatened suit, action or
claim which is material;
(r) collect receivables or pay payables or purchase inventory or make
shipments to customers, other than in the ordinary course of business
consistent with past practice;
(s) modify the amount spent on advertising for the Company as a whole
and the allocation between each of the check business and the P&C Business
from the schedule related thereto previously delivered by the Company to
Parent; or
(t) agree to do any of the foregoing or any action which would make
any of the representations or warranties of the Company contained in this
Agreement untrue and incorrect as of the date when made if such action had
then been taken.
Section 4.02. Other Potential Bidders. (a) The Company, its affiliates and
their respective officers, directors, employees, representatives and agents
shall immediately cease any existing discussions or negotiations, if any, with
any parties conducted heretofore with respect to any acquisition or exchange of
all or any material portion of the assets of, or any equity interest in, the
Company or any business combination with the Company other than a sale of assets
and assumption of liabilities pursuant to the Asset Purchase Agreement. The
Company may, directly or indirectly, furnish information and access, in each
case only in response to unsolicited requests therefor made after the date
hereof, to any corporation, partnership, person or other entity or group
pursuant to
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confidentiality agreements, and may participate in discussions and negotiate
with such entity or group concerning any merger, sale of assets, sale of shares
of capital stock or similar transaction involving the Company or any division of
the Company, if such entity or group has submitted a bona fide written proposal
to the Board relating to any such transaction and the Board by a majority vote
determines in its good faith judgment, based upon the written advice of outside
counsel, that failing to take such action would constitute a breach of the
Board's fiduciary duty under applicable law; provided, however, that the Company
may furnish information and access, and participate in discussing and negotiate,
with respect to a sale of assets and assumption of liabilities pursuant to the
Asset Purchase Agreement. The Board shall notify Parent immediately if any such
proposal is made and shall in such notice indicate in reasonable detail the
identity of the offeror and the terms and conditions of any proposal and shall
keep Parent promptly advised of all material developments in connection
therewith. Except as set forth above, neither the Company or any of its
affiliates, nor any of its or their respective officers, directors, employees,
representatives or agents shall, directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, or provide any
information to, any corporation, partnership, person or other entity or group
(other than Parent and Newco, any affiliate or associate of Parent and Newco or
any designee of Parent and Newco) concerning any merger, sale of assets, sale of
shares of capital stock or similar transactions involving the Company or any
division of the Company (other than with respect to the assets and liabilities
to be transferred pursuant to the Asset Purchase Agreement), provided, however,
that nothing herein shall prevent the Board from taking, and disclosing to the
Company's stockholders, a position contemplated by Rules 14D-9 and 14e-2
promulgated under the Exchange Act with regard to any tender offer, provided,
further, that the Board shall not recommend that the stockholders of the Company
tender their Shares in connection with any such tender offer unless the Board by
a majority vote determines in its good faith judgment that, based upon the
written advice of outside counsel, failing to take such action would constitute
a breach of the Board's fiduciary duty under applicable law.
(b) Notwithstanding anything in this Agreement to the contrary, no action
taken by the Board, based upon the written advice of outside counsel, in the
exercise of its fiduciary duties, shall constitute a breach of any provision of
this Agreement.
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Section 4.03. Access to Information. (a) From the date of this Agreement
until the Effective Time, the Company will give Parent and Newco and their
authorized representatives (including counsel, environmental and other
consultants, accountants, auditors, and intellectual property counsel and
agents) full access during normal business hours to all facilities, personnel
and operations and to all books and records of the Company, will permit Parent
and Newco to make such inspections as they may reasonably require and will cause
its officers to furnish Parent with such financial and operating data and other
information with respect to the businesses and properties of the Company as
Parent may from time to time reasonably request.
(b) Parent will permit the Company and its agents, including its counsel
and auditors, to have access to Parent's books and records and personnel for the
purpose of conducting customary due diligence regarding the accuracy of the
Parent SEC Documents.
(c) Each of Parent and Newco will hold and will cause their respective
authorized representatives, including consultants and advisors, to hold in
strict confidence pursuant to the Confidentiality Agreement dated October 21,
1996 between Parent and the Company (the "Confidentiality Agreement") all
documents and information concerning the Company furnished to Parent or Newco in
connection with the transactions contemplated by this Agreement. The Company
will hold and will cause its respective authorized representatives, including
consultants and advisers, to hold in strict confidence pursuant to the
Confidentiality Agreement all documents and information concerning the Parent
and Newco furnished to the Company in connection with the transactions
contemplated by this Agreement.
Section 4.04. Commercially Reasonable Efforts; Other Actions. Subject to
the terms and conditions herein provided, Parent, Newco and the Company shall
use all commercially reasonable efforts to take, or cause to be taken, all other
actions and do, or cause to be done, all other things necessary, proper or
appropriate under applicable laws and regulations to consummate and make
effective as soon as practicable the transactions contemplated by this
Agreement, including, without limitation, (i) the filing of Notification and
Report Forms under the HSR Act with the Federal Trade Commission (the "FTC") and
the Antitrust Division of the Department of Justice (the "Antitrust Division")
and using all commercially reasonable efforts to respond as promptly as
practicable to all inquiries received from the FTC or the Antitrust Division for
additional
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information or documentation, (ii) the obtaining of all necessary consents,
approvals or waivers, and (iii) the lifting of any legal bar to the Merger.
Parent shall cause Newco to perform all of its obligations under this Agreement
and shall not take any action which would cause the Company to fail to perform
its obligations hereunder. The Company shall not take any action which would
cause Parent or Newco to fail to perform its obligations hereunder.
Section 4.05. Public Announcements. Before issuing any press release or
otherwise making any public statement with respect to the Merger or any of the
other transactions contemplated hereby, Parent, Newco and the Company will
consult with, and obtain the consent of, which consent shall not be unreasonably
withheld, each other as to its form and substance and shall not issue any such
press release or make any such public statement prior to obtaining such consent,
except as may be required by law or any listing agreement with its securities
exchange.
Section 4.06. Notification of Certain Matters. The Company shall give
prompt notice to Parent of any notice of, or other communication relating to, a
default or event which, with notice or lapse of time or both, would become a
default, received by the Company subsequent to the date of this Agreement and
prior to the Effective Time, under any contract material to the business,
operations, assets or financial condition of the Company to which the Company is
a party or is subject. Each of the Company and Parent shall give prompt notice
to the other party of (a) any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the Merger or other transactions contemplated hereby, (b) the
occurrence or existence of any event which would, or could with the passage of
time or otherwise, make any representation or warranty made by such party
contained herein untrue or (c) any failure of such party to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 4.06 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
Section 4.07. Indemnification. (a) For six years after the Effective Time,
Parent shall cause the Surviving Corporation to indemnify, defend and hold
harmless the present and former directors and officers of the Company,
determined as of the Effective Time, against all losses, claims, damages,
expenses or liabilities (collectively, "Costs") (but only to the
-32-
extent such costs are not otherwise covered by insurance or are not promptly
paid by insurance) arising out of actions or omissions or alleged actions or
omissions occurring at or prior to the Effective Time to the extent permitted or
required under applicable law and the Company's Restated Certificate of
Incorporation and By-Laws in effect at the date hereof (to the extent consistent
with applicable law).
(b) For a period of three years after the Effective Time, the Surviving
Corporation shall use its best efforts to cause to be maintained in effect the
current policies of directors' and officers' liability insurance maintained by
the Company (provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous) with respect to claims arising from
facts or events which occurred before the Effective Time to the extent
available; provided, however, that the Surviving Corporation shall not be
obligated to make annual premium payments for such insurance to the extent such
premiums exceed 150% of the annual premiums paid as of the date hereof by the
Company for such insurance (which the Company represents and warrants to be not
more than $60,000).
(c) Parent hereby agrees to guarantee each and every one of the obligations
of the Surviving Corporation set forth in Sections 4.07(a) and 4.07(b).
Section 4.08. Expenses. Except as set forth in Section 6.03, Parent and
Newco, on the one hand, and the Company, on the other hand, shall bear their
respective expenses incurred in connection with the Merger, including, without
limitation, the preparation, execution and performance of this Agreement and the
transactions contemplated hereby and all fees and expenses of investment
bankers, finders, brokers, agents, representatives, counsel and accountants.
Section 4.09. Resignation of Directors. Prior to the Effective Time, the
Company shall take all commercially reasonable efforts to deliver to Parent the
resignation of such directors of the Company as Parent shall specify, effective
at the Effective Time.
Section 4.10. Asset Purchase Agreement. (a) The Company shall not amend the
Asset Purchase Agreement or waive any of its rights thereunder without the prior
written consent of Parent.
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(b) The Company shall keep Parent reasonably informed of the status of the
financing related to the Asset Purchase Agreement.
ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF
PARENT, NEWCO AND THE COMPANY
Section 5.01. Conditions to Obligations of Parent, Newco and the Company.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of each of the following
conditions:
(a) this Agreement, the Asset Purchase Agreement, the Merger and the
transactions contemplated by the Asset Purchase Agreement shall have been
adopted by the affirmative vote of the stockholders of the Company by the
Requisite Vote;
(b) any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired; and
(c) there shall not have been any action taken, or any statute, rule,
regulation, judgment, decree, order or injunction proposed, sought,
promulgated, enacted, entered, enforced or deemed applicable to the Merger,
or any other action shall have been taken, proposed or threatened, by any
state or federal government or governmental authority or by any U.S. or
Canadian court, that presents substantial likelihood of prohibiting or
restricting consummation of the Merger.
Section 5.02. Conditions to Obligations of Parent and Newco. The
obligations of Parent and Newco to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of each of the following
conditions:
(a) there shall not have occurred any event or circumstances that has
had or is reasonably likely to have a Material Adverse Effect on the
Company;
(b) all representations and warranties of the Company under this
Agreement which are qualified as to materiality shall be true and correct
in all respects and all
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representations and warranties of the Company under this Agreement that are
not qualified as to materiality shall be true and correct in all material
respects on and as of the Effective Time;
(c) the Company shall have performed in all material respects all
covenants and agreements required to be performed by it prior to the
Effective Time;
(d) Parent shall have received a certificate signed on behalf of the
Company by its chief executive officer to the effect set forth in clauses
(b) and (c) above; and
(e) all conditions under the Asset Purchase Agreement shall have been
satisfied or waived and the transactions contemplated thereby shall have
been consummated.
Section 5.03. Conditions to Obligations of Company. The obligations of the
Company to effect the Merger shall be subject to the fulfillment at or prior to
the Effective Time of each of the following conditions:
(a) all representations and warranties of Parent and Newco under this
Agreement which are qualified as to materiality shall be true and correct
in all respects and all representations and warranties of Parent and Newco
under this Agreement that are not qualified as to materiality shall be true
and correct in all material respects on and as of the Effective Time.
(b) Parent and Newco shall have performed in all material respects all
covenants and agreements required to be performed by each of them prior to
the Effective Time.
ARTICLE VI
TERMINATION; AMENDMENT, WAIVER
Section 6.01. Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, whether before or
after stockholder approval thereof:
(a) by mutual written consent of Parent, Newco and the Company;
-35-
(b) by Parent and Newco or the Company if any court of competent
jurisdiction in the United States or Canada or other United States or
Canadian governmental body shall have issued a final order, injunction,
decree or ruling or taken any other final action restraining, enjoining or
otherwise prohibiting the Merger and such order, injunction, decree, ruling
or other action is or shall have become nonappealable; provided that the
right to terminate this Agreement pursuant to this Section 6.01(b) shall
not be available to any party which has not used its reasonable best
efforts to cause any such order, injunction, decree, ruling or other action
to be lifted;
(c) by either the Parent and Newco or the Company if the stockholders
of the Company fail to adopt and approve this Agreement, the Asset Purchase
Agreement, the Merger and the transactions contemplated by this Agreement
and the Asset Purchase Agreement at the Special Meeting and any adjournment
thereof, by the Requisite Vote;
(d) by the Company if a corporation, partnership, person or other
entity or group shall have made a bona fide offer not solicited in
violation of Section 4.02 that the Board by a majority vote determines in
its good faith judgment and in the exercise of its fiduciary duties (i),
based upon the advice of the Financial Advisor, is more favorable to the
Company's stockholders than the Merger and (ii), based upon the written
advice of outside counsel, must not make or must withdraw or modify its
recommendation of the Merger in order to avoid breaching its fiduciary
duties under applicable law; provided, however, that such termination under
this clause shall not be effective (i) unless Parent or Newco does not,
within 5 business days of receipt of the Company's notification of its
intention to enter into a definitive agreement with respect to a superior
proposal, make an offer that the Board by a majority vote determines in its
good faith judgment and in the exercise of its fiduciary duties, based upon
the advice of the Financial Advisor, is at least as favorable to the
Company's stockholders as the superior proposal and (ii) until the Company
has made payment of the full fee and expense reimbursement required by
Section 6.03;
(e) by Parent and Newco, if (i) there shall have been a breach of any
representation or warranty on the part of the Company that is or will have
a Material Adverse Effect on the Company or which materially adversely
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affects the ability of the Company to consummate the Merger, (ii) there
shall have been a breach of any covenant or agreement on the part of the
Company which is or will result in a Material Adverse Effect on the Company
or materially adversely affects the ability of the Company to consummate
the Merger, which shall not have been cured prior to the earlier of (A) 10
days following notice of such breach and (B) two business days prior to the
Closing Date, (iii) the Company shall engage in negotiations with any
entity or group (other than Parent or Newco) that has proposed a Third
Party Acquisition (as defined below), (iv) the Board (A) shall have
withdrawn or modified in a manner adverse to Newco its approval or
recommendation of this Agreement or the Merger or shall have recommended
another offer or transaction or shall have adopted any resolution to effect
any of the foregoing or (B), in response to any tender or exchange offer
for more than 20% of the outstanding Common Stock, shall not have
recommended rejection of such tender offer or exchange offer within the
time periods specified by applicable law, or shall have adopted any
resolution to effect any of the foregoing; (v) the existing Asset Purchase
Agreement shall have become terminable by the Company and the Company shall
not have entered into a substitute Asset Purchase Agreement with another
party within 2 Business Days; or (vi) the Company shall have failed to mail
the Proxy Statement as promptly as practicable after the clearance thereof
by the SEC or the Company has failed to include in the Proxy Statement the
Board's recommendation of the Merger;
(f) by the Company if (i) there shall have been a breach of any
representation or warranty on the part of Parent or Newco which materially
adversely affects (or materially delays) the consummation of the Merger or
(ii) there shall have been a material breach of any covenant or agreement
on the part of Parent or Newco and which materially adversely affects (or
materially delays) the consummation of the Merger which shall not have been
cured prior to the earliest of (A) 10 days following notice of such breach
and (B) two business days prior to the Closing Date; or
(g) by Parent and Newco or the Company if the Merger shall not have
been consummated on or before the date that is 5 months from the date of
this Agreement; provided that the right to terminate this Agreement
pursuant to this Section 6.01(g) shall not be available to any party which
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has not used its reasonable best efforts to cause the Merger to be
consummated.
Section 6.02. Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 6.01, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party hereto or its affiliates, directors, officers or stockholders, other
than the provision of this Section 6.02 and Section 6.03 hereof. Nothing
contained in this Section 6.02 shall relieve any party from liability for any
breach of this Agreement.
Section 6.03. Certain Payments. (a) In the event Parent and Newco terminate
this Agreement pursuant to Section 6.01(e)(i), (ii) or (v) hereof, Parent and
Newco would suffer direct and substantial damages, which damages cannot be
determined with reasonable certainty. To compensate Parent and Newco for such
damages, the Company shall pay to Parent, as liquidated damages immediately upon
such a termination, an amount equal to the reasonable, documented out-of-pocket
third party expenses of Parent and Newco incurred in connection with the
transactions contemplated hereby, not to exceed $600,000 in the aggregate. It is
specifically agreed that the amount to be paid pursuant to this Section 6.03(a)
represents liquidated damages and not a penalty.
(b) If
(i) Parent and Newco terminate this Agreement pursuant to Section
6.01(e)(vi) hereof and, within 18 months thereafter the Company enters into
an agreement with respect to a Third Party Acquisition, or a Third Party
Acquisition occurs, involving any party (or any affiliate thereof) (x) with
whom the Company (or its agents) had negotiations with a view to a Third
Party Acquisition, (y) to whom the Company (or its agents) furnished
information with a view to a Third Party Acquisition or (z) who had
submitted a proposal or expressed an interest in a Third Party Acquisition,
in the case of each of clauses (x), (y) and (z) after the date hereof and
prior to such termination; or
(ii) Parent and Newco terminate this Agreement pursuant to Section
6.01(e)(iii) or (vi), and within 18 months thereafter a Third Party
Acquisition shall occur involving a consideration for Shares (including the
value of any stub equity) in excess of the Merger Consideration; or
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(iii) (A) the Company terminates this Agreement pursuant to 6.01(d)
hereof or (B) Parent and Newco or the Company terminate this Agreement
pursuant to Section 6.01(c) hereof or (C) Parent and Newco terminate this
Agreement pursuant to Section 6.01(e)(iv),
the Company shall pay to Parent and Newco either prior to termination in the
case of the event described in Section 6.03(iii)(A) or within one business day
following the execution and delivery of such agreement or such occurrence or
termination, as the case may be, in the case of the event described in Section
6.03(i), (ii), (iii)(B) or (iii)(C), a fee, in cash, of $1,300,000, plus
reasonable, documented out-of-pocket third party expenses of Parent and Newco
incurred in connection with the transactions contemplated hereby, provided,
however, that the Company in no event shall be obligated to pay more than one
such $1,300,000 fee with respect to all such agreements and occurrences and such
termination.
"Third Party Acquisition" means the occurrence of any of the following
events (i) the acquisition of the Company by merger or otherwise by any person
(which includes a "person" as such term is defined in Section 13(d)(3) of the
Exchange Act) or entity other than Parent, Newco or any affiliate thereof (a
"Third Party"); (ii) the acquisition by a Third Party of more than 30% of the
total assets of the Company (other than pursuant to the Asset Purchase
Agreement); (iii) the acquisition by a Third Party of 30% of more of the
outstanding Shares; (iv) the adoption by the Company of a plan of liquidation or
the declaration or payment of an extraordinary dividend; or (v) the repurchase
by the Company or any of its subsidiaries of more than 20% of the outstanding
Shares, other than a repurchase which was not approved by the Company or
publicly announced prior to the termination of this Agreement and which is not
part of a series of transactions resulting in a change of control.
Section 6.04. Amendment. This Agreement may be amended by action taken by
the Company, Parent and Newco at any time before or after approval of the Merger
by the stockholders of the Company (if required by applicable law) but, after
any such approval, no amendment shall be made which requires the approval of
such stockholders under applicable law without such approval. This Agreement may
not be amended except by an instrument in writing signed on behalf of the
parties hereto.
Section 6.05. Extension; Waiver. At any time prior to the Effective Time,
each party hereto may (i) extend the
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time for the performance of any of the obligations or other acts of the other
party, (ii) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document, certificate or writing
delivered pursuant hereto or (iii) waive compliance by the other party with any
of the agreements or conditions contained herein. Any agreement on the part of
either party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The failure of
either party hereto to assert any of its rights hereunder shall not constitute a
waiver of such rights.
ARTICLE VII
DEFINITIONS
Section 7.01. Terms Defined in This Agreement. The following capitalized
terms used herein shall have the meanings ascribed in the indicated sections.
Agreement..................................... First Paragraph
Antitrust Division............................ 4.04
Asset Purchase Agreement...................... 1.07
Board......................................... Recitals
Certificates.................................. 1.11
Certificate of Merger......................... 1.12
Closing....................................... 1.05
Closing Date.................................. 1.05
Common Stock.................................. Recitals
Company....................................... First Paragraph
Common Stock Equivalents...................... 3.13
Company SEC Reports........................... 3.04
Contracts..................................... 3.19
Confidentiality Agreement..................... 4.02
Delaware Act.................................. 1.01
Disclosure Statement.......................... Article III
Dissenting Shares............................. 1.10
Effective Time................................ 1.02
ERISA......................................... 3.17
Exchange Act.................................. 3.03
Exchange Agent................................ 1.11
Exchange Fund................................. 1.11
Financial Advisor............................. 1.09
FTC........................................... 4.04
HSR Act....................................... 2.03
Intellectual Property......................... 3.23
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Licenses...................................... 3.23
Material Adverse Effect....................... 3.01
Merger........................................ 1.01
Merger Consideration.......................... 2.07
Newco......................................... First Paragraph
Parent........................................ First Paragraph
Proxy Statement............................... 1.09
SEC........................................... 1.04
Securities Act................................ 2.03
Special Meeting............................... 1.09
Stock Plans................................... 1.08
Surviving Corporation......................... 1.01
Tax Return.................................... 3.18
Taxes......................................... 3.18
Third Party................................... 6.03
Third Party Acquisition....................... 6.03
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Waiver of Compliance; Consents. Any failure of Parent or
Newco, on the one hand, or the Company, on the other hand, to comply with any
obligation, covenant, agreement or condition herein may be waived by the Company
or Parent or Newco, respectively, only by a written instrument signed by the
party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
8.01.
Section 8.02. Survivability; Investigations. The respective representations
and warranties of Parent, Newco and the Company contained herein or in any
certificates or other documents delivered prior to or at the Closing shall not
be deemed waived or otherwise affected by any investigation made by any party
hereto and shall not survive the Closing.
Section 8.03. Notices. All notices and other communications hereunder shall
be in writing and shall be delivered personally, by next-day courier or mailed
by registered or certified mail (return receipt requested), first class postage
-41-
prepaid, or telecopied with written confirmation of receipt, to the parties at
the addresses specified below (or at such other address for a party as shall be
specified by like notice; provided, that notices of a change of address shall be
effective only upon receipt thereof). Any such notice shall be effective upon
receipt, if personally delivered or telecopied, one day after delivery to a
courier for next-day delivery, or three days after mailing, if deposited in the
U.S. mail, first class postage prepaid.
(a) if to the Company, to
Xxx Xxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxx
with a copy to
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
(b) if to Parent, or Newco, to
00 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Telephone: (000) 000-0000
Attention: Miles X. Xxxxx
with a copy to
Xxxxx X. Xxxxxx, Esq.
Xxxxxx X. Xxxxx, Esq.
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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Section 8.04. Assignment; No Third Party Beneficiaries. This Agreement and
all of the provisions hereof shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns, but
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto without the prior written consent
of the other parties, except that Parent and Newco may assign all or any of
their respective rights and obligations hereunder to any direct or indirect
wholly owned subsidiary or subsidiaries of Parent, provided that no such
assignment shall relieve the assigning party of its obligations hereunder if
such assignee does not perform such obligations. This Agreement is not intended
to confer any rights or remedies hereunder upon any other person except the
parties hereto and, with respect to Section 4.07, the officers and directors of
the Company.
Section 8.05. Governing Law. Except as the laws of the State of Delaware
are by their terms applicable, this Agreement shall be governed by the laws of
the State of New York (regardless of the laws that might otherwise govern under
applicable New York principles of conflicts of law) as to all matters, including
but not limited to matters of validity, construction, effect, performance and
remedies.
Section 8.06. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 8.07. Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect against a party hereto, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party and such invalidity, illegality or unenforceability shall only apply as to
such party in the specific jurisdiction where such judgment shall be made.
Section 8.08. Interpretation. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. As used in this Agreement, the term "person"
shall mean and include an individual, a partnership, a
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joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
Section 8.09. Entire Agreement. This Agreement, including the exhibits
hereto and the documents and instruments referred to herein (including the
Confidentiality Agreement and Disclosure Statement), embodies the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and supersedes all prior agreements and the
understandings between the parties with respect to such subject matter. There
are no representations, promises, warranties, covenants, or undertakings, other
than those expressly set forth or referred to herein and therein.
S-1
IN WITNESS WHEREOF, Parent, Newco and the Company have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
MDC COMMUNICATIONS CORPORATION
By: /s/ Miles X. Xxxxx
-----------------------------------
Name: Miles X. Xxxxx
Title: President and Chief
Executive Officer
AGI ACQUISITION CO.
By: /s/ Xxxxx Xxxxx
-----------------------------------
Name: Xxxxx Xxxxx
Title: President
ARTISTIC GREETINGS INCORPORATED
By: /s/ Xxxxxx Xxxxx
-----------------------------------
Name: Xxxxxx Xxxxx
Title: Chairman of the Board
