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Sincerely, | |
Dennis J. Martin | |
Chairman, President and Chief Executive Officer |
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Norman H. Wesley | |
Chairman of the Board and | |
Chief Executive Officer |
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General Binding Corporation | |
One GBC Plaza | |
Northbrook, Illinois 60062 | |
Attn: Investor Relations | |
Tel: (847) 272-3700 |
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(1) | To consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of March 15, 2005, by and among Fortune Brands, Inc., ACCO World Corporation, Gemini Acquisition Sub, Inc. and General Binding Corporation, and approve the merger provided for by the merger agreement, pursuant to which (i) Gemini Acquisition Sub, Inc., a wholly-owned subsidiary of ACCO World Corporation, will merge with and into General Binding Corporation, after which General Binding Corporation will become a wholly-owned subsidiary of ACCO World Corporation (which will have been renamed ACCO Brands Corporation) and (ii) each outstanding share of GBC common stock and Class B common stock will be converted into the right to receive one share of ACCO Brands common stock. | |
(2) | To transact any and all other business that may properly come before the special meeting or any adjourned session of the special meeting. |
By Order of the Board of Directors, | |
/s/ Steven Rubin | |
Steven Rubin | |
Vice President, Secretary and General Counsel |
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Annexes | ||||||
Annex A — Agreement and Plan of Merger | ||||||
Annex B — Distribution Agreement | ||||||
Annex C — Opinion of Goldman, Sachs & Co. | ||||||
Annex D — Opinion of Deutsche Bank Securities, Inc. | ||||||
Annex E — Form of Restated Certificate of Incorporation of ACCO Brands Corporation | ||||||
Annex F — Form of Amended By-laws of ACCO Brands Corporation |
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Q: | What are General Binding Corporation stockholders being asked to vote on at the special meeting? | |
A: | General Binding Corporation (also referred to herein as “GBC”) stockholders are being asked to consider and vote upon a proposal to adopt the merger agreement entered into among GBC, Fortune Brands, ACCO World Corporation (also referred to herein as “ACCO World”) and Gemini Acquisition Sub, Inc. and to approve the merger contemplated by the merger agreement. | |
Q: | What will happen in the spin-off and merger? | |
A: | First, ACCO World will be recapitalized and renamed ACCO Brands Corporation. Fortune Brands will then distribute all of its outstanding shares of ACCO Brands common stock on a pro rata basis to Fortune Brands common stockholders. Immediately following this spin-off, Gemini Acquisition Sub, a wholly-owned subsidiary of ACCO Brands, will merge with and into GBC. GBC will survive the merger and will become a wholly-owned subsidiary of ACCO Brands. | |
Q: | What will GBC stockholders receive in the merger? | |
A: | Upon completion of the merger, holders of GBC common stock and Class B common stock will receive one share of ACCO Brands common stock (and one associated preferred share purchase right) for each GBC share they own. Immediately following the merger, 34% of ACCO Brands, on a fully diluted basis, will be owned by GBC stockholders. Because GBC stockholders in the aggregate will become minority stockholders in ACCO Brands, without additional votes of other ACCO Brands stockholders, former GBC stockholders in the aggregate generally will not have the ability to approve or block approval of proposals to be voted upon by ACCO Brands stockholders. | |
Q: | What will Fortune Brands stockholders receive in the transactions? | |
A: | In the spin-off, Fortune Brands will distribute all of its outstanding shares of ACCO Brands common stock on a pro rata basis to Fortune Brands common stockholders. Fortune Brands currently estimates that one share of ACCO Brands common stock will be distributed for each 4.32 shares of Fortune Brands common stock held on the distribution date. Fortune Brands stockholders will not receive any new shares in the merger and will continue to hold the shares they received in the spin-off. Immediately following the spin-off and merger, 66% of ACCO Brands, on a fully diluted basis, will be owned by Fortune Brands stockholders and ACCO Brands’ minority stockholder. | |
Q: | What stockholder approvals are needed? | |
A: | The merger cannot be completed unless the merger agreement is adopted and the merger is approved by the affirmative vote of the holders of a majority of the voting power of the outstanding shares of GBC common stock and Class B common stock entitled to vote at the special meeting. No vote of Fortune Brands stockholders is required or being sought in connection with the spin-off transaction or the merger. | |
Q: | Have any of GBC’s stockholders already agreed to vote in favor of the merger agreement and the merger? | |
A: | Yes. In connection with the execution of the merger agreement, Fortune Brands, ACCO World and Lane Industries, Inc. entered into a voting agreement pursuant to which Lane Industries has agreed, subject to limited exceptions, to vote, and granted to Fortune Brands a proxy to vote, all its shares of GBC stock for the adoption of the merger agreement and approval of the merger. By virtue of its ownership of GBC stock as of the record date for the special meeting, Lane Industries controls approximately 86.7% of the voting power at the meeting. Accordingly, the voting power of Lane Industries’ shares is sufficient to adopt the merger agreement and approve the merger and, as a result of Lane Industries’ obligations under the voting agreement, the adoption of the merger agreement and approval of the merger is practically assured. | |
Q: | Does GBC’s Board support the merger? | |
A: | Yes. The GBC board of directors has unanimously approved the merger agreement and the merger and unanimously recommends that GBC stockholders vote FOR the proposal to |
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adopt the merger agreement and approve the merger. | ||
Q: | Who can vote at the GBC special meeting? | |
A: | Holders of GBC common stock and Class B common stock can vote their shares at the special meeting if they are holders of record of those shares at the close of business on June 23, 2005, the record date for the special meeting. | |
Q: | When and where is the special meeting of GBC stockholders? | |
A: | The special meeting of GBC stockholders will take place on August 15, 2005 at GBC’s headquarters located at One GBC Plaza, Northbrook, Illinois, at 10:30 a.m., local time. | |
Q: | Can GBC stockholders change their vote after they mail their proxy card? | |
A: | Yes. If you are a holder of record of GBC common stock or Class B common stock and have properly completed and submitted your proxy card, you can change your vote in any of the following ways: |
• by sending a written notice to the corporate secretary of GBC that is received prior to the special meeting stating that you revoke your proxy; | ||
• by properly completing a new proxy card bearing a later date and properly submitting it so that it is received prior to the special meeting; or | ||
• by attending the special meeting and voting in person. | ||
Simply attending the special meeting will not revoke a proxy. | ||
If you are a GBC stockholder whose shares are held in “street name” by your broker and you have directed such person to vote your shares, you should instruct such person to change your vote. |
Q: | If my GBC shares are held in “street name” by my broker, will my broker vote my shares for me? | |
A: | Your broker will vote your GBC shares only if you provide instructions on how to vote. You should follow the directions provided by your broker regarding how to instruct your broker to vote your shares. Without instructions, your shares will not be voted, which will have the effect of a vote against the adoption of the merger agreement and approval of the merger. | |
Q: | Where will the ACCO Brands Corporation shares be listed? | |
A: | ACCO World will apply to list the ACCO Brands common stock on the New York Stock Exchange. Approval of the listing of the ACCO Brands common stock is a condition to completion of the merger. | |
Q: | Will shares of GBC common stock continue to be traded on the Nasdaq National Market after the merger is completed? | |
A: | No. If the merger is completed, shares of GBC common stock will no longer be listed for trading on the Nasdaq National Market. | |
Q: | What are the material tax consequences to GBC stockholders and Fortune Brands stockholders resulting from the spin-off and the merger? | |
A: | We expect that the merger generally will be tax-free to GBC stockholders for federal income tax purposes (other than with respect to cash that GBC stockholders may receive instead of fractional shares). Assuming that the spin-off and the merger qualify as a tax-free spin-off and reorganization, respectively, Fortune Brands stockholders will not recognize any taxable gain or loss for federal income tax purposes as a result of the spin-off (other than with respect to cash that Fortune Brands stockholders may receive instead of fractional shares in the spin-off.) To review the tax consequences of the spin-off and the merger in greater detail, see “Certain United States Federal Income Tax Consequences of the Spin-Off and the Merger” on pages 83 to 86. | |
Q: | Can GBC stockholders dissent and require appraisal of their shares? | |
A: | No. GBC stockholders have no dissenters’ rights under Delaware law in connection with the merger. | |
Q: | When will the merger be completed? | |
A: | We are working to complete the merger as quickly as possible. If approved by the GBC stockholders, we hope to complete the merger as early as the summer of 2005. However, it is possible that factors outside our control could |
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require us to complete the merger at a later time or not complete it at all. | ||
Q: | When will the spin-off be completed? | |
A: | If the merger is approved by the GBC stockholders, and the other conditions to the merger and spin-off are satisfied or waived, the spin-off will occur immediately prior to the completion of the merger. | |
Q: | What should GBC stockholders do now? | |
A: | After carefully reading and considering the information contained in this proxy statement/ prospectus-information statement, GBC stockholders should complete, sign and date their proxy card and return it in the enclosed, postage-paid envelope as soon as possible so that their shares will be represented and voted at the GBC special meeting. If a GBC stockholder signs and sends in their proxy and does not indicate how they want to vote, GBC will count their proxy as a vote in favor of adoption of the merger agreement and approval of the merger. Because the required vote of GBC stockholders is based upon the voting power of the outstanding shares of GBC common stock and Class B common stock, rather than upon the shares actually voted, the failure by the holder of any such shares to submit a proxy or to vote in person at the special meeting, including abstentions and broker non-votes, will have the same effect as a vote against adoption of the merger agreement and approval of the merger. |
GBC STOCKHOLDERS SHOULD NOT SURRENDER THEIR STOCK CERTIFICATES AT THIS TIME. AFTER THE MERGER IS COMPLETED, GBC STOCKHOLDERS WILL RECEIVE A TRANSMITTAL FORM WITH INSTRUCTIONS FOR THE SURRENDER OF GBC STOCK CERTIFICATES. |
Q: | What should Fortune Brands stockholders do now? | |
A: | Fortune Brands common stockholders should carefully read this proxy statement/ prospectus-information statement, which contains important information about the distribution of ACCO Brands Corporation common stock by Fortune Brands to its stockholders, the merger, ACCO World, GBC and ACCO Brands. Fortune Brands stockholders are not required to take any action to approve the spin-off or the merger. Holders of Fortune Brands common stock who are entitled to receive shares of ACCO Brands common stock will be mailed after the merger book-entry statements evidencing their ownership of ACCO Brands common stock and other information regarding their receipt of ACCO Brands common stock. |
FORTUNE BRANDS STOCKHOLDERS WILL NOT BE REQUIRED TO SURRENDER THEIR EXISTING FORTUNE BRANDS COMMON SHARES IN THE SPIN-OFF TRANSACTION OR THE MERGER AND THEY SHOULD NOT SEND IN THEIR FORTUNE BRANDS STOCK CERTIFICATES. |
Q: | Who can answer my questions? | |
A: | If you are a GBC stockholder and you have any questions about the merger, the special meeting, or if you need assistance in voting your shares, please contact: |
General Binding Corporation One GBC Plaza Northbrook, Illinois 60062 Attn: Investor Relations Tel: (847) 272-3700 | ||
If you are a Fortune Brands stockholder and you have any questions regarding the distribution of ACCO Brands Corporation shares, the merger or any matter described in this proxy statement/ prospectus-information statement, please direct your questions to: | ||
Fortune Brands, Inc. 300 Tower Parkway Lincolnshire, IL 60069 Attn: Investor Relations Tel: (847) 541-9500 |
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• | a prospectus of ACCO World Corporation (which will be renamed ACCO Brands Corporation) relating to the issuance of shares of ACCO Brands common stock in connection with the merger; | |
• | a proxy statement of General Binding Corporation for use in the solicitation of proxies for GBC’s special meeting; and | |
• | an information statement of Fortune Brands, Inc. relating to the spin-off of its shares of ACCO Brands common stock to Fortune Brands stockholders. |
• | “ACCO World” means ACCO World Corporation before the spin-off and the merger; | |
• | “ACCO Brands” means ACCO Brands Corporation following the spin-off and the merger; | |
• | “ACCO U.S.” means the ACCO Brands segment of the business of ACCO World; | |
• | “GBC” means General Binding Corporation; | |
• | “Fortune Brands” means Fortune Brands, Inc.; and | |
• | the terms “we,” “us” and “our” refer to GBC and ACCO World, jointly. |
The Companies (page 87) | |
General Binding Corporation | |
One GBC Plaza | |
Northbrook, Illinois 60062 | |
(847) 272-3700 |
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ACCO World Corporation | |
300 Tower Parkway | |
Lincolnshire, Illinois 60069 | |
(847) 484-4800 |
Fortune Brands, Inc. | |
300 Tower Parkway | |
Lincolnshire, Illinois 60069 | |
(847) 541-9500 |
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• | arrangements regarding the appointment of directors and officers of ACCO Brands; | |
• | certain outstanding options to purchase GBC common stock issued under GBC stock plans prior to the date of the merger agreement, including those held by executive officers and directors, would become fully exercisable upon completion of the merger and restrictions upon certain restricted stock units under GBC stock plans awarded prior to the date of the merger agreement, including those held by executive officers and directors, would lapse; | |
• | employment and severance arrangements maintained for GBC executive officers that provide for cash severance pay and other benefits, valued in an aggregate amount of approximately $10,362,122 (based on levels of pay and other circumstances as of June 30, 2005), plus tax gross-up payments, if applicable, if their employment is terminated within specified periods; | |
• | special fee payments valued in an aggregate amount of $245,000, $90,000 of which is payable by GBC and $155,000 of which is payable by Lane Industries, to be made to directors (or members of their immediate family) as a result of the merger; | |
• | the voting agreement entered into by Fortune Brands, ACCO World and Lane Industries, GBC’s largest stockholder; and | |
• | the registration rights agreement entered into by ACCO World and Lane Industries. |
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• | the approval and adoption of the merger agreement and the merger by GBC stockholders; | |
• | the applicable waiting period under the Hart-Scott-Rodino Act having terminated or expired (the waiting period expired on May 12, 2005); | |
• | all notifications and filings required under non-U.S. competition laws having been made, and all consents, approvals and authorizations required under non-U.S. competition laws in order to complete the merger having been made or obtained and all applicable waiting periods under non-U.S. competition laws having been terminated or expired; | |
• | the approval for listing on the New York Stock Exchange of the ACCO Brands common stock to be issued in the spin-off and the merger; | |
• | the completion of the spin-off in accordance with the terms of the merger agreement and the distribution agreement; | |
• | receipt by each of GBC and Fortune Brands of opinions of their respective tax counsel stating that the merger will constitute a reorganization under section 368(a) of the Internal Revenue Code and receipt by Fortune Brands of an opinion of its tax counsel stating that the spin-off will constitute a spin-off under section 355 of the Internal Revenue Code; and | |
• | other customary contractual conditions set forth in the merger agreement. |
• | Fortune Brands and GBC agree to terminate the agreement by mutual written consent; | |
• | the merger has not been completed by November 30, 2005, provided that the terminating party’s failure to fulfill any obligation under the merger agreement or the distribution agreement is not the cause of the merger not being completed by November 30, 2005; or | |
• | GBC stockholders fail to adopt the merger agreement and approve the merger at the GBC special meeting. |
• | if the GBC board of directors withdraws, modifies or qualifies (or publicly proposes to withdraw, modify or qualify) its recommendation to GBC stockholders to adopt the merger agreement and approve the merger; | |
• | if the GBC board of directors recommends an alternate acquisition proposal; or | |
• | GBC breaches its obligation to call and hold the GBC special meeting. |
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• | the absence of any law, order or injunction having the effect of making the spin-off illegal or otherwise prohibiting completion of the spin-off, and the absence of any proceeding initiated by any governmental entity seeking, and which is reasonably likely to result in, such a law, order or injunction; | |
• | each condition to the closing of the merger agreement shall have been fulfilled or waived by the party for whose benefit such condition exists (except for the consummation of the spin-off). |
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• | no taxable gain or loss will generally be recognized by a Fortune Brands stockholder as the result of the spin-off or receipt of ACCO Brands common stock pursuant to the spin-off (except with respect to cash that a Fortune Brands stockholder may receive instead of a fractional share interest in ACCO Brands common stock); | |
• | the distribution of ACCO Brands common stock to Fortune Brands stockholders in connection with the spin-off will qualify as tax-free to Fortune Brands so long as the spin-off is not disqualified as tax-free under section 355(e) of the Internal Revenue Code because of certain subsequent acquisitions of Fortune Brands common stock or ACCO Brands common stock by a third party; and | |
• | no taxable gain or loss will generally be recognized by GBC, ACCO Brands, an ACCO Brands stockholder or a GBC stockholder in the merger (except with respect to cash that a GBC stockholder may receive instead of a fractional share interest in ACCO Brands common stock). |
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Quarter Ended | |||||||||||||||||||||||||||||
March 25, | Fiscal Year Ended December 27, | ||||||||||||||||||||||||||||
2005 | 2004 | 2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||||||||||||||
(unaudited) | (unaudited) | ||||||||||||||||||||||||||||
Income Statement Data: | |||||||||||||||||||||||||||||
Net sales(1) | 275.2 | 270.9 | 1,175.7 | 1,101.9 | 1,105.4 | 1,176.3 | 1,354.2 | ||||||||||||||||||||||
Net income/(loss) | 10.5 | 8.6 | 68.5 | 26.7 | 4.2 | (83.8 | ) | (508.0 | ) | ||||||||||||||||||||
Balance Sheet Data (at period end): | |||||||||||||||||||||||||||||
Total assets | 927.5 | 885.5 | 984.5 | 886.7 | 860.5 | 930.8 | 1,171.2 | ||||||||||||||||||||||
External long-term debt(2) | — | — | — | — | — | 0.9 | 2.6 | ||||||||||||||||||||||
Total stockholders’ equity(3) | 656.5 | 459.6 | 616.8 | 533.1 | 528.8 | 672.1 | 890.2 |
(1) | The net sales decline from 2000 to 2001 of $177.9 was due to strategic decisions to minimize reinvestment in declining product categories (including Day-Timers, labels, filing and business essentials), strategic product category exits (including Kensington imaging, joysticks and media), the adverse impact of foreign exchange translation ($27.1), and economic slowdown after the September 11th tragedy in the U.S. |
(2) | External long-term debt refers only to the portion financed by third parties, and does not include any portion financed through banking relationships or lines of credit secured by ACCO World’s parent company, Fortune Brands. Interest expenses associated with Fortune Brands’ debt have been allocated to ACCO World for the periods presented. |
(3) | If the stockholders’ equity at March 25, 2005 included the declaration of the $625.0 dividend payable to ACCO World stockholders prior to the spin-off, total stockholders’ equity would be reduced to $31.5 on a pro forma basis. |
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Quarter Ended | ||||||||||||||||||||||||||||||
March 31, | Fiscal Year Ended December 31, | |||||||||||||||||||||||||||||
2005 | 2004 | 2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||||
(Amounts in millions, except for per share data) | ||||||||||||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||||||||||||
Net sales | $ | 180.2 | $ | 170.9 | $ | 712.3 | $ | 697.9 | $ | 701.7 | $ | 711.9 | $ | 824.6 | ||||||||||||||||
Net income (loss) from continuing operations | $ | (3.4 | ) | $ | 0.5 | $ | 14.8 | $ | (3.3 | ) | $ | (1.0 | ) | $ | (19.5 | ) | $ | 2.4 | ||||||||||||
Net income (loss) per share from continuing operations: | ||||||||||||||||||||||||||||||
Diluted(1) | $ | (0.21 | ) | $ | 0.03 | $ | 0.88 | $ | (0.20 | ) | $ | (0.06 | ) | $ | (1.24 | ) | $ | 0.15 | ||||||||||||
Basic(1) | $ | (0.21 | ) | $ | 0.03 | $ | 0.91 | $ | (0.20 | ) | $ | (0.06 | ) | $ | (1.24 | ) | $ | 0.15 | ||||||||||||
Balance Sheet Data (at period end): | ||||||||||||||||||||||||||||||
Total assets | $ | 545.2 | $ | 531.6 | $ | 540.4 | $ | 530.3 | $ | 557.4 | $ | 719.6 | $ | 761.3 | ||||||||||||||||
Long-term obligations | $ | 260.8 | $ | 283.6 | $ | 255.2 | $ | 282.0 | $ | 314.8 | $ | 410.7 | $ | 397.0 | ||||||||||||||||
Cash dividends per common share(1) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
(1) | Amounts represent per share amounts for both GBC common stock and Class B common stock. |
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Fiscal Year Ended | Quarter Ended | ||||||||
December 27, 2004 | March 25, 2005 | ||||||||
(In millions) | |||||||||
Income Statement Data: | |||||||||
Net sales | $ | 1,888.0 | $ | 455.4 | |||||
Net income | 59.2 | 1.2 | |||||||
Balance Sheet Data (at period end): | |||||||||
Total assets | $ | 2,032.5 | |||||||
Long-term debt | 913.5 | ||||||||
Total stockholders’ equity | 529.5 |
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Fiscal Year Ended | Quarter Ended | |||||||
December 27, 2004 | March 25, 2005 | |||||||
GBC — HISTORICAL(1): | ||||||||
Basic net income (loss) per share from continuing operations | $ | 0.91 | $ | (0.21 | ) | |||
Diluted net income (loss) per share from continuing operations | 0.88 | (0.21 | ) | |||||
Cash dividends declared per common share | — | — | ||||||
Book value per common share, basic | 4.80 | 4.57 | ||||||
Book value per common share, diluted | 4.64 | 4.35 | ||||||
PRO FORMA COMBINED: | ||||||||
Basic net income per share from continuing operations | $ | 1.24 | $ | 0.03 | ||||
Diluted net income per share from continuing operations | 1.20 | 0.02 | ||||||
Book value per common share, basic | 11.08 | |||||||
Book value per common share, diluted | 10.68 | |||||||
GBC — PRO FORMA EQUIVALENTS: | ||||||||
Basic net income per share from continuing operations | $ | 1.24 | $ | 0.03 | ||||
Diluted net income per share from continuing operations | 1.21 | 0.02 | ||||||
Book value per common share, basic | 11.08 | |||||||
Book value per common share, diluted | 10.68 |
(1) | GBC reports its financial information on a calendar period basis, while ACCO World reports its financial information on a fiscal year basis. GBC’s financial information is as of and for the year ended December 31, 2004 and as of and for the three months ended March 31, 2005. |
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General Binding | ||||||||
Corporation | ||||||||
Common Stock | ||||||||
High | Low | |||||||
Calendar Year Ended Dec. 31, 2002 | ||||||||
First Quarter | $ | 14.66 | $ | 11.86 | ||||
Second Quarter | $ | 20.00 | $ | 14.85 | ||||
Third Quarter | $ | 19.65 | $ | 14.50 | ||||
Fourth Quarter | $ | 15.40 | $ | 8.48 | ||||
Calendar Year Ended Dec. 31, 2003 | ||||||||
First Quarter | $ | 12.83 | $ | 7.90 | ||||
Second Quarter | $ | 12.50 | $ | 7.60 | ||||
Third Quarter | $ | 14.83 | $ | 9.25 | ||||
Fourth Quarter | $ | 18.68 | $ | 11.24 | ||||
Calendar Year Ended Dec. 31, 2004 | ||||||||
First Quarter | $ | 19.01 | $ | 12.91 | ||||
Second Quarter | $ | 17.00 | $ | 9.75 | ||||
Third Quarter | $ | 15.92 | $ | 10.01 | ||||
Fourth Quarter | $ | 15.11 | $ | 12.83 | ||||
Calendar Year Ended Dec. 31, 2005 | ||||||||
First Quarter | $ | 21.00 | $ | 11.70 | ||||
Second Quarter | $ | 22.35 | $ | 19.98 | ||||
Third Quarter (through July 15, 2005) | $ | 24.00 | $ | 21.74 |
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• | competition within the office products, document finishing and film lamination industries; | |
• | the effects of economic and political conditions; | |
• | the ability of distributors to successfully market and sell our products; | |
• | the availability and price of raw materials; | |
• | dependence on certain suppliers of manufactured products; | |
• | the effect of consolidation in the office products industry; | |
• | the ability to obtain governmental approvals of the transaction on the proposed terms and schedule; | |
• | the risk that the businesses will not be integrated successfully; | |
• | the risk that the cost savings and any synergies from the transaction may not be fully realized or may take longer to realize than expected; | |
• | disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers; and | |
• | other risks and uncertainties, including those set forth in this proxy statement/ prospectus-information statement and those detailed from time to time in GBC’s and ACCO Brands’ filings with the Securities and Exchange Commission. |
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ACCO Brands may not realize the anticipated benefits from the merger. |
The integration of ACCO World and GBC following the merger may present significant challenges. |
• | the challenge of establishing ACCO Brands as a separately traded independent public company and then integrating the ACCO World and GBC businesses while carrying on the ongoing operations of each business; | |
• | the necessity of coordinating geographically separate organizations; | |
• | the challenge of integrating the business cultures of each company, which may prove to be incompatible; | |
• | the challenge and cost of integrating the information technology systems of each company; and | |
• | the potential difficulty in retaining key officers and personnel of ACCO World and GBC. |
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There is no prior market for ACCO Brands common stock. |
Sales of ACCO Brands common stock after the merger may negatively affect its market price. |
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• | arrangements regarding the appointment of directors and officers of ACCO Brands; | |
• | certain outstanding options to purchase GBC common stock issued under GBC stock plans prior to the date of the merger agreement, including those held by executive officers and directors, would become fully exercisable upon completion of the merger and restrictions upon certain restricted stock units under GBC stock plans issued prior to the date of the merger agreement, including those held by executive officers and directors, would lapse; | |
• | employment and severance arrangements maintained for GBC executive officers; | |
• | special fee payments to be made to GBC directors as a result of the merger; | |
• | the voting agreement entered into by Fortune Brands, ACCO World and Lane Industries, GBC’s largest stockholder; and | |
• | the registration rights agreement entered into by ACCO World and Lane Industries. |
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• | the failure of the spin-off to constitute a spin-off under section 355 of the Internal Revenue Code, or | |
• | the subsequent disqualification of the distribution of the ACCO Brands common stock to Fortune Brands stockholders in connection with the spin-off as tax-free to Fortune Brands for United States federal income tax purposes, |
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• | depending on the reasons for termination of the merger agreement, the requirement that GBC pay Fortune Brands a termination fee of $9.5 million plus costs incurred by Fortune Brands and ACCO World in connection with the transaction; | |
• | substantial costs related to the merger, such as legal, accounting, filing, financial advisory and financial printing fees, must be paid regardless of whether the merger is completed; and | |
• | potential disruption to the businesses of GBC and distraction of its workforce and management team. |
ACCO Brands substantial indebtedness could adversely affect its operations and financial condition. |
• | limiting its ability to obtain additional financing to fund growth, working capital, capital expenditures, debt service requirements or other cash requirements; | |
• | limiting its operational flexibility due to the covenants contained in its debt agreements; | |
• | limiting its ability to invest operating cash flow in its business due to debt service requirements; | |
• | limiting its ability to compete with companies that are not as highly leveraged and that may be better positioned to withstand economic downturns; | |
• | increasing its vulnerability to economic downturns and changing market conditions; and | |
• | to the extent that ACCO Brands’ debt is subject to floating interest rates, increasing its vulnerability to fluctuations in market interest rates. |
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• | the division of ACCO Brands’ board of directors into three classes to be elected on a staggered basis, one class each year; | |
• | the ability of the ACCO Brands board of directors to issue shares of preferred stock in one or more series without further authorization of stockholders; | |
• | a prohibition on stockholder action by written consent; | |
• | a prohibition on the right of stockholders to call a special meeting of stockholders; | |
• | a requirement that stockholders provide advance notice of any stockholder nominations of directors or any proposal of new business to be considered at any meeting of stockholders; | |
• | a requirement that the affirmative vote of at least 80% of ACCO Brands’ shares be obtained to amend or repeal the provisions of the restated certificate of incorporation relating to the election and removal of directors, the classified board or the right to act by written consent; and | |
• | a fair price provision. |
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• | sending a written notice to GBC’s corporate secretary that is received prior to the special meeting stating that you are revoking your proxy; | |
• | properly completing a new proxy bearing a later date and properly submitting it so that it is received prior to the special meeting; or | |
• | attending the special meeting and voting it in person. |
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• | a stand-alone scenario, whereby GBC would continue to sell and innovate in its current area of strategic focus; | |
• | a strategic business combination scenario, whereby GBC would seek to partner with another company in the office products industry in an effort to strengthen both companies by expanding their mutual product offerings; or | |
• | a financial business combination scenario, whereby GBC would seek to partner with a financial sponsor having an interest in the office products industry. |
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• | Form of Merger Consideration. The GBC board of directors considered that the merger would allow GBC stockholders to exchange their shares of GBC common stock and Class B common stock for shares of ACCO Brands common stock and retain an equity interest in the combined enterprise and the related opportunity to share in its future growth. The GBC board of directors also considered that the merger would create a larger company with capital stock potentially having greater liquidity and trading volume than GBC common stock, an expanded investor base and the potential to generate enhanced analyst coverage. | |
• | Business, Condition and Prospects. The GBC board of directors considered information concerning the business, operations, financial condition, earnings and prospects of each of GBC and ACCO World as separate entities and on a combined basis, including their revenues, their complementary businesses and the potential for revenue enhancement and cost savings, as well as current industry, economic and market conditions and trends. The GBC board of directors also reviewed GBC’s future prospects if it were to remain independent, including the risks inherent in remaining independent. Further, the GBC board of directors explored possible alternatives to the merger (including the possibility of continuing to operate as an independent entity), the range of possible benefits to GBC stockholders from these alternatives and the possible timing and likelihood of accomplishing these alternatives. | |
• | Strategic Advantages. The GBC board of directors considered the expected enhanced strategic and market position of ACCO Brands following the merger. The GBC board of directors also considered the increased scale, scope and diversity of operations, distribution channels, efficiencies that may be achievable through complementary businesses, product lines, served markets and customers resulting from combining GBC’s and ACCO World’s businesses and that the larger market capitalization of ACCO Brands following the merger may allow it to have increased access to debt and equity markets than GBC would as a stand-alone entity. |
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• | Management/ Culture. The GBC board of directors considered whether ACCO World’s executive management has demonstrated the skills necessary to successfully address the structural, operational, product, financial and marketing issues required to enhance the performance of the businesses of ACCO Brands. Further, the GBC board of directors considered the compatibility of GBC’s and ACCO World’s corporate values and management styles. | |
• | Ability to Accept Superior Proposal Upon Payment of Termination Fee. The GBC board of directors considered GBC’s ability to terminate the merger agreement prior to stockholder approval of the merger in order to enter into an alternative transaction in response to a superior proposal, although GBC’s ability to enter into an alternative transaction would be restricted in that it could not solicit competing offers and would be required to pay, in connection with accepting a superior proposal, a $9.5 million termination fee, plus costs and expenses incurred by Fortune Brands and ACCO World in connection with the transaction. | |
• | Tax Treatment. The GBC board of directors considered the structure of the merger as a tax-free reorganization for federal income tax purposes. | |
• | Opinions of Financial Advisors. The GBC board of directors considered Goldman Sachs’ presentation of its financial analyses of the transactions contemplated by the merger agreement and the distribution agreement and its opinion that, as of March 15, 2005, and based upon and subject to the factors and assumptions set forth therein, the exchange ratio pursuant to the merger agreement is fair from a financial point of view to the holders of the GBC common stock and the Class B common stock, taken together in the aggregate. The GBC board of directors also considered Deutsche Bank’s presentation of its financial analyses of the transactions contemplated by the merger agreement and the distribution agreement and its opinion that, as of March 14, 2005, based upon and subject to the assumptions made, matters considered and limits of the review undertaken by Deutsche Bank, the exchange ratio is fair from a financial point of view to the holders of GBC common stock and Class B common stock. The full text of the separate written opinions of Goldman Sachs and Deutsche Bank, which set forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with each opinion, are attached to this proxy statement/ prospectus-information statement as Annexes C and D, respectively. | |
• | Additional Considerations. In the course of its deliberations on the merger, the GBC board of directors consulted with members of GBC’s management and GBC’s legal, financial, accounting and tax advisors on various legal, business and financial matters. Additional factors considered by the GBC board of directors in determining whether to approve the merger agreement and recommend that GBC stockholders vote to adopt the merger agreement and approve the merger included: (1) the likelihood of the merger being approved by the appropriate regulatory authorities; (2) the uncertainty of an alternative transaction that would yield a superior value to GBC stockholders; (3) the terms and conditions of the merger agreement; and (4) the fact that GBC stockholders will have an opportunity to vote on the proposed merger. |
• | the potential diversion of management resources from operational matters and the opportunity costs associated with the proposed merger prior to the completion of the merger; | |
• | the possibility that the increased revenues, earnings and synergies expected to result from the merger would fail to materialize within the projected time frames; | |
• | the challenges of integrating GBC’s and ACCO World’s businesses; | |
• | the inability to adjust the exchange ratio based upon events that may occur between signing of the merger agreement and the completion of the merger; |
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• | ACCO Brands’ potential liabilities to Fortune Brands and Lane Industries under the tax allocation agreements following the merger; | |
• | the possibility that the merger might not be completed as a result of one or more closing conditions not being satisfied, which could result in significant distractions of GBC’s employees and increased expenses from an unsuccessful attempt to complete the merger; | |
• | GBC being required to conduct its business only in the ordinary course consistent with past practice and subject to operational restrictions prior to the completion of the merger; and | |
• | GBC being required to pay a $9.5 million termination fee, plus costs and expenses incurred by Fortune Brands and ACCO World in connection with the transaction, if the merger agreement is terminated under circumstances specified in the merger agreement and, in some cases, if GBC later agrees to or consummates a takeover proposal. |
• | Facilitate the Merger. The spin-off will facilitate the merger of ACCO World and GBC, resulting in a combined office products company with a breadth and strength of product brands that is better positioned in key geographic markets, that can respond better to large customers and that can realize potential cost reductions through careful integration and efficiencies. | |
• | Greater Strategic Focus. The spin-off separates ACCO World’s office products business from Fortune Brands’ remaining businesses, so that each of Fortune Brands and ACCO World can adopt strategies and pursue objectives appropriate to its specific businesses. The spin-off will permit the management of each company to prioritize the allocation of its respective management and financial resources for achievement of its own corporate objectives. It will also permit Fortune Brands’ management to focus more on its higher return businesses: spirits and wine, golf and hardware and home improvement. | |
• | Focused Incentives and Greater Accountability for Employees. The distribution will allow each company to seek to attract, motivate and retain qualified personnel by enabling Fortune Brands and |
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ACCO Brands to provide incentive compensation programs that are more closely based on the performance of the respective business in which such individuals are employed. | ||
• | Direct Access to Capital Markets. The establishment of ACCO Brands common stock as a separate, publicly-traded equity security will allow Fortune Brands and ACCO Brands separately to seek to issue debt or equity securities to fund its growth. It will also afford investors the opportunity to invest in either or both of Fortune Brands or ACCO Brands. |
• | the strategic and competitive benefits of a combined ACCO World and GBC including the expected ability of the combined company to respond better to large customers who, because of consolidation in the customer tier, increasingly want to deal with suppliers with strong product development capabilities; | |
• | the potential cost reductions attributable to efficiencies and synergies to be realized by the combination of ACCO World and GBC such as facility integration, headcount reduction, supply chain optimization and revenue enhancement, and the expectation of compatibility and smooth integration between GBC and ACCO World on a business level as well as with respect to brands, product lines and cultures; | |
• | strategic alternatives available to Fortune Brands and the potential risks and benefits of each such alternative, including selling ACCO World or attempting to grow ACCO World by acquiring related or unrelated product lines; | |
• | the $625.0 million dividend to be paid by ACCO Brands in connection with the spin-off and merger; | |
• | the proposed deal structure, involving the spin-off immediately followed by the merger, would be a tax-efficient structure for Fortune Brands and Fortune Brands stockholders; and | |
• | the other terms and conditions of the merger agreement, the distribution agreement and the related agreements, which are summarized in this document. |
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Opinion of Goldman, Sachs & Co. |
• | the merger agreement; | |
• | the distribution agreement; | |
• | annual reports to stockholders and Annual Reports on Form 10-K of GBC and Fortune Brands for the four years ended December 31, 2003; | |
• | Annual Reports on Form 10-K of GBC and Fortune Brands for the year ended December 31, 2004; | |
• | audited consolidated financial statements for ACCO World and its subsidiaries for the four years ended December 27, 2004; | |
• | certain interim reports to stockholders and Quarterly Reports on Form 10-Q of GBC and Fortune Brands; | |
• | certain other communications from GBC and Fortune Brands to their respective stockholders; | |
• | certain internal financial analyses and forecasts for GBC prepared by GBC management; | |
• | certain internal financial analyses and forecasts for ACCO World prepared by ACCO World management; and | |
• | certain internal financial analyses and forecasts for ACCO Brands (pro forma for the merger) prepared by ACCO World management, or the Pro Forma Forecasts, including certain cost savings and operating synergies projected to result from the distribution and the merger, or the Synergies. |
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• | Avery Dennison Corporation | |
• | Buhrmann NV | |
• | Cenveo, Inc. | |
• | Global Imaging Systems, Inc. | |
• | MeadWestvaco Corporation | |
• | Newell Rubbermaid Inc. |
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• | Dorel Industries Inc. | |
• | Escalade, Incorporated | |
• | Furniture Brands International, Inc. | |
• | Hooker Furniture Corporation | |
• | Jakks Pacific, Inc. | |
• | Knoll, Inc. | |
• | The Scotts Miracle-Gro Company (f.k.a. “The Scotts Company”) | |
• | Select Comfort Corporation | |
• | Stanley Furniture Company, Inc. |
ACCO | ||||||||||||||||||||||||||||
Brands | ||||||||||||||||||||||||||||
Selected Office Products | Selected Industrial | (pro | ||||||||||||||||||||||||||
Companies | Companies | forma | ||||||||||||||||||||||||||
ACCO | for | |||||||||||||||||||||||||||
Range | Median | Range | Median | GBC | World | merger) | ||||||||||||||||||||||
Levered Market Capitalization as a multiple of LTM EBITDA | 7.0x-12.2x | 9.7x | 7.3x-13.6x | 9.3x | 6.7x | NA | NA | |||||||||||||||||||||
LTM EBITDA Margin | 5.2%-14.8% | 12.5 | % | 8.6%-14.4% | 11.6 | % | 10.5 | % | 14.2 | % | 12.2 | % |
ACCO | ||||||||||||||||||||||||||||
Brands | ||||||||||||||||||||||||||||
Selected Office Products | Selected Industrial | (pro | ||||||||||||||||||||||||||
Companies | Companies | forma | ||||||||||||||||||||||||||
ACCO | for | |||||||||||||||||||||||||||
Range | Median | Range | Median | GBC | World | merger) | ||||||||||||||||||||||
Price/ Earnings Ratio (2005E) | 13.7x-22.1x | 18.3x | 9.9x-21.9x | 13.2x | 10.5x | NA | NA | |||||||||||||||||||||
5-Year EPS CAGR | 5.0%-17.5% | 9.5 | % | 10.0%-20.0% | 16.5 | % | NA | NA | NA |
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Illustrative per Share | ||||
Value Indications | ||||
GBC | $ | 12.22-$18.93 |
Illustrative per Share | ||||
Value Indications | ||||
ACCO Brands (pro forma for the merger) | $ | 12.88-$20.20 |
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Implied Value per Share of ACCO Brands Common Stock to be Received in Exchange for Each Share of GBC | ||||||||
Common Stock and Class B Common Stock vs. GBC Share Price as of March 15, 2005 ($13.08) | ||||||||
ACCO Brands 2004 (pro forma for | Pro Forma | Pro Forma for | ||||||
the merger) | Before | Synergies in First | ||||||
EBITDA Multiple | Synergies | Full Year | ||||||
6.1x | (28.9 | )% | (6.5 | )% | ||||
6.3x | (21.8 | )% | +1.4 | % | ||||
6.5x | (14.7 | )% | +9.2 | % | ||||
6.7x | (6.1 | )% | +18.7 | % | ||||
6.9x | (0.5 | )% | +24.9 | % | ||||
7.1x | +6.6 | % | +32.7 | % | ||||
7.3x | +13.7 | % | +40.6 | % |
GBC Absolute Contribution to | GBC Debt-Adjusted Contribution to | |||||||||||||||||||||||
ACCO Brands | ACCO Brands | |||||||||||||||||||||||
Adjusted | Adjusted | |||||||||||||||||||||||
Adjusted | Operating | Adjusted | Operating | |||||||||||||||||||||
EBITDA | Income | Net Income | EBITDA | Income | Net Income | |||||||||||||||||||
2004A | 31 | % | 28 | % | N/A | 31 | % | 25 | % | 17 | % | |||||||||||||
2005E | 29 | % | 26 | % | N/A | 27 | % | 22 | % | 16 | % | |||||||||||||
2006E | 29 | % | 27 | % | N/A | 27 | % | 23 | % | 19 | % | |||||||||||||
2007E | 30 | % | 28 | % | N/A | 29 | % | 25 | % | 21 | % |
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Opinion of Deutsche Bank Securities, Inc. |
• | reviewed certain publicly available financial and other information concerning ACCO World and GBC and certain internal analyses and financial and other information furnished to it by ACCO World and GBC, respectively; | |
• | reviewed certain financial forecasts prepared by management relating to ACCO World and GBC, respectively; | |
• | reviewed certain financial forecasts and projections relating to the merger, including information relating to the certain financial and operational benefits anticipated from the merger, provided by the management of ACCO World (including potential synergies); | |
• | held discussions with members of the senior managements of ACCO World and GBC regarding the businesses and prospects of their respective companies and the joint prospects of a combined ACCO Brands following the merger, including the financial and operational benefits anticipated from the merger (including potential synergies); |
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• | compared the pro forma impact of the merger on earnings per share, cash flow, consolidated capitalization and financial ratios to GBC and GBC common stock and Class B common stock, as appropriate; | |
• | reviewed information relating to the relative contributions of ACCO World’s business and GBC’s business to ACCO Brands; | |
• | reviewed the reported prices and trading activity for GBC common stock; | |
• | compared certain financial and stock market information for ACCO World and GBC with similar information for certain other companies whose securities are publicly traded; and | |
• | reviewed the terms of the merger agreement, the distribution agreement and certain related documents in each case as set forth in drafts dated as of March 8, 2005. |
• | the representations and warranties of GBC, ACCO World and Gemini Acquisition Sub contained in the merger agreement are true and correct; | |
• | GBC, ACCO World and Gemini Acquisition Sub will each perform all of the covenants and agreements to be performed by it under the merger agreement; | |
• | all conditions to the obligations of each of GBC, ACCO World and Gemini Acquisition Sub to consummate the merger and the related transactions will be satisfied without any waiver or modification thereof; | |
• | all material governmental, regulatory or other approvals and consents required in connection with the completion of the transactions contemplated by the merger agreement will be obtained; | |
• | in connection with obtaining any necessary governmental, regulatory or other approvals and consents, or any amendments, modifications or waivers to any agreements, instruments or orders to which either GBC or ACCO World is a party or is subject or by which it is bound, no limitations, restrictions or conditions will be imposed or amendments, modifications or waivers made that would have a material effect on GBC or ACCO World or materially reduce the contemplated benefits of the merger to GBC; | |
• | the distribution will qualify under section 355 of the Internal Revenue Code as a “spin-off”; and |
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• | the merger will constitute a tax-free reorganization within the meaning of section 368(a) of the Internal Revenue Code and a “plan of reorganization” for purposes of section 354 and 361 of the Internal Revenue Code. |
Low | High | Median | Mean | |||||||||||||
Equity Value to EPS Multiple | ||||||||||||||||
2004 | 10.1x | 31.9 | x | 21.1 | x | 20.5x | ||||||||||
2005 | 9.8x | 44.3 | x | 15.2 | x | 20.0x | ||||||||||
2006 | 8.8x | 40.8 | x | 15.5 | x | 17.4x | ||||||||||
Enterprise Value to EBITDA Multiple | ||||||||||||||||
2004 | 6.5x | 15.6 | x | 9.7 | x | 10.4x | ||||||||||
2005 | 6.6x | 14.5 | x | 9.0 | x | 9.6x | ||||||||||
2006 | 6.4x | 10.9 | x | 8.2 | x | 8.5x |
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Relevant | ||||||||||||||||||||||
Multiple | Equity | Equity | ||||||||||||||||||||
Ranges | Value Low | Value High | ||||||||||||||||||||
(US$ in millions) | ||||||||||||||||||||||
GBC | ||||||||||||||||||||||
2004 EBITDA | 6.6x | - | 9.2x | $ | 201.3 | - | $ | 392.0 | ||||||||||||||
2004 net income | 13.2x | - | 18.9x | $ | 194.9 | - | $ | 279.0 | ||||||||||||||
2005E EBITDA | 6.6x | - | 9.0x | $ | 169.4 | - | $ | 333.8 | ||||||||||||||
2005E net income | 11.5x | - | 15.3x | $ | 163.8 | - | $ | 217.9 | ||||||||||||||
2006E EBITDA | 6.6x | - | 9.0x | $ | 211.7 | - | $ | 391.4 | ||||||||||||||
2006E net income | 10.1x | - | 14.7x | $ | 192.4 | - | $ | 280.0 | ||||||||||||||
ACCO World | ||||||||||||||||||||||
2004 EBITDA | 7.0x | - | 9.7x | $ | 513.2 | - | $ | 952.2 | ||||||||||||||
2004 net income | 13.2x | - | 19.6x | $ | 591.9 | - | $ | 879.0 | ||||||||||||||
2005E EBITDA | 6.6x | - | 9.0x | $ | 503.1 | - | $ | 913.3 | ||||||||||||||
2005E net income | 12.2x | - | 15.3x | $ | 737.9 | - | $ | 925.4 | ||||||||||||||
2006E EBITDA | 6.6x | - | 9.0x | $ | 566.3 | - | $ | 999.5 | ||||||||||||||
2006E net income | 10.1x | - | 14.7x | $ | 667.9 | - | $ | 972.2 |
Implied Ownership by Current GBC | ||||||||
Stockholders of ACCO Brands | ||||||||
Corporation | ||||||||
Low Values of | ||||||||
GBC and ACCO | High Values of GBC | |||||||
Implied Equity Values Based on: | World | and ACCO World | ||||||
GBC | ||||||||
2004 EBITDA | 28.2 | % | 29.2 | % | ||||
2004 net income | 24.8 | % | 24.1 | % | ||||
2005E EBITDA | 25.2 | % | 26.8 | % | ||||
2005E net income | 18.2 | % | 19.1 | % | ||||
2006E EBITDA | 29.6 | % | 30.0 | % | ||||
2006E net income | 22.4 | % | 22.4 | % |
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Implied Equity | Equity Value | |||||||||||||||
Value | per Share | |||||||||||||||
Low | High | Low | High | |||||||||||||
(US$ in millions) | ||||||||||||||||
GBC | $ | 223 | $ | 319 | $ | 13.29 | $ | 19.07 | ||||||||
ACCO World | $ | 550 | $ | 772 | NA | NA |
Implied Equity | ||||
Ownership by | ||||
Current GBC Stockholders | ||||
Implied Equity Values Based on: | of ACCO Brands | |||
High End of Ranges | 29.3 | % | ||
Low End of Ranges | 28.8 | % |
Contribution of GBC to a Combination of | ||||||||||||
GBC and ACCO World | ||||||||||||
Financial Metric | 2004 | 2005 (Projected) | 2006 (Projected) | |||||||||
EBITDA | 31.1 | % | 28.6 | % | 29.3 | % | ||||||
Net Income | 24.8 | % | 19.1 | % | 22.4 | % |
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Implied Equity Ownership of ACCO Brands | ||||||||||||
Financial Metric | 2004 | 2005 (Projected) | 2006 (Projected) | |||||||||
EBITDA | 31.0 | % | 25.8 | % | 27.2 | % | ||||||
Net Income | 24.8 | % | 19.1 | % | 22.4 | % |
• | Financial projections for ACCO Brands based on projections developed by the management of GBC and ACCO World; and | |
• | Estimates of cost savings and the potential synergies resulting from the merger developed by the management of GBC and ACCO World. |
Implied | ||||||||
Pro Forma | ||||||||
Accretion to | ||||||||
Current GBC | ||||||||
Stockholders | ||||||||
Source of GBC EPS Estimates | 2005 | 2006 | ||||||
GBC Management | 76.5 | % | 52.2 | % | ||||
KeyBanc Capital Markets Equity Research | 20.0 | % | NA |
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Implied Equity | |||||||||
Value | |||||||||
Low | High | ||||||||
(US$ in millions) | |||||||||
GBC (standalone) | $ | 223 | $ | 319 | |||||
34% of ACCO Brands | $ | 249 | $ | 365 | |||||
% difference | 11.7 | % | 14.2 | % |
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• | Fortune Brands, ACCO World or GBC will be able to satisfy or comply with such conditions; | |
• | compliance or non-compliance will not have adverse consequences on ACCO Brands after completion of the merger; or | |
• | the required regulatory approvals will be obtained within the time frame contemplated by Fortune Brands, ACCO World and GBC and referred to in this proxy statement/ prospectus-information statement or on terms that will be satisfactory to Fortune Brands, ACCO World and GBC. |
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• | unvested restricted stock units granted under the GBC stock plans in 2003 and 2004 which have been earned as of the date of the completion of the merger pursuant to certain performance criteria; | |
• | remaining unvested restricted stock units granted under the GBC stock plans in 2003 which remain subject to target awards for the year 2005; and | |
• | a pro rata portion of remaining unvested restricted stock units granted under the GBC stock plans in 2004 which remain subject to target awards for the years 2005 and 2006. |
Number of Shares | |||||||||||||
Subject to Grants | |||||||||||||
of Restricted Stock | |||||||||||||
Number of Shares | Weighted Average | Units which | |||||||||||
Subject to Unvested | Exercise Price per | Immediately | |||||||||||
Name | Options | Share ($) | Accelerate | ||||||||||
Dennis J. Martin, | 162,500 | 13.35 | 49,446 | ||||||||||
Director, Chairman of the | |||||||||||||
Board, President and Chief | |||||||||||||
Executive Officer | |||||||||||||
George V. Bayly, | 3,000 | 21.07 | 0 | ||||||||||
Director | |||||||||||||
G. Thomas Hargrove, | 3,000 | 21.07 | 0 | ||||||||||
Director | |||||||||||||
Marc Knez, | 3,000 | 21.07 | 0 | ||||||||||
Director |
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Number of Shares | |||||||||||||
Subject to Grants | |||||||||||||
of Restricted Stock | |||||||||||||
Number of Shares | Weighted Average | Units which | |||||||||||
Subject to Unvested | Exercise Price per | Immediately | |||||||||||
Name | Options | Share ($) | Accelerate | ||||||||||
Jeffery P. Lane, | 3,000 | 21.07 | 0 | ||||||||||
Director | |||||||||||||
Nelson P. Lane, | 3,000 | 21.07 | 0 | ||||||||||
Director | |||||||||||||
Arthur C. Nielsen, Jr., | 3,000 | 21.07 | 0 | ||||||||||
Director | |||||||||||||
Forrest M. Schneider, | 3,000 | 21.07 | 0 | ||||||||||
Director | |||||||||||||
Robert J. Stucker, | 3,000 | 21.07 | 0 | ||||||||||
Director | |||||||||||||
Thomas Stenebring, | 17,500 | 10.56 | 20,754 | ||||||||||
President, Europe Group, | |||||||||||||
Senior Vice President, | |||||||||||||
Worldwide Office Products | |||||||||||||
John E. Turner, | 32,500 | 13.35 | 15,321 | ||||||||||
Group President, Industrial and | |||||||||||||
Print Finishing Group | |||||||||||||
Govind K. Arora, | 32,500 | 13.35 | 21,692 | ||||||||||
Senior Vice President, | |||||||||||||
Worldwide Manufacturing and | |||||||||||||
Logistics | |||||||||||||
Don Civgin, | 40,625 | 13.36 | 19,152 | ||||||||||
Senior Vice President and | |||||||||||||
Chief Financial Officer | |||||||||||||
Steven Rubin, | 11,750 | 13.47 | 5,745 | ||||||||||
Vice President, Secretary and | |||||||||||||
General Counsel | |||||||||||||
Perry S. Zukowski, | 11,750 | 13.47 | 7,656 | ||||||||||
Vice President, Human Resources |
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• | continued participation in GBC’s medical and dental plans on a cost-sharing basis for three years following termination; | |
• | to the extent not already vested and exercisable, the ability to exercise any or all stock options that were outstanding immediately prior to the change in control for the earlier of two years following termination or the expiration date of the stock option; | |
• | a lump sum payment equal to the amount of retirement plan payments made by GBC for Mr. Martin in the two calendar years prior to termination; and | |
• | a gross-up for any “golden parachute” excise tax that may be payable by Mr. Martin under Section 4999 of the Internal Revenue Code, and any income and employment withholding taxes on the gross-up payment, with respect to the severance payments and other benefits due to Mr. Martin (whether under the change in control plan or otherwise), unless the amount of any “excess parachute payments” paid or payable to Mr. Martin do not exceed 330% of Mr. Martin’s base pay as determined pursuant to Section 280G of the Internal Revenue Code, in which case the gross-up payment shall not be paid and the amounts payable to Mr. Martin will be reduced so that no amounts paid or payable to Mr. Martin will be deemed “excess parachute payments” for purposes of Section 4999 of the Internal Revenue Code. |
• | GBC must pay the executive officer a single lump-sum cash payment equal to 2.25 times (2.0 times for Messrs. Civgin and Stenebring) the sum of the executive’s annual base salary plus the greater of either the executive’s target bonus for the year in which the change in control takes place or the executive’s bonus based on actual performance for that year; | |
• | the executive officer would be entitled to continued participation in GBC’s medical and dental plans on a cost-sharing basis for two years following termination; | |
• | to the extent not already vested and exercisable, the executive officer would be entitled to exercise any or all stock options (other than stock options issued in 2005 with respect to a change in control caused by the merger (See “— Stock Options and Other Stock Based Awards” on page 53)) that were outstanding immediately prior to the change in control for the earlier of one year following termination or the expiration date of the stock option; | |
• | the executive officer would be entitled to outplacement services of an amount not to exceed ten percent of the executive’s base salary in effect at the time of termination; and | |
• | a gross-up for any “golden parachute” excise tax that may be payable by the executive under Section 4999 of the Internal Revenue Code, and any income and employment withholding taxes on the gross-up payment, with respect to the severance payments and other benefits due to the executive officer (whether under the change in control plan or otherwise), unless the amount of any “excess parachute payments” paid or payable to the executive do not exceed 330% of the executive’s base pay as determined pursuant to Section 280G of the Internal Revenue Code, in which case the gross-up payment shall not be paid and the severance payable to the executive will |
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be reduced so that no amounts paid or payable to the executive will be deemed “excess parachute payments” for purposes of Section 4999 of the Internal Revenue Code. |
Payment and | |||||
Name | Benefit Amounts ($) | ||||
Dennis J. Martin, | 4,383,460 | ||||
Chairman of the Board, President and | |||||
Chief Executive Officer | |||||
Thomas Stenebring, | 1,352,540 | ||||
President, Europe Group, Senior Vice | |||||
President, Worldwide Office Products | |||||
John E. Turner, | 1,122,484 | ||||
Group President, Industrial and Print | |||||
Finishing Group | |||||
Govind K. Arora, | 874,653 | ||||
Senior Vice President, Worldwide | |||||
Manufacturing and Logistics | |||||
Don Civgin, | 1,206,042 | ||||
Senior Vice President and Chief | |||||
Financial Officer | |||||
Steven Rubin, | 770,991 | ||||
Vice President, Secretary and General | |||||
Counsel | |||||
Perry S. Zukowski, | 651,952 | ||||
Vice President, Human Resources |
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• | account statements indicating the number of whole shares of ACCO Brands common stock owned by each stockholder as a result of the exchange of shares in the merger; and | |
• | a check representing the amount of cash in lieu of fractional shares of ACCO Brands common stock payable by ACCO Brands to the stockholder. |
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• | corporate existence, qualification to conduct business and corporate power; | |
• | ownership of subsidiaries; | |
• | capital structure; | |
• | corporate authority to enter into, and perform the obligations under, the merger agreement and enforceability of the merger agreement; | |
• | absence of a breach of organizational documents and absence of a material breach of laws or material agreements as a result of the merger; | |
• | required governmental approvals; | |
• | financial statements; | |
• | information supplied for use in this proxy statement/ prospectus-information statement; | |
• | board of directors’ approval; | |
• | litigation; | |
• | compliance with laws; | |
• | absence of certain changes or events; | |
• | environmental matters; | |
• | intellectual property matters; | |
• | title to properties; | |
• | assets and services; | |
• | payment of fees to finders or brokers in connection with the merger; | |
• | tax matters; | |
• | material contracts; | |
• | employee benefits; | |
• | labor relations; | |
• | insurance; | |
• | absence of material liens; and | |
• | affiliate transactions. |
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• | entering into any new material lines of business or incurring any capital expenditures other than in the ordinary course of business consistent with past practice; | |
• | declaring or paying dividends in respect of its capital stock; | |
• | splitting, combining or reclassifying its capital stock or issuing securities in respect of, in lieu of or in substitution for its capital stock; | |
• | repurchasing, redeeming or otherwise acquiring its capital stock; | |
• | issuing, delivering, selling, pledging or encumbering any shares of its capital stock or any securities convertible into or exercisable for, or any right to acquire, capital stock; | |
• | amending its certificate of incorporation, by-laws or other governing documents (other than pursuant to the merger agreement and other agreements related to the transaction); | |
• | making acquisitions of other entities or material assets or disposing of assets, other than inventory in the ordinary course of business consistent with past practice; | |
• | making loans, advances, capital contributions to, or investments in, any other person other than certain intercompany loans or investments, employee loans, loans made pursuant to existing obligations, loans, advances, capital contributions or investments made in the ordinary course of business which are not material, or loans, advances, capital contributions or investments not in excess of specified amounts; | |
• | incurring debt, other than under existing agreements or in the ordinary course of business which is not material; | |
• | compensation and benefit matters with respect to directors, officers and employees; | |
• | changing its accounting methods, except as may be required by changes in generally accepted accounting principles; | |
• | changing its fiscal year, making any material tax elections or settling or compromising any material income tax liabilities other than in the ordinary course of business consistent with past practice; | |
• | entering into contracts that limit or restrict the ability to engage or compete in any line of business or in any geographic area; |
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• | acting in any manner such that material intellectual property that is owned lapses or becomes impaired or unenforceable; and | |
• | entering into or amending certain types of agreements or arrangements with related parties. |
• | initiate, solicit, encourage or knowingly facilitate any inquiries or the making of any proposal or offer with respect to, or a transaction to effect, any acquisition proposal, as described below; | |
• | have any discussions with or provide any confidential information or data to any person relating to an acquisition proposal, or engage in any negotiations concerning an acquisition proposal or knowingly facilitate any effort or attempt to make or implement an acquisition proposal; | |
• | approve, recommend, agree to or accept, or propose publicly to approve, recommend, agree to or accept, any acquisition proposal; | |
• | approve, recommend, agree to or accept, or propose to approve, recommend, agree to or accept, or execute or enter into, any letter of intent, agreement in principle, merger agreement, acquisition agreement, option agreement or other similar agreement related to any acquisition proposal; or | |
• | waive, amend, modify or grant any release under any standstill or similar agreement or confidentiality agreement (other than the confidentiality agreement between GBC and Fortune Brands) to which it or any of its subsidiaries is a party. |
• | a merger, reorganization, share exchange, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving GBC or any of its significant subsidiaries; | |
• | any direct or indirect purchase or sale, lease, exchange, transfer or other disposition of 15% or more of the consolidated assets (including stock of subsidiaries) of GBC and its subsidiaries, taken as a whole; |
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• | any direct or indirect purchase or sale of, or tender or exchange offer for, or similar transaction with respect to, the equity securities of GBC that, if consummated, would result in any person beneficially owning securities representing 15% or more of the total voting power of GBC (or of the surviving parent entity in such transaction). |
• | engaging in any discussions or negotiations with, or providing any information to, any person in response to an unsolicited bona fide written acquisition proposal by such person which has not been withdrawn; or | |
• | approving or recommending a superior acquisition proposal, as described below, or terminating the merger agreement subject to the termination provisions. |
• | GBC stockholders have not yet adopted and approved the merger agreement; | |
• | GBC has received an unsolicited bona fide written acquisition proposal from a third party which has not been withdrawn that was made after March 15, 2005 and did not result from a breach of GBC’s no solicitation obligations; and |
• | before engaging in any discussion or negotiations, or providing any information, the GBC board concludes in good faith that the acquisition proposal is a superior acquisition proposal or is reasonably likely to be a superior acquisition proposal, or | |
• | before approving or recommending a proposal or terminating the merger agreement, the GBC board concludes in good faith that the acquisition proposal is a superior acquisition proposal; |
• | the GBC board, after consulting with outside legal counsel, determines in good faith, based on such matters as it deems appropriate, that failure to take such action would be a breach of its fiduciary duties to stockholders under applicable laws; | |
• | before approving or recommending a proposal or terminating the merger agreement, the GBC board has provided Fortune Brands with at least three business days’ notice of such action; | |
• | before providing any information or data to any person in connection with an acquisition proposal by that person, GBC or its board of directors receives from that person an executed confidentiality agreement with terms substantially the same as those contained in the confidentiality agreement between Fortune Brands and GBC; and | |
• | before providing any information or data to any person or entering into discussions with any person, GBC promptly notifies Fortune Brands of any inquiries, proposals or offers received from, any information requested by, or any discussions or negotiations sought to be initiated or continued with, that person or any of its representatives. |
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• | indemnify and provide advancement of expenses, for a period of six years, to all past and present directors, officers and employees of ACCO World and its subsidiaries, and of GBC and its subsidiaries, to the same extent those persons were indemnified or had the right to advancement of expenses on the date of the merger agreement pursuant to GBC’s, Fortune Brands’, or ACCO World’s certificate of incorporation, by-laws or indemnification agreements, as applicable, for acts or omissions occurring on or before the effective time of the merger, including acts or omissions occurring in connection with the approval of the merger agreement and consummation of the transactions contemplated thereby; | |
• | maintain for a period of six years after the merger, for the benefit of GBC’s directors and officers, directors’ and officers’ liability insurance and fiduciary liability insurance policies currently maintained by GBC, or policies of at least the same coverage and amounts containing terms and conditions which are, in the aggregate, no less advantageous to the insured than the current insurance maintained by GBC with respect to claims arising from facts or events that occurred on or before the effective time of the merger. However, ACCO Brands will not be required to expend in any one year an amount in excess of 250% of the current annual premiums paid by GBC for this insurance; and | |
• | maintain for a period of six years after the merger, for the benefit of the directors and officers of ACCO World directors’ and officers’ liability insurance and fiduciary liability insurance policies which are, in the aggregate, no less advantageous to the insured than the current insurance maintained by Fortune Brands and ACCO World with respect to claims arising from facts or events that occurred on or before the effective time of the merger. However, ACCO Brands will not be required to obtain coverage in an amount exceeding $50 million or to expend in any one year an amount in excess of $1,000,000. |
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• | the approval and adoption of the merger agreement and the merger by GBC stockholders; | |
• | the absence of any law, order or injunction having the effect of making the merger illegal or otherwise prohibiting completion of the merger, and the absence of any proceeding initiated by any governmental entity seeking, and which is reasonably likely to result in, such a law, order or injunction; | |
• | the applicable waiting period under the Hart-Scott-Rodino Act shall have been terminated or expired (the waiting period expired on May 12, 2005); | |
• | all notifications and filings required under non-U.S. competition laws to have been made, and all consents, approvals and authorizations required to be obtained prior to completion of the merger under non-U.S. competition laws in order to complete the merger to have been made or obtained and all applicable waiting periods under non-U.S. competition laws to have been terminated or expired; | |
• | the approval for listing on the New York Stock Exchange of the ACCO Brands common stock to be issued in the spin-off and the merger; | |
• | the effectiveness of the registration statement of which this proxy statement/ prospectus-information statement is a part; | |
• | the completion of the spin-off transaction in accordance with the terms of the merger agreement and the distribution agreement; and | |
• | the completion of the financing of the transaction. |
• | the accuracy of each of Fortune Brands and ACCO World’s representations and warranties set forth in the merger agreement, without any qualification or limitation as to materiality or material adverse effect set forth therein, except where the failure of such representations and warranties to be true and correct would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on ACCO World and its subsidiaries; | |
• | the performance or compliance of each of Fortune Brands, ACCO World and Gemini Acquisition Sub with all agreements and covenants required to be performed by it under the merger agreement that are qualified as to materiality or material adverse effect and the performance or compliance in all material respects with all other agreements and covenants required to be performed by it under the merger agreement that are not so qualified; | |
• | receipt from Skadden, Arps, Slate, Meagher & Flom LLP of an opinion stating that the merger will constitute a reorganization under section 368(a) of the Internal Revenue Code; and | |
• | the execution and delivery by Fortune Brands and ACCO World of the tax allocation agreement and the transition services agreement, and the employee matters agreement being in full force and effect with respect to ACCO Brands’ obligations following the effective time. |
• | the accuracy of GBC’s representations and warranties set forth in the merger agreement, without any qualification or limitation as to materiality or material adverse effect set forth therein, except |
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where the failure of such representations and warranties to be true and correct would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on GBC and its subsidiaries; | ||
• | the performance or compliance of GBC with all agreements and covenants required to be performed by it under the merger agreement that are qualified as to materiality or material adverse effect and the performance or compliance in all material respects with all other agreements and covenants required to be performed by it under the merger agreement that are not so qualified; | |
• | receipt from Chadbourne & Parke LLP of an opinion stating that the merger will constitute a reorganization under section 368(a) of the Internal Revenue Code and the distribution will constitute a spin-off under section 355 of the Internal Revenue Code; and | |
• | the execution and delivery by GBC and Lane Industries of the tax allocation agreement, and the employee matters agreement being in full force and effect with respect to GBC’s obligations following the effective time. |
• | Fortune Brands and GBC agree to terminate the agreement by mutual written consent; | |
• | the merger has not been completed by November 30, 2005, provided that the terminating party’s failure to fulfill any obligation under the merger agreement or the distribution agreement is not the cause of the merger not being completed by November 30, 2005; | |
• | an order or ruling of a court or other governmental entity permanently prohibiting the completion of the merger becomes final and non-appealable, provided that the terminating party has used its reasonable best efforts to avoid or remove the prohibition to the extent required in accordance with the terms of the merger agreement; | |
• | a court or other governmental entity fails to issue an order or ruling that is necessary to satisfy specified conditions to the merger and the denial of a request to issue such an order or ruling becomes final and non-appealable, provided that the terminating party has used its reasonable best efforts to obtain the order or ruling; or |
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• | GBC stockholders fail to adopt the merger agreement and approve the merger at the GBC special meeting. |
• | the GBC board of directors: |
• | fails to recommend adoption of the merger agreement and the merger to GBC stockholders; | |
• | withdraws, modifies, or qualifies (or publicly proposes to withdraw, modify or qualify) its recommendation to GBC stockholders to adopt the merger agreement and the merger; | |
• | fails to confirm its recommendation to GBC stockholders to adopt the merger agreement and the merger within five business days of Fortune Brands’ request to do so; or | |
• | approves or recommends an alternate acquisition proposal; |
• | GBC breaches its obligation to call and hold the GBC special meeting; | |
• | a tender or exchange offer relating to securities of GBC has been commenced by a person unaffiliated with Fortune Brands and GBC has not sent to its stockholders within ten business days after such tender or exchange offer is first published, sent or given, a statement that GBC recommends rejection of such tender or exchange offer; or | |
• | GBC breaches or fails to perform any of its representations, warranties, covenants or other agreements contained in the merger agreement such that any of the conditions described above with respect to the accuracy of GBC’s representations and warranties or the performance by GBC of its covenants and agreements is not capable of being satisfied prior to November 30, 2005. |
• | if Fortune Brands or ACCO World breaches or fails to perform any of its representations, warranties, covenants or other agreements contained in the merger agreement such that any of the conditions described above with respect to the accuracy of Fortune Brands’ and ACCO World’s representations and warranties or the performance by Fortune Brands and ACCO World of their respective covenants and agreements is not capable of being satisfied prior to November 30, 2005; or | |
• | in accordance with and subject to the conditions described in “— No Solicitation” beginning on page 64. |
• | the merger agreement has been terminated (1) by either Fortune Brands or GBC because the merger has not been completed by November 30, 2005 and the GBC special meeting has not occurred, (2) by either Fortune Brands or GBC because GBC stockholders fail to adopt the merger |
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agreement and approve the merger at the GBC special meeting or (3) by Fortune Brands because of GBC’s intentional breach or failure to perform any of its representations, warranties, covenants or other agreements contained in the merger agreement; and |
• | if the merger agreement is terminated (1) because GBC stockholders fail to adopt the merger agreement and approve the merger, at any time before the GBC special meeting, an acquisition proposal with respect to GBC has been publicly announced, become publicly known or otherwise been communicated to the senior management, board of directors or stockholders of GBC or (2) because the merger has not been completed by November 30, 2005, or because GBC intentionally breaches or fails to perform any of its representations, warranties, covenants or other agreements contained in the merger agreement, at any time before the agreement is terminated, an acquisition proposal has been publicly announced, become publicly known or otherwise been communicated to the senior management, board of directors or stockholders of GBC; and | |
• | within twelve months of the termination of the merger agreement, GBC enters into a definitive agreement with respect to or consummates an acquisition proposal, provided that for purposes of this clause of the merger agreement, references to 15% in the definition of an acquisition proposal with respect to GBC shall be deemed to be references to 33%; or |
• | Fortune Brands terminates the merger agreement as a result of GBC breaching its obligation to call and hold the GBC special meeting; | |
• | Fortune Brands terminates the merger agreement as a result of the GBC board of directors recommending an alternate acquisition proposal; | |
• | Fortune Brands terminates the merger agreement as a result of a tender or exchange offer relating to securities of GBC having been commenced by a person unaffiliated with Fortune Brands, and GBC having failed to send to its stockholders within ten business days after such tender or exchange offer is first published, sent or given, a statement that GBC recommends rejection of such tender or exchange offer; or | |
• | GBC terminates the agreement in accordance with and subject to the conditions described in “— No Solicitation” beginning on page 64. |
• | owning not in excess of 5% in the aggregate of any class of capital stock or other equity interest of any person engaged in the businesses described above; | |
• | until the second anniversary of the completion of the merger, acquiring control of any business deriving less than 30% of its revenues from the businesses described above so long as Fortune Brands uses reasonable efforts to divest such operations as promptly as practicable, with this obligation to divest expiring on the second anniversary of the completion of the merger, and | |
• | following the second anniversary of the completion of the merger, acquiring control of any business deriving less than 50% of its revenues from the businesses described above so long as Fortune Brands uses reasonable efforts to divest such operations as promptly as practicable, with this obligation to divest expiring on the fifth anniversary of the completion of the merger. |
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• | immediately before the spin-off, all intercompany agreements and loans between Fortune Brands and its subsidiaries (other than ACCO World and its subsidiaries), on the one hand, and ACCO World and its subsidiaries, on the other hand, will be terminated, except for those specifically provided for in the distribution agreement; | |
• | immediately before the spin-off, if amounts due to ACCO World from Fortune Brands under cancelled intercompany cash management loans are greater than the amount of “credited cash”, then Fortune Brands will reimburse ACCO World in the amount of the excess; |
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• | immediately before the spin-off, if the amounts due to ACCO World from Fortune Brands under cancelled intercompany cash management loans are less than the amount of “credited cash”, then ACCO World will reimburse Fortune Brands in the amount of the shortfall; and | |
• | Fortune Brands will satisfy all indebtedness for borrowed money of ACCO World and its subsidiaries that was outstanding as of the close of business on March 14, 2005. |
• | the sum of amounts due on March 14, 2005 to ACCO World from Fortune Brands under intercompany cash management loans plus the amount of cash and cash equivalents maintained by ACCO World on March 14, 2005, minus | |
• | the sum of $10,000,000 plus the aggregate amount paid between March 16, 2005 and the date of the completion of the merger to ACCO World employees under the Day-Timer Special Incentive Plan and the ACCO Senior Management Incentive Plan (and any taxes incurred in respect of such payments). |
• | the absence of any law, order or injunction having the effect of making the spin-off illegal or otherwise prohibiting completion of the spin-off, and the absence of any proceeding initiated by any governmental entity seeking, and which is reasonably likely to result in, such a law, order or injunction; and | |
• | each condition to the closing of the merger agreement shall have been fulfilled or waived by the party for whose benefit such condition exists (except for the consummation of the spin-off). |
• | any liability assumed, transferred, assigned or allocated to ACCO World or to Fortune Brands in accordance with, or any other liability of either of them under, the merger agreement or any other transaction agreements or any contracts contemplated thereby; | |
• | the ability of a party to enforce its rights under the merger agreement or any other transaction agreements or any contracts contemplated thereby; or |
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• | any liability the release of which would result in the release of any person other than ACCO World, Fortune Brands or their respective subsidiaries. |
• | all liabilities of ACCO World under the merger agreement and any other transaction agreement to which ACCO World is a party; and | |
• | all liabilities of Fortune Brands to the extent based upon, arising out of or relating to ACCO World’s business (other than specified environmental liabilities for which Fortune Brands has expressly agreed to indemnify ACCO World). |
• | all liabilities of Fortune Brands under the merger agreement and any other transaction agreement to which Fortune Brands is a party; and | |
• | all liabilities of ACCO Brands to the extent based upon, arising out of or relating to Fortune Brands’ businesses, other than the businesses of ACCO Brands. |
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• | any waiver by ACCO World prior to the completion of the spin-off is subject to the prior written consent of GBC unless the merger agreement has been terminated; and | |
• | certain waivers by Fortune Brands of conditions to the consummation of the spin-off are subject to the prior written consent of GBC. See “— Conditions to the Completion of the Spin-Off” on page 73. |
• | in favor of the merger agreement, the merger and any other actions necessary or desirable in furtherance of the merger agreement, the merger and the transactions contemplated by the merger agreement; and | |
• | against approval of any action or agreement: |
• | that would reasonably be expected to result in a breach in any material respect of any covenant, representation or warranty or any other obligation or agreement of GBC under the merger agreement; or | |
• | except with the prior written consent of Fortune Brands, that would reasonably be expected to adversely affect or delay the merger in any respect including, but not limited to: |
• | any proposal for a competing transaction with respect to GBC; | |
• | any amendment of GBC’s certificate of incorporation or bylaws other than as contemplated by the merger agreement or any other proposal, action or transaction involving GBC or any of its subsidiaries that would reasonably be expected to in any manner impede, frustrate, prevent or nullify the merger agreement, the merger or any of the other transactions contemplated by the merger agreement or change in any manner the voting rights of any class of GBC’s capital stock; |
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• | any change in the persons who constitute GBC’s board of directors that is not approved in advance by at least a majority of the persons who were directors of GBC as of March 15, 2005 or their successors who were so approved; | |
• | any material change in the capitalization or dividend policy of GBC; or | |
• | any other material change in GBC’s corporate structure or business that would reasonably be expected to adversely affect or delay the merger in any respect. |
• | sell, transfer, pledge (except to the extent that shares of GBC common stock or Class B common stock are pledged as of the date of the voting agreement), encumber, assign or otherwise dispose of (including by gift) (which actions are collectively referred to herein as a Transfer), or enter into any contract, option or other arrangement or understanding (including any profit sharing arrangement) with respect to the Transfer of, any shares of GBC common stock or Class B common stock over which it has record or beneficial ownership other than pursuant to the merger agreement; | |
• | deposit any shares of GBC common stock or Class B common stock over which it has record or beneficial ownership into a voting trust, enter into any voting arrangement or understanding, or otherwise Transfer, whether by proxy, voting agreement or otherwise the right to vote the shares of GBC common stock or Class B common stock over which it has beneficial or record ownership; or | |
• | take any other action that would make any of its representations or warranties contained in the voting agreement untrue or incorrect or have the effect of preventing, disabling or impeding it from performing its obligations under the voting agreement. |
• | a Transfer to affiliates of Lane Industries (other than GBC or its affiliates) who agree to be bound by the terms of the voting agreement; | |
• | Transfers pursuant to the exercise of options that were granted by Lane Industries and outstanding as of the date of the voting agreement; or | |
• | Transfers of shares of GBC common stock or Class B common stock as part of the exercise of remedies under a pledge agreement pursuant to which Lane Industries pledged its shares of GBC common stock and Class B common stock following an event of default under that pledge agreement, provided that those shares of GBC common stock or Class B common stock will be, and a transferee will hold those shares, subject to the rights of Fortune Brands and ACCO World under the voting agreement. |
• | initiate, solicit, encourage or knowingly facilitate any inquiry or proposal regarding a competing transaction with respect to GBC; | |
• | have any discussions with or provide any confidential information or data to any person relating to any competing transaction with respect to GBC, or engage in any negotiations concerning any competing transaction with respect to GBC, or knowingly facilitate any effort or attempt to make or implement any competing transaction with respect to GBC; | |
• | approve, recommend, agree to or accept, or propose publicly to approve, recommend, agree to or accept any competing transaction with respect to GBC; |
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• | approve, recommend, agree to or accept, or propose to approve, recommend, agree to or accept, or execute or enter into, any letter of intent, agreement in principle, merger agreement, acquisition agreement, option agreement or other similar agreement related to any competing transaction with respect to GBC; or | |
• | waive, amend or modify any standstill or confidentiality agreement to which it or GBC or any of GBC’s subsidiaries is a party. |
• | the effective time of the merger; and | |
• | the termination of the merger agreement in accordance with its terms. |
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• | 50% of a retention bonus will be paid 120 days after the completion of the merger if the employee remains employed with GBC for the 120 day period; | |
• | the remainder of the retention bonus will be paid 180 days after the completion of the merger if the employee remains employed with GBC for the 180 day period; and | |
• | the entire retention bonus would be paid if a participant is terminated without “cause” (as defined in the retention program documents) by GBC on or before the 180th day after the completion of the merger. |
• | the restricted stock units awarded in 2004 that vest in full upon the consummation of the merger will be treated as described in the merger agreement (See “The Merger Agreement — Treatment of Restricted Stock Units” beginning on page 60); | |
• | restricted stock units awarded in 2004 that do not vest in full upon the consummation of the merger will convert into a restricted stock unit with respect to one share of ACCO Brands common stock, with a vesting date of February 26, 2007, provided that the employee is employed by GBC or an affiliate on that date; |
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• | stock incentive awards issued to officers and employees of GBC and its subsidiaries during 2005 (other than to Mr. Dennis J. Martin, GBC’s Chairman, President, and Chief Executive Officer), will provide that the completion of the merger will not be deemed to be a change in control and the awards for a recipient who is entitled to receive severance benefits at or following the effective time shall continue to vest in any awards during the period over which such severance is paid and/or calculated; and | |
• | the stock incentive award issued to Mr. Martin during 2005 shall be covered by the terms of his employment agreement with GBC dated as of May 8, 2001 (See “Interests of Certain Persons in the Merger — CEO Employment Agreement” beginning on page 55.). |
Fortune Brands/ ACCO World |
• | the failure of the spin-off to constitute a spin-off under section 355 of the Internal Revenue Code, or | |
• | the subsequent disqualification of the distribution of ACCO Brands common stock to Fortune Brands’ stockholders in connection with the spin-off as tax-free to Fortune Brands for United States federal income tax purposes, |
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Lane Industries/ GBC |
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• | senior secured credit facilities, consisting of a Term A Loan Facility in the principal amount of $200.0 million, a Term B Loan Facility in the principal amount of $400.0 million and a $150.0 million aggregate principal amount Revolving Credit Facility, which are collectively referred to herein as the First Priority Facilities; and | |
• | a junior secured Term C Loan Facility in the principal amount of $350.0 million, which will not be drawn to the extent of any net proceeds ACCO Brands receives from the issuance of $350.0 million in aggregate principal amount of senior subordinated notes in a public offering, Rule 144A offering or other private placement. |
($ In millions) | ||||
Sources | ||||
Term A Loan Facility | $ | 200.0 | ||
Term B Loan Facility | $ | 400.0 | ||
Initial Drawing on Revolving Credit Facility | 0 | |||
Excess Cash on Hand | $ | 41.0 | ||
Term C Loan Facility or Notes | $ | 350.0 | ||
TOTAL SOURCES | $ | 991.0 | ||
($ In millions) | ||||
Uses | ||||
Repayment of Dividend Notes | $ | 625.0 | ||
Repayment of Indebtedness | $ | 309.7 | ||
Transaction Fees and Expenses | $ | 46.3 | ||
TOTAL USES | $ | 991.0 | ||
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• | the distribution of the ACCO Brands common stock to Fortune Brands stockholders in connection with the spin-off will qualify as tax-free to Fortune Brands; | |
• | no taxable gain or loss will be recognized by a Fortune Brands stockholder solely as the result of the receipt of ACCO Brands common stock in the spin-off (except with respect to cash received instead of a fractional share interest in ACCO Brands common stock); | |
• | the aggregate tax basis of the Fortune Brands common stock and ACCO Brands common stock in the hands of Fortune Brands stockholders immediately after the distribution of the ACCO Brands common stock to Fortune Brands stockholders in connection with the spin-off (including fractional shares deemed received and redeemed as described below) will be the same as the aggregate tax basis of the Fortune Brands common stock immediately before the distribution, allocated between the common stock of Fortune Brands and ACCO Brands in proportion to their relative fair market values on the date the ACCO Brands common stock is distributed to Fortune Brands stockholders; | |
• | cash received by a Fortune Brands stockholder instead of a fractional share interest in ACCO Brands common stock will be treated as received in redemption of that fractional share interest, and a Fortune Brands stockholder should generally recognize taxable capital gain or loss for United States federal income tax purposes measured by the difference between the amount of cash received and the portion of the tax basis of the shares of Fortune Brands common stock allocable to that fractional share of ACCO Brands common stock. This gain or loss should be long-term capital gain or loss if the holding period for the ACCO Brands common stock (as determined below) is greater than one year at the effective time of the merger; and |
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• | the holding period of the ACCO Brands common stock received by Fortune Brands stockholders will include the holding period of their Fortune Brands common stock, provided that such Fortune Brands common stock is held as a capital asset on the date the ACCO Brands common stock is distributed to Fortune Brands stockholders. |
• | no taxable gain or loss will be recognized by an ACCO World stockholder in the merger because no ACCO World stockholder is exchanging any property in the merger; and | |
• | ACCO World will not recognize any taxable gain or loss in the merger. |
• | no taxable gain or loss will be recognized by a GBC stockholder solely as the result of the receipt of ACCO Brands common stock in exchange for such stockholder’s GBC common stock in the merger (except with respect to cash received instead of a fractional share interest in common stock of ACCO Brands); | |
• | the aggregate tax basis of the ACCO Brands common stock in the hands of former GBC stockholders immediately after the merger (including fractional shares deemed received and |
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redeemed as described below) will be the same as the aggregate tax basis of the shares of GBC common stock surrendered in exchange for the ACCO Brands common stock; | ||
• | the holding period of the ACCO Brands common stock received by a GBC stockholder in the merger will include the holding period of such stockholder’s GBC common stock, provided that such GBC common stock is held as a capital asset on the date of the merger; and | |
• | cash received by a GBC stockholder instead of a fractional share interest in common stock of ACCO Brands will be treated as received in redemption of that fractional share interest, and a GBC stockholder should generally recognize taxable capital gain or loss for United States federal income tax purposes measured by the difference between the amount of cash received and the portion of the tax basis of the shares of ACCO Brands common stock allocable to that fractional share interest. This gain or loss should be long-term capital gain or loss if the holding period for the ACCO Brands common stock (as determined above) is greater than one year at the effective time of the merger; | |
• | GBC will not recognize any taxable gain or loss in the merger. |
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Overview |
ACCO World’s Industry |
Business Segments |
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Products |
• | Kensington computer accessories primarily focused on the mobile computer user including security locks, input devices, power adapters, carry cases and ergonomic and cleaning computer products; | |
• | Swingline stapling and punch products; | |
• | ACCO fastener and clip products; | |
• | Wilson Jones binders, indexes, folders and labels; and | |
• | Apollo and Boone presentation products, including bulletin and dry-erase boards, chalkboards and dry-erase markers, overhead projectors and accessories. |
• | Kensington computer accessories primarily focused on the mobile computer user including security locks, input devices, power adapters, carry cases and ergonomic and cleaning computer products; | |
• | Rexel filing, stapling, shredding, binding and laminating products; | |
• | Nobo presentation products; | |
• | Marbig products (Australia only); | |
• | Twinlock filing products (U.K., Ireland, Australia); | |
• | Eastlight bindery and storage products (U.K., Ireland, New Zealand); | |
• | Hetzel filing, bindery and storage products (Germany, Eastern Europe); |
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• | Dox bindery products (Italy); and | |
• | Val-Rex desk accessory and filing products (France). |
Business Repositioning |
Supply |
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Seasonality |
Customers |
Competition |
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Product Development |
Risks Associated with International Operations |
Risks Associated with Outsourcing |
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Intellectual Property |
Environmental Matters |
Employees |
Location | Functional Use | Owned/Leased | |||||
U.S. Properties: | |||||||
Ontario, California | Distribution/Manufacturing | Leased | |||||
East Texas, Pennsylvania | Distribution/Manufacturing/ Office | Owned | |||||
Ogdensburg, New York | Distribution/Manufacturing | Owned/Leased | |||||
Corona, California | Distribution/Manufacturing | Leased | |||||
Atlanta, Georgia | Distribution/Manufacturing | Leased | |||||
Wheeling, Illinois | Manufacturing | Leased |
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Location | Functional Use | Owned/Leased | |||||
Non-U.S. Properties: | |||||||
Nogales, Mexico | Manufacturing | Owned | |||||
Sydney, Australia | Distribution/Manufacturing/ Office | Owned | |||||
Brampton, Canada | Distribution/Manufacturing/ Office | Leased | |||||
Halesowen, England | Distribution | Owned | |||||
Denton, England | Manufacturing | Owned | |||||
Dijon, France | Distribution | Leased | |||||
Peterborough, England | Manufacturing | Owned | |||||
Turin, Italy | Distribution | Leased | |||||
Dublin, Ireland | Distribution | Owned | |||||
Keswick, England | Manufacturing | Owned | |||||
Lerma, Mexico | Manufacturing/ Office | Owned | |||||
Tabor, Czech Republic | Distribution/Manufacturing | Owned | |||||
Audenshaw, England | Distribution | Leased | |||||
Rudesberg, Germany | Distribution | Leased | |||||
Llantrisant, Wales | Manufacturing | Owned | |||||
Wellington, New Zealand | Distribution/ Office | Owned |
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Quarter Ended | |||||||||||||||||||||||||||||
March 25, | Fiscal Year Ended December 27, | ||||||||||||||||||||||||||||
2005 | 2004 | 2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||||||||||||||
(unaudited) | (unaudited) | ||||||||||||||||||||||||||||
Income Statement Data: | |||||||||||||||||||||||||||||
Net sales(1) | 275.2 | 270.9 | 1,175.7 | 1,101.9 | 1,105.4 | 1,176.3 | 1,354.2 | ||||||||||||||||||||||
Operating income/(loss) | 23.6 | 13.6 | 92.9 | (2) | 46.3 | (3) | 18.6 | (4) | (77.6 | )(5) | (480.7 | ) | |||||||||||||||||
Operating income/(loss) margin(6) | 8.6 | % | 5.0 | % | 7.9 | % | 4.2 | % | 1.7 | % | (6.6 | )% | (35.5 | )% | |||||||||||||||
Net income/(loss) | 10.5 | 8.6 | 68.5 | 26.7 | 4.2 | (83.8 | ) | (508.0 | ) | ||||||||||||||||||||
Cash flow data: | |||||||||||||||||||||||||||||
Cash flow from operating activities, (use)/source | (34.2 | ) | (2.0 | ) | 63.7 | 67.2 | 161.9 | 148.6 | 35.5 | ||||||||||||||||||||
Cash flow from investing activities, (use) | (4.7 | ) | (3.7 | ) | (6.1 | ) | (1.7 | ) | (17.2 | ) | (18.6 | ) | (27.8 | ) | |||||||||||||||
Cash flow from financing activities, (use)/source | 23.9 | 6.0 | (45.3 | ) | (56.8 | ) | (128.7 | ) | (135.4 | ) | (9.8 | ) | |||||||||||||||||
Balance sheet data (at period end): | |||||||||||||||||||||||||||||
Property, plant and equipment, net | 157.2 | 168.6 | 157.7 | 170.0 | 195.3 | 233.8 | 259.4 | ||||||||||||||||||||||
Total assets | 927.5 | 885.5 | 984.5 | 886.7 | 860.5 | 930.8 | 1,171.2 | ||||||||||||||||||||||
External long-term debt(7) | — | — | — | — | — | 0.9 | 2.6 | ||||||||||||||||||||||
Total stockholders’ equity(10) | 656.5 | 560.3 | 616.8 | 533.1 | 528.8 | 672.1 | 890.2 | ||||||||||||||||||||||
Other Data: | |||||||||||||||||||||||||||||
Capital expenditures | 5.1 | 5.0 | 27.6 | 16.3 | 22.0 | 19.7 | 30.4 | ||||||||||||||||||||||
Depreciation expense | 6.2 | 7.9 | 28.2 | 33.3 | 37.0 | 40.8 | 43.3 | ||||||||||||||||||||||
Amortization of intangibles | 0.6 | 0.3 | 1.3 | 1.7 | 2.1 | 6.4 | 22.8 | ||||||||||||||||||||||
Write-down of intangibles(8),(9) | — | — | — | 12.0 | — | 64.4 | 498.0 | ||||||||||||||||||||||
Restructuring charges | — | 2.6 | 19.4 | 17.3 | 34.3 | 28.0 | 10.1 |
(1) | The net sales decline from 2000 to 2001 of $177.9 was due to strategic decisions to minimize reinvestment in declining product categories (including Day-Timers, labels, filing and business essentials), strategic product category exits (including Kensington imaging, joysticks and media), the adverse impact of foreign exchange translation ($27.1), and economic slowdown after the September 11th tragedy in the U.S. | |
(2) | In 2004, business repositioning costs including restructuring charges and restructuring-related expenses, decreased operating income by $19.4 and $22.2, respectively. | |
(3) | In 2003, business repositioning costs including restructuring charges, restructuring-related expenses, and intangible write-down, decreased operating income by $17.3, $20.2 and $12.0, respectively. | |
(4) | In 2002, business repositioning costs including restructuring charges and restructuring-related expenses, decreased operating income by $34.3 and $13.9, respectively. | |
(5) | In 2001, business repositioning costs including restructuring charges, restructuring-related expenses and intangible write-downs, decreased operating income by $28.0, $29.8 and $64.4, respectively. | |
(6) | Operating income margin as presented has been depressed by business repositioning costs, as discussed in notes 2, 3, 4 & 5 above. | |
(7) | External long-term debt refers only to the portion financed by third parties, and does not include any portion financed through banking relationships or lines of credit secured by ACCO World’s parent company, Fortune Brands. Interest expenses associated with Fortune Brands’ debt have been allocated to ACCO World for the periods presented. The annual change in the total financing |
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requirements for ACCO for each of the last 5 years can be referenced in the “Cash Flow from Financing Activities” line item of the cash flow data presented in the table above. | ||
(8) | In 2001, operating income was depressed by the write-off of certain identifiable intangible assets of $64.4 due to diminished fair values resulting from business repositioning and restructuring activities. | |
(9) | In 2000, operating income was depressed by the write-down of goodwill of $498 due to a significant shortfall in earnings compared to plans and to prior year, as well as softening conditions in the industry and strategic reviews concerning the direction of the business. |
(10) | If the stockholders’ equity at March 25, 2005 included the declaration of the $625.0 dividend payable to ACCO World stockholders prior to the spin-off, total stockholders’ equity would be reduced to $31.5 on a pro forma basis |
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Selected Currency Trends | |
YTD Averages | |
U.S. Dollars/ Local Currency Unit | |
(2002 = 100) |
Currency | 2002 | 2003 | 2004 | |||||||||
Pound Sterling | 100 | 109 | 122 | |||||||||
Euro | 100 | 119 | 132 | |||||||||
Australian Dollar | 100 | 118 | 136 | |||||||||
Canadian Dollar | 100 | 112 | 121 | |||||||||
Mexican Peso | 100 | 90 | 86 |
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Revenue Recognition |
Allowances for Doubtful Accounts and Sales Returns |
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Inventories |
Property, Plant and Equipment |
Buildings | 40 to 50 years | |||
Leasehold improvements | 1 to 10 years | |||
Machinery, equipment and furniture | 3 to 10 years | |||
Computer hardware and software | 3 to 7 years | |||
Automobiles | 2 to 4 years |
Long-lived Assets |
Intangibles |
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Employee Benefit Plans |
Customer Program Costs |
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Restructuring |
Fiscal Year 2004 | |||||||||||||||||
Net | Gross | Operating | |||||||||||||||
Sales | Profit | SG&A | Income | ||||||||||||||
(In millions of dollars) | |||||||||||||||||
Reported Results | $ | 1,175.7 | $ | 461.4 | $ | 347.8 | $ | 92.9 | |||||||||
Restructuring and restructuring-related charges included in the above numbers | |||||||||||||||||
Restructuring costs | — | — | — | 19.4 | |||||||||||||
Restructuring-related costs | — | 8.9 | 13.3 | 22.2 |
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Fiscal Year 2003 | |||||||||||||||||
Net | Gross | Operating | |||||||||||||||
Sales | Profit | SG&A | Income | ||||||||||||||
(In millions of dollars) | |||||||||||||||||
Reported Results | $ | 1,101.9 | $ | 415.1 | $ | 337.8 | $ | 46.3 | |||||||||
Restructuring and restructuring-related charges included in the above numbers | |||||||||||||||||
Restructuring costs | — | — | — | 17.3 | |||||||||||||
Restructuring-related costs | — | 10.9 | 9.3 | 20.2 |
Gross Profit |
SG&A |
Operating Income |
Interest, Other Expense/(Income) and Income Taxes |
Net Income |
ACCO U.S. |
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ACCO Europe |
Trading Companies |
Day-Timers |
Net Sales |
Restructuring |
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Fiscal Year 2003 | |||||||||||||||||
Net | Gross | Operating | |||||||||||||||
Sales | Profit | SG&A | Income | ||||||||||||||
(In millions of dollars) | |||||||||||||||||
Reported Results | $ | 1,101.9 | $ | 415.1 | $ | 337.8 | $ | 46.3 | |||||||||
Restructuring and restructuring-related charges included in the above numbers | |||||||||||||||||
Restructuring costs | — | — | — | 17.3 | |||||||||||||
Restructuring-related costs | — | 10.9 | 9.3 | 20.2 |
Fiscal Year 2002 | |||||||||||||||||
Net | Gross | Operating | |||||||||||||||
Sales | Profit | SG&A | Income | ||||||||||||||
(In millions of dollars) | |||||||||||||||||
Reported Results | $ | 1,105.4 | $ | 406.5 | $ | 351.5 | $ | 18.6 | |||||||||
Restructuring and restructuring-related charges included in the above numbers | |||||||||||||||||
Restructuring costs | — | — | — | 34.3 | |||||||||||||
Restructuring-related costs | — | 5.3 | 8.6 | 13.9 |
Gross Profit |
SG&A |
Operating Income |
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Interest, Other Expense/(Income) and Income Taxes |
Net Income |
ACCO U.S. |
ACCO Europe |
Trading Companies |
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Day-Timers |
Three Months Ended | ||||||||||
March 25 | ||||||||||
2005 | 2004 | |||||||||
(Unaudited; | ||||||||||
in millions of | ||||||||||
dollars) | ||||||||||
Sales: | ||||||||||
ACCO U.S. | $ | 123.5 | $ | 120.0 | ||||||
ACCO Europe | 92.8 | 92.9 | ||||||||
Trading Companies | 44.7 | 43.9 | ||||||||
Day-Timers | 14.2 | 14.1 | ||||||||
Total | $ | 275.2 | $ | 270.9 | ||||||
Three Months Ended | ||||||||||
March 25 | ||||||||||
2005 | 2004 | |||||||||
(Unaudited) | ||||||||||
Operating Income: | ||||||||||
ACCO U.S. | $ | 8.8 | $ | 1.4 | ||||||
ACCO Europe | 10.5 | 9.2 | ||||||||
Trading Companies | 6.6 | 6.5 | ||||||||
Day-Timers | 0.3 | (0.1 | ) | |||||||
Other/ Corporate* | (2.6 | ) | (3.4 | ) | ||||||
Total | $ | 23.6 | $ | 13.6 | ||||||
* | “Corporate” represents general and administrative expenses not directly attributable to operating segments. |
Sales |
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Restructuring |
Three Months Ended March 25, 2004 | |||||||||||||||||
Net | Gross | Operating | |||||||||||||||
Sales | Profit | SG&A | Income | ||||||||||||||
(in millions of dollars) | |||||||||||||||||
Reported Results | $ | 270.9 | $ | 101.1 | $ | 84.6 | $ | 13.6 | |||||||||
Restructuring and restructuring-related charges included in the above numbers | �� | ||||||||||||||||
Restructuring costs | — | — | — | 2.6 | |||||||||||||
Restructuring-related costs | — | 1.8 | 2.8 | 4.6 |
Gross Profit |
SG&A |
Operating Income |
Interest, Other Expense/(Income) and Income Taxes |
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Net Income |
ACCO U.S. |
ACCO Europe |
Trading Companies |
Day-Timers |
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Cash Flow from Operating Activities |
Cash Flow from Investing Activities |
Cash Flow from Financing Activities |
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Cash Requirements of Restructuring and Restructuring-Related Activities |
ACCO World Restructuring Program | 2004 | 2003 | 2002 | |||||||||
Cash Requirements by Year of Expenditure | Year | Year | Year | |||||||||
(In millions) | ||||||||||||
Severance related | $ | 15.0 | $ | 13.7 | $ | 18.1 | ||||||
Lease abandonment | 1.1 | 1.5 | 2.5 | |||||||||
Other restructuring | 1.2 | 0.6 | 0.4 | |||||||||
Capital expenditures | 2.0 | 2.0 | 4.9 | |||||||||
Restructuring-related costs | 11.2 | 8.0 | 6.7 | |||||||||
Total Restructuring & Related Cash Expenditures | 30.5 | 25.8 | 32.6 | |||||||||
Proceeds from asset sales(a) | (19.7 | ) | (13.7 | ) | (2.9 | ) | ||||||
Expenditures net of proceeds | 10.8 | 12.1 | 29.7 | |||||||||
(a) | Net of disposition costs |
Cash Flow from Operating Activities |
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Cash Flow from Investing Activities |
Cash Flow from Financing Activities |
Payments due by Period as of Dec. 27, 2004 | ||||||||||||||||||||
Less than | 1-3 | 4-5 | After 5 | |||||||||||||||||
Contractual Obligations | Total | 1 Year | Years | Years | Years | |||||||||||||||
(In millions of dollars) | ||||||||||||||||||||
Operating lease obligations | $ | 120.2 | $ | 16.2 | $ | 27.6 | $ | 23.1 | $ | 53.3 | ||||||||||
Purchase obligations(1) | 89.8 | 86.4 | 2.8 | 0.6 | 0.0 | |||||||||||||||
Other long-term liabilities(2) | 9.6 | 4.8 | 4.8 | 0.0 | 0.0 | |||||||||||||||
Total | $ | 219.6 | $ | 107.4 | $ | 35.2 | $ | 23.7 | $ | 53.3 | ||||||||||
(1) | The company’s purchase obligations primarily consist of contracts and noncancellable purchase orders for raw materials and finished goods. |
(2) | The company’s obligations related to the other long-term liabilities consist of payments for certain non-U.S. pension plans. |
Less than | 1-3 | 4-5 | After 5 | |||||||||||||||||
Pro Forma Contractual Obligations | Total | 1 Year | Years | Years | Years | |||||||||||||||
(In millions of dollars) | ||||||||||||||||||||
Notes payable to banks(1) | $ | 6.7 | $ | 5.8 | $ | 0.9 | $ | — | $ | — | ||||||||||
Long-term debt(2) | 957.5 | 18.0 | 74.0 | 128.0 | 737.5 | |||||||||||||||
Interest payable on long-term debt(3) | 437.2 | 46.2 | 132.8 | 105.1 | 153.1 | |||||||||||||||
$ | 1,401.4 | $ | 70.0 | $ | 207.7 | $ | 233.1 | $ | 890.6 | |||||||||||
(1) | Represents lines of credit which will not be repaid upon completion of the merger. |
(2) | ACCO World would be required to fund payment of the $625.0 million dividend by securing a credit facility of similar proportion. In addition, following ACCO World’s anticipated merger with GBC, it |
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expects to pay-off substantially all of the existing GBC debt and utilize new credit facilities which it expects to secure as a combined company. ACCO World further expects to fund the costs of the spin-off and merger transactions from these facilities. Therefore, ACCO World has estimated the pro forma amount of outstanding debt as of the future date of close to be $957.5 million. Payment obligations related to this debt are expected to amortize in quarterly installments with minimum payment obligations as described in “Financing of ACCO Brands Corporation” beginning on page 81. | |
(3) | The facilities included above are expected to carry an average interest rate of 6.53% amounting to $62.5 million of annual interest on the initial obligation, which would be reduced in proportion to the minimum principal repayment each quarter (which for purposes of this presentation we have assumed will occur at the end of each quarter). |
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Foreign Exchange Risk Management |
Average | Fair | |||||||||||||||
Exchange | Notional | Market | Gain/ | |||||||||||||
Forward contracts as of December 27, 2004 | Rate | Amount | Value | (Loss) | ||||||||||||
(In millions of dollars) | ||||||||||||||||
Currency Sold | ||||||||||||||||
Sell Euro/ Buy USD | 1.24 | 7.1 | 6.6 | (0.5 | ) | |||||||||||
Sell GBP/ Buy USD | 1.79 | 26.0 | 24.5 | (1.5 | ) | |||||||||||
Sell Euro/ Buy GBP | 0.69 | 6.5 | 6.4 | (0.1 | ) | |||||||||||
Other | 1.7 | 1.6 | (0.1 | ) | ||||||||||||
Total | 41.3 | 39.1 | (2.2 | ) | ||||||||||||
Interest Rate Risk Management |
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ACCO | |||||||||||||||||||||||||
Effect of | World | ||||||||||||||||||||||||
Dividend to | Adjusted | Pro Forma | Pro Forma | ||||||||||||||||||||||
ACCO World | Shareholders(1) | for Dividend | GBC | Adjmts | Combined | ||||||||||||||||||||
Cash and cash equivalents | $ | 65.8 | $ | 65.8 | $ | 7.7 | $ | (21.8 | )(d) | $ | 31.4 | ||||||||||||||
(297.0 | )(c) | ||||||||||||||||||||||||
(625.0 | )(a) | ||||||||||||||||||||||||
(55.8 | )(b) | ||||||||||||||||||||||||
957.5 | (o) | ||||||||||||||||||||||||
Accounts Receivable, net of allowances | 266.0 | 266.0 | 147.0 | 413.0 | |||||||||||||||||||||
Inventories, net | 182.1 | 182.1 | 100.4 | 11.4 | (g) | 293.9 | |||||||||||||||||||
Prepaid expenses & other current assets | 34.4 | 34.4 | 25.9 | 2.8 | (d) | 64.6 | |||||||||||||||||||
(1.9 | )(d) | ||||||||||||||||||||||||
2.2 | (f) | ||||||||||||||||||||||||
1.2 | (f) | ||||||||||||||||||||||||
Total Current Assets | 548.3 | — | 548.3 | 281.0 | (26.4 | ) | 802.9 | ||||||||||||||||||
Net property, plant and equipment | 157.2 | 157.2 | 78.0 | 14.5 | (h) | 249.7 | |||||||||||||||||||
Goodwill | — | 148.8 | 571.5 | (q) | 571.5 | ||||||||||||||||||||
(148.8 | )(i) | ||||||||||||||||||||||||
Identifiable Intangibles, net of amortization | 117.1 | 117.1 | 1.4 | 137.5 | (j) | 254.6 | |||||||||||||||||||
(1.4 | )(i) | ||||||||||||||||||||||||
Prepaid pension expense | 86.8 | 86.8 | 3.5 | 90.3 | |||||||||||||||||||||
Other non-current assets | 18.1 | 18.1 | 32.5 | 19.0 | (d) | 66.3 | |||||||||||||||||||
(3.5 | )(d) | ||||||||||||||||||||||||
6.1 | (f) | ||||||||||||||||||||||||
(5.9 | )(f) | ||||||||||||||||||||||||
Total Assets | 927.5 | — | 927.5 | 545.2 | 562.6 | 2,035.3 | |||||||||||||||||||
Accounts Payable | 100.3 | 100.3 | 50.7 | 151.0 | |||||||||||||||||||||
Customer program liabilities | 71.3 | 71.3 | 29.4 | 100.7 | |||||||||||||||||||||
Salaries, wages & other compensation | 15.0 | 15.0 | 14.4 | 29.4 | |||||||||||||||||||||
Deferred Revenue | 12.5 | 12.5 | |||||||||||||||||||||||
Other current liabilities | 47.5 | 47.5 | 37.3 | 4.2 | (k) | 100.0 | |||||||||||||||||||
(6.0 | )(c) | ||||||||||||||||||||||||
17.0 | (m) | ||||||||||||||||||||||||
Notes Payable to Banks | 0.3 | 0.3 | 6.4 | 6.7 | |||||||||||||||||||||
Current Maturities of Long-Term Debt | — | 25.1 | (30.2 | )(c) | 18.0 | ||||||||||||||||||||
5.1 | (c) | ||||||||||||||||||||||||
18.0 | (o) | ||||||||||||||||||||||||
Dividend Payable to Shareholders | $ | 625.0 | 625.0 | (625.0 | )(a) | ||||||||||||||||||||
Total Current Liabilities | 234.4 | 625.0 | 859.4 | 175.8 | (616.9 | ) | 418.3 | ||||||||||||||||||
Long-term Debt | — | 260.8 | (260.8 | )(c) | 939.5 | ||||||||||||||||||||
939.5 | (o) | ||||||||||||||||||||||||
Accrued pension and post-retirement benefits | 26.4 | 26.4 | 18.2 | 8.5 | (n) | 56.5 | |||||||||||||||||||
3.4 | (n) | ||||||||||||||||||||||||
Other non-current liabilities | 10.2 | 10.2 | 15.4 | 63.1 | (l) | 88.7 | |||||||||||||||||||
Stockholder’s Equity: | |||||||||||||||||||||||||
Common Stock | 0.1 | 0.1 | 2.3 | 2.4 | |||||||||||||||||||||
Additional Paid-in-Capital | 1,589.6 | (625.0 | ) | 964.6 | 7.5 | 496.6 | (p) | 1,472.2 | |||||||||||||||||
65.2 | (e) | ||||||||||||||||||||||||
(55.8 | )(b) | ||||||||||||||||||||||||
(5.9 | )(f) | ||||||||||||||||||||||||
Retained Earnings (Deficit) | (951.4 | ) | (951.4 | ) | 74.7 | (74.7 | )(e) | (951.4 | ) | ||||||||||||||||
Unearned Compensation | — | (9.1 | )(r) | (9.1 | ) | ||||||||||||||||||||
Accumulated other comprehensive income | 18.2 | 18.2 | (9.5 | ) | 9.5 | (e) | 18.2 | ||||||||||||||||||
Total Liabilities & Stockholder’s Equity | 927.5 | — | 927.5 | 545.2 | 562.6 | 2,035.3 |
(1) | Gives effect to the dividend payable to ACCO’s parent and minority interest investor of $613.3 and $11.7, respectively, which will be declared and paid immediately prior to the spin-off of ACCO World. |
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(a) | Reflects payment following the merger of ACCO World and GBC, of the aggregate $625.0 loan notes with respect to the dividend to ACCO World’s stockholders, the funds for which are expected to be obtained from the issuance of notes and borrowings under ACCO Brands new credit facilities. | |
(b) | Represents the return of cash owned by Fortune Brands of $55.8 in order to leave ACCO World with $10.0 of net cash prior to financing arrangements pursuant to the distribution agreement. | |
(c) | Represents payoff of GBC debt of: $260.8 long-term portion, $25.1 current portion, $6.0 of accrued interest and recognition of $5.1 adjustment to fair value of the debt which equates to the pre-payment penalty for early extinguishment of the debt. | |
(d) | Reflects an adjustment to capitalize estimated debt issuance costs of $21.8 associated with the issuance of notes and borrowings under ACCO Brands new credit facilities, and the elimination of GBC’s existing capitalized debt issuance costs of $5.4 as a result of management’s plan to repay the related debt in connection with the completion of the merger. | |
(e) | Reflects elimination and reclassification of GBC’s historical retained earnings and other comprehensive income to additional paid in capital. | |
(f) | Represents the following adjustments to deferred tax assets: recognition of a $2.2 current deferred tax asset related to the elimination of existing GBC prepaid debt issuance costs, recognition of a $1.2 deferred tax asset related to severance payable to the GBC CEO, and elimination of the existing GBC non-current deferred tax liability (netted in assets) of $6.1 related to intangible asset amortization. These were partly offset by a $5.9 elimination of GBC deferred tax assets which will no longer be realized due to GBC’s deconsolidation from their majority shareholder, Lane Industries (the offset will be a reduction of paid in capital). | |
(g) | Reflects an adjustment to record the estimated fair market value of work-in-process and finished goods inventory, less the estimated additional costs required to complete work-in-process inventory and to sell or dispose of all inventories acquired at the date of merger. The asset is expected to be amortized over one average inventory turn (approximately three months). | |
(h) | Reflects an adjustment to record property, plant and equipment at their estimated fair values. This asset is expected to be amortized over a 10-year weighted average useful life. | |
(i) | Represents the elimination of GBC’s existing goodwill and purchased identifiable intangibles (already incorporated into the fair value assigned in note “j” below). | |
(j) | Reflects an adjustment to record purchased identifiable intangibles at their estimated fair values (e.g. trademarks, developed technology and customer relationships). The developed technology and customer relationship assets are expected to be amortized over a 15 year average useful life. | |
(k) | Represents the liability to be recognized at date of merger for severance to be paid to the GBC CEO shortly after the merger/close date. | |
(l) | Reflects the deferred tax liability adjustment of $63.1 resulting from the recognition of asset revaluations (inventory and property, plant & equipment) and purchased identifiable intangibles. | |
(m) | Represents estimated accrued transaction costs of $17.0 (including legal, audit, consulting and other service costs) expected to be incurred and capitalized as a result of the merger. | |
(n) | Represents the $8.5 elimination of unrecognized actuarial losses and prior service costs in order to recognize the pension and post-retirement liabilities at fair value (as of December 31, 2004 valuation), and a $3.4 liability related to pension benefits which will vest upon the termination of the GBC CEO. |
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(o) | Represents the issuance of notes and estimated borrowing under ACCO Brands’ new credit facilities totaling $957.5, of which $18.0 of credit facility borrowings is scheduled to be repaid within the first 12 months after the completion of the merger and is reflected as the current portion of long term debt in the pro forma balance sheet. The following table describes the estimated notes outstanding and borrowings under new credit facilities of the combined company immediately following the merger on a pro forma basis as of March 2005. |
Pro forma | ||||||||||
amount | ||||||||||
outstanding as | ||||||||||
of March 2005 | ||||||||||
(In millions) | ||||||||||
Bank debt: | ||||||||||
Revolving Credit Facility up to | $ | 150.0 | $ | 7.5 | ||||||
Term Loan A — 5 Years | 200.0 | 200.0 | ||||||||
Term Loan B — 7 Years | 400.0 | 400.0 | ||||||||
Total bank debt | 750.0 | 607.5 | ||||||||
Notes: | ||||||||||
Dollars Notes — 10 yr fixed | 200.0 | 200.0 | ||||||||
Euro Notes — 10 yr fixed | 150.0 | 150.0 | ||||||||
Total Notes | 350.0 | 350.0 | ||||||||
Total | $ | 1,100.0 | $ | 957.5 | ||||||
(p) | The calculation of consideration given for the GBC business is described in the following table. |
Because there is no readily available market value for the ACCO World business due to its status as a subsidiary of Fortune Brands, the value of ACCO World has been derived from detailed reviews and appraisals performed by third parties. |
(dollars in | |||||
millions) | |||||
Calculated consideration for the GBC business: | |||||
ACCO World valuation(1) | $ | 1,000.0 | |||
Less: ACCO World dividend to stockholders | 625.0 | ||||
ACCO World value adjusted for dividend | 375.0 | ||||
Divided by: ownership % of the combined company(2) | 66.0% | ||||
Estimated Market value of the combined company | 568.2 | ||||
Less: ACCO World value adjusted for dividend | 375.0 | ||||
Implied debt-free GBC value | 193.2 | ||||
GBC assumed debt (per March 31, 2005 balance sheet): | |||||
Short-term debt and accrued interest and notes payable | 37.5 | ||||
Long-term debt | 260.8 | ||||
Adjustment to fair value(3) | 5.1 | ||||
Consideration for the GBC business, before costs to acquire | $ | 496.6 | |||
Estimated transaction costs(4) | 17.0 | ||||
Total Consideration for the GBC business | $ | 513.6 | |||
(1) | Derived from independent appraisals and recent market value assessments. | |
(2) | Represents Fortune Brands stockholders’ and ACCO World’s minority stockholder’s negotiated ownership percentage in ACCO Brands. | |
(3) | Equates to penalty related to early extinguishment of the GBC debt. | |
(4) | Represents legal, M&A advisory and other capitalizable transaction service fees. |
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(q) | The calculation of estimated goodwill is equal to the consideration given in determining the purchase price, offset by the estimated fair value of net assets acquired, net of related taxes, as described in the following table. |
(In millions) | |||||
Calculation of Goodwill: | |||||
Consideration given for the GBC business (see note “p”) | $ | 513.6 | |||
Plus fair value of liabilities assumed: | |||||
Accounts payable and accrued liabilities | 107.0 | ||||
Debt | 303.4 | ||||
Other liabilities | 159.1 | ||||
Fair value of stock options outstanding | 60.0 | (1) | |||
Total Consideration, plus liabilities and stock options | 1,143.1 | ||||
Less allocation to assets acquired: | |||||
Accounts receivable | 147.0 | ||||
Inventory | 111.8 | ||||
Fixed assets | 92.5 | ||||
Identifiable intangible assets | 137.5 | ||||
Other assets | 73.7 | ||||
Unearned compensation | 9.1 | ||||
571.6 | |||||
Calculated Goodwill | $ | 571.5 | |||
(1) | The calculation of consideration given for the GBC business includes an assignment of estimated fair value of GBC stock options outstanding of $60.0, which is required as a result of the excess of fair value price per share over average exercisable price per share. |
(r) | Included in the recognition of fair value for GBC stock options outstanding, is $9.1 which represents the fair value of unearned compensation for stock options which will not vest immediately upon change of control (at the merger date), and which will be amortized based on the remaining vesting period. |
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Pro Forma | Pro Forma | |||||||||||||||||
GBC | Adjmts | Combined | ||||||||||||||||
ACCO World | Fiscal | Fiscal | Fiscal | |||||||||||||||
Fiscal Year | Year | Year | Year | |||||||||||||||
Net Sales | $ | 1,175.7 | $ | 712.3 | $ | 1,888.0 | ||||||||||||
Costs and Expenses: | ||||||||||||||||||
Cost of products sold | 714.3 | 434.9 | $ | 0.7 | (s) | 1,149.9 | ||||||||||||
Selling, general and administrative | 347.8 | 225.9 | 2.8 | (t) | 577.0 | |||||||||||||
0.5 | (s) | |||||||||||||||||
Amortization of Identifiable Intangibles | 1.3 | 0.8 | 3.2 | (u) | 5.3 | |||||||||||||
Restructuring Charges | 19.4 | 0.9 | 20.3 | |||||||||||||||
Interest Expense, net | 8.5 | 25.9 | (34.4 | )(v) | 65.5 | |||||||||||||
3.0 | (w) | |||||||||||||||||
62.5 | (x) | |||||||||||||||||
Earnings from joint ventures | (0.6 | ) | (0.4 | ) | (1.0 | ) | ||||||||||||
Other (income)/expense, net | (4.6 | ) | 0.4 | (4.2 | ) | |||||||||||||
Income/(Loss) before income tax expense | 89.6 | 23.9 | (38.3 | ) | 75.2 | |||||||||||||
Income Tax expense/(benefit) | 21.1 | 9.1 | (14.2 | )(y) | 16.0 | |||||||||||||
Net Income/(Loss) | $ | 68.5 | $ | 14.8 | $ | (24.1 | ) | $ | 59.2 | |||||||||
Pro Forma Net Income/(Loss) per share from continuing operations: | ||||||||||||||||||
Basic Shares Outstanding | 31.5 | 16.2 | 47.7 | |||||||||||||||
Diluted Shares Outstanding | 31.9 | 16.8 | 0.5 | (z) | 49.2 | |||||||||||||
Basic Net Income per share from continuing operations | $ | 1.24 | ||||||||||||||||
Diluted Net Income per share from continuing operations | $ | 1.20 | ||||||||||||||||
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Pro Forma | Pro Forma | ||||||||||||||||
ACCO World | GBC | Adjmts | Combined | ||||||||||||||
Three Month | Three Month | Three Month | Three Month | ||||||||||||||
Interim | Interim | Interim | Interim | ||||||||||||||
Net Sales | $ | 275.2 | $ | 180.2 | $ | 455.4 | |||||||||||
Costs and Expenses: | |||||||||||||||||
Cost of products sold | 168.5 | 112.1 | $ | 0.2 | (s) | 280.8 | |||||||||||
Selling, general and administrative | 82.5 | 63.0 | 0.7 | (t) | 146.3 | ||||||||||||
0.1 | (s) | ||||||||||||||||
Amortization of Identifiable Intangibles | 0.6 | 0.1 | 0.8 | (u) | 1.5 | ||||||||||||
Restructuring Charges | 1.1 | 1.1 | |||||||||||||||
Interest Expense, net | 2.1 | 6.7 | (8.8 | )(v) | 16.4 | ||||||||||||
0.8 | (w) | ||||||||||||||||
15.6 | (x) | ||||||||||||||||
Earnings from joint ventures | (0.6 | ) | (0.6 | ) | |||||||||||||
Other (income)/expense, net | 1.2 | 1.0 | 2.2 | ||||||||||||||
Income/(Loss) before income tax expense | 20.3 | (3.2 | ) | (9.4 | ) | 7.7 | |||||||||||
Income Tax expense/(benefit) | 9.8 | 0.2 | (3.5 | )(y) | 6.5 | ||||||||||||
Net Income/(Loss) | $ | 10.5 | $ | (3.4 | ) | $ | (5.9 | ) | $ | 1.2 | |||||||
Pro Forma Net Income/(Loss) per common share: | |||||||||||||||||
Basic Shares Outstanding | 31.5 | 16.3 | 47.8 | ||||||||||||||
Diluted Shares Outstanding | 32.0 | 16.3 | 1.3 | (z) | 49.5 | ||||||||||||
Basic Net Income per share from continuing operations | $ | 0.03 | |||||||||||||||
Diluted Net Income per share from continuing operations | $ | 0.02 | |||||||||||||||
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(s) | Represents the incremental depreciation expense recorded to reflect the fixed asset step-up to fair value (ten-year weighted average useful life). Assumes a depreciation allocation of 58% to cost of goods sold and 42% to selling, general and administrative expense based on the plans of GBC. | |
(t) | Represents amortization of unearned compensation related to stock options and restricted stock units (RSU’s) which will not vest upon change of control (at the merger close date). The portion related to stock options of $6.8 is expected to be amortized over the remaining vesting period of four years. The portion related to RSU’s of $2.3 is expected to be amortized over the remaining vesting period of two years. | |
(u) | Represents the amortization of fair value assigned to developed technology and customer relationships. Assumes a 15-year useful life based on the estimated period of asset retention and related cash flows. | |
(v) | Reflects reversal of interest expense and debt issuance amortization related to pre-existing debt for each of ACCO World and GBC. | |
(w) | Reflects annual amortization of capitalizable debt issuance costs of $3.0 related to the new debt of the combined company, as described in the following table. | |
Estimated debt issuance costs are amortized over the life of the related debt. Estimated debt issuance costs, amortization period and cost per year are as follows: |
Amortization | |||||||||||||
Issuance | |||||||||||||
Fee | # Years | Per Year | |||||||||||
Revolving Credit Facility | — | — | — | ||||||||||
Term Loan A Facility — 5 Years | — | — | — | ||||||||||
Term Loan B Facility — 7 Years | — | — | — | ||||||||||
Combined Fees(1) | $ | 11.4 | 5.6 | (2) | $ | 2.0 | |||||||
Dollar Notes — 10 yr fixed | 5.9 | 10.00 | 0.5 | ||||||||||
Euro Notes — 10 yr fixed | 4.5 | 10.00 | 0.5 | ||||||||||
Total | $ | 21.8 | $ | 3.0 | |||||||||
(1) | Fees related to the above facilities are not currently separable. | |
(2) | Weighted average number of years based on the weighted average life of the Term Loan A Facility, the Term Loan B Facility and the Revolving Credit Facility. |
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(x) | Represents estimated annual interest expense recognized on the initial debt structure of the combined company, as calculated in the following table. | |
Interest expense is based on the following estimated debt financing arrangements contemplated in connection with the spin-off of ACCO World and merger of ACCO World and GBC. |
Interest | ||||||||||||||
Debt Facility | Expense | |||||||||||||
Bank Debt: | ||||||||||||||
Revolving Credit Facility — used(1) | $ | 7.5 | ||||||||||||
Revolving Credit Facility — unused(1) | 142.5 | |||||||||||||
Term Loan A — 5 Years(2) | 200.0 | |||||||||||||
Term Loan B — 7 Years(2) | 400.0 | |||||||||||||
Total bank debt (used) | 607.5 | |||||||||||||
Notes: | ||||||||||||||
Dollar Notes — 10 yr fixed | 200.0 | |||||||||||||
Euro Notes — 10 yr fixed | 150.0 | |||||||||||||
Total Notes | 350.0 | |||||||||||||
Total | $ | 957.5 | 6.53%(3) | $ | 62.5 | |||||||||
Estimated LIBOR = 3.27% |
(1) | Floating interest rate based on LIBOR plus applicable margin; a 0.5% interest rate is applied to any unused facility. | |
(2) | Floating interest rate based on LIBOR plus applicable margin. | |
(3) | Estimated weighted average interest rate on use of the facilities as described above. |
A change in interest rate of one-eighth of one percent would change interest expense as follows: |
Revolving Credit Facility — used | $ | 0.0 | |||
Revolving Credit Facility — unused | 0.0 | ||||
Term Loan A — 5 Years | 0.3 | ||||
Term Loan B — 7 Years | 0.5 | ||||
Dollar Notes — 10 yr fixed | 0.3 | ||||
Euro Notes — 10 yr fixed | 0.1 | ||||
Total | $ | 1.2 | |||
(y) | Assumes estimated average effective income tax rate of 37% on the sum of pre-tax adjustments of the combined company. | |
(z) | Incremental dilution resulting from GBC stock options. Because the purchase price at fair value exceeds the average GBC exercisable stock price at the end of the period, additional GBC options are considered dilutive (also, for the three months ended March 31, 2005, GBC recorded a net loss and as a result options are excluded from the calculation of diluted shares outstanding for the GBC business only). |
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Fortune Brands Designees to the Board of Directors |
GBC Designees to the Board of Directors |
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Classified Board |
Committees of the Board of Directors |
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ACCO World |
Annual Compensation | Long-Term Compensation | ||||||||||||||||||||||||||||
Awards | Payouts | ||||||||||||||||||||||||||||
Other | Securities | ||||||||||||||||||||||||||||
Annual | Underlying | LTIP | All Other | ||||||||||||||||||||||||||
Name and | Compensa- | Options/ | Payout | Compensa- | |||||||||||||||||||||||||
Principal Position(1) | Year | Salary($) | Bonus($)(2) | tion ($)(3) | SARs(#)(4) | ($)(5) | tion ($)(6) | ||||||||||||||||||||||
David Campbell | 2004 | 525,000 | 1,273,116 | 30,780 | 75,000 | 3,885,480 | 103,854 | ||||||||||||||||||||||
Chairman of the Board, | 2003 | 500,000 | 1,183,100 | 25,841 | 75,000 | 581,429 | 92,473 | ||||||||||||||||||||||
President and Chief Executive | 2002 | 475,000 | 1,369,640 | 15,952 | 66,700 | 241,656 | 87,546 | ||||||||||||||||||||||
Officer | |||||||||||||||||||||||||||||
Neal V. Fenwick | 2004 | 286,886 | 434,568 | — | 18,000 | 1,500,000 | 3,446 | ||||||||||||||||||||||
Executive Vice President | 2003 | 261,417 | 406,411 | — | 15,000 | — | 3,416 | ||||||||||||||||||||||
and Chief Financial | 2002 | 248,509 | 507,916 | — | 15,350 | — | 3,128 | ||||||||||||||||||||||
Officer | |||||||||||||||||||||||||||||
Dennis Chandler | 2004 | 293,700 | 437,586 | — | 18,000 | 1,500,000 | 14,334 | ||||||||||||||||||||||
Chief Operating Officer, Office Products Division | 2003 | 260,550 | 348,239 | — | 15,000 | — | 13,580 | ||||||||||||||||||||||
2002 | 236,736 | 380,243 | — | 12,700 | — | 12,456 |
(1) | The listed principal position of each named executive officer is the principal position each named executive officer is expected to hold with ACCO Brands. Mr. Campbell is currently the Chairman, President and Chief Executive Officer of ACCO World. Mr. Fenwick is currently Executive Vice President of Finance and Administration and chief financial officer of ACCO World. Mr. Chandler is currently Chief Operating Officer of ACCO World. During 2004, 2003 and 2002 Mr. Campbell was employed by and received his compensation from Fortune Brands. |
(2) | The annual bonus amounts are earned and accrued during the fiscal year indicated, and paid subsequent to the end of such year. |
Messrs. Campbell, Fenwick and Chandler received payments under two incentive plans, a traditional annual incentive plan and three one-year transitional incentive plans. Payments under the traditional annual incentive plan for 2004, 2003 and 2002 were: $558,400, $475,750 and $331,265 for Mr. Campbell; $228,018, $194,236 and $196,404 for Mr. Fenwick; and $208,086, $136,064 and $137,956 for Mr. Chandler. Payments under the one-year transitional incentive plans for 2004, 2003 and 2002 were: $688,875, $707,250 and $1,038,375 for Mr. Campbell; $206,550, $212,175 and $311,512 for Mr. Fenwick; and $229,500, $212,175 and $242,288 for Mr. Chandler. |
(3) | “Other Annual Compensation” for Mr. Campbell represents dividends paid on performance awards under Fortune Brands’ Long-Term Incentive Plans. |
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(4) | Stock options granted to Messrs. Campbell, Fenwick and Chandler are for the purchase of Fortune Brands common stock. All unvested options will convert from options to purchase Fortune Brands common stock to options to purchase ACCO Brands common stock based on a conversion factor determined by the price of Fortune Brands common stock before the spin-off and the price of ACCO Brands common stock after the merger. |
(5) | The amounts listed in the “LTIP Payout” column for Messrs. Campbell, Fenwick and Chandler are the value of performance awards for the performance period that ended in the year reported and paid subsequent to the end of such year. Amounts listed represent a one-time, non-recurring incentive payment of $3,150,000 for Mr. Campbell, and $1,500,000 for each of Messrs. Fenwick and Chandler related to a three-year incentive plan aligned to certain business repositioning and restructuring goals established by Fortune Brands. |
Additionally, Mr. Campbell received performance shares under the Fortune Brands Performance Share Plan with a value of $735,480 in 2004, $581,429 in 2003, and $241,656 in 2002. |
(6) | The amount listed in the “All Other Compensation” column includes: (a) ACCO World contributions to the tax qualified defined contribution plans, (b) profit-sharing amounts under the Fortune Brands Supplemental Plan, and (c) the value of premiums paid by ACCO World under executive long term disability and life insurance programs. As described below: |
(a) | Defined Contribution Plan and Supplemental Plan Contributions. Amounts are contributions made to individual defined contribution plan accounts pursuant to ACCO World’s matching contribution policy in 2004, 2003 and 2002: $21,963, $21,980 and $24,044 for Mr. Campbell in the Fortune Brands Plans; and $9,225, $9,022 and $8,581 for Mr. Chandler in the ACCO World Plan. | |
(b) | Additional Life Insurance and Long Term Disability Programs. Certain executive officers receive life insurance and long term disability programs in addition to those offered to the general employee population. The amounts include the dollar value of life insurance premiums paid by ACCO World in 2004, 2003 and 2002. These amounts are: $8,941, $8,378 and $7,423 for Mr. Campbell; $2,046, $2,016 and $2,016 for Mr. Fenwick; and $3,709, $3,158 and $2,730 for Mr. Chandler. In addition, the following amounts relate to company payment of supplemental long-term disability insurance premiums in 2004, 2003 and 2002: $1,333, $1,400 and $1,169 for Mr. Campbell; $1,400, $1,400 and $1,112 for Mr. Fenwick; and $1,400, $1,400 and $1,145 for Mr. Chandler. |
GBC |
Long-Term | |||||||||||||||||||||||||||||
Annual Compensation | Compensation | ||||||||||||||||||||||||||||
Awards | Payouts | ||||||||||||||||||||||||||||
Other | Securities | ||||||||||||||||||||||||||||
Annual | Underlying | LTIP | All Other | ||||||||||||||||||||||||||
Name and | Compensa- | Options/ | Payout | Compensa- | |||||||||||||||||||||||||
Principal Position(1) | Year | Salary($) | Bonus($)(2) | tion ($)(3) | SARs(#) | ($) | tion ($)(7) | ||||||||||||||||||||||
John Turner | 2004 | 304,881 | 106,708 | — | 20,000 | 42,987 | (4) | 14,318 | |||||||||||||||||||||
President, Industrial and | 2003 | 293,155 | 20,521 | — | 20,000 | 21,599 | (5) | 16,820 | |||||||||||||||||||||
Print Finishing Group | 2002 | 292,378 | 80,618 | 1,983 | 30,000 | 82,504 | (6) | 15,558 | |||||||||||||||||||||
Steven Rubin | 2004 | 218,395 | 33,748 | — | 7,500 | 12,681 | (4) | 11,274 | |||||||||||||||||||||
Vice President, | 2003 | 214,274 | 32,141 | — | 7,500 | 25,780 | (5) | 11,700 | |||||||||||||||||||||
General Counsel and | 2002 | 207,384 | 72,853 | 782 | 9,000 | 24,958 | (6) | 10,608 | |||||||||||||||||||||
Secretary |
(1) | The listed principal position of each named executive officer is the principal position each named executive officer is expected to hold with ACCO Brands. Mr. Turner is currently Group President, |
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Industrial and Print Finishing Group of GBC. Mr. Rubin is currently Vice President, Secretary and General Counsel of GBC. | |
(2) | Annual bonus amounts are earned and accrued during the fiscal years indicated, and paid subsequent to the end of such year. |
(3) | The above named individuals receive certain non-cash personal benefits, the aggregate cost of which to GBC are below applicable reporting thresholds. The amounts included in this column represent the amounts included in income to the named individuals for such personal benefits. |
(4) | Represents the value of restricted stock units awarded to the named individuals on February 26, 2004 as of that date which were earned for the year 2004 pursuant to performance criteria established by the Executive Compensation and Development Committee of the Board of Directors of GBC. In general, the performance based restricted stock units which have been earned will vest in full on February 26, 2007, provided the named individual remains continuously employed by GBC or its subsidiaries until such date. No dividends will be paid on restricted stock units. The target performance restricted stock unit awards for 2004 for the named individuals were 4,267 units for Mr. Turner and 1,600 units for Mr. Rubin. The total number of restricted stock units actually earned for the year 2004 by the named individuals and their aggregate market value at December 31, 2004 was: Mr. Turner, 2,588 units valued at $33,799; and Mr. Rubin, 971 units valued at $12,681. The aggregate market value is based on the fair market value of GBC common stock as of December 31, 2004 of $13.06. Completion of the merger would result in the accelerated vesting of those restricted stock units which have been earned as of the effective date of the merger plus a pro rata portion of the remaining target restricted stock units, with each being converted into one share of unrestricted stock of ACCO Brands. The vesting date for the non-accelerated portion of these restricted stock units is February 26, 2007 (with the holder needing be employed by GBC or an affiliate thereof through February 27, 2007). |
(5) | Represents the value of restricted stock units awarded to the named individuals on February 27, 2003 as of that date which were earned for the years 2003 and 2004 pursuant to performance criteria established by the Executive Compensation and Development Committee of the Board of Directors of GBC. In general, the performance based restricted stock units which have been earned will vest in full on February 27, 2006, provided the named individual remains continuously employed by GBC or its subsidiaries until such date. No dividends will be paid on restricted stock units. The target performance restricted stock unit awards for the years 2003 and 2004 for the named individuals were 9,248 units for Mr. Turner and 3,468 units for Mr. Rubin. The total number of restricted stock units actually earned for the years 2003 and 2004 by the named individuals and their aggregate market value at December 31, 2004 was: Mr. Turner, 5,265 units valued at $68,761; and Mr. Rubin, 1,974 units valued at $25,780. The aggregate market value is based on the fair market value of GBC common stock as of December 31, 2004 of $13.06. Completion of the merger would result in the accelerated vesting of those restricted stock units which have been earned in addition to the remaining target award for the year 2005 with each being converted into one share of unrestricted stock of ACCO Brands. |
(6) | Represents the value of restricted stock units awarded to the named individuals on February 15, 2002 as of that date. These restricted stock units vested on February 15, 2005. At that time, all restrictions on those units lapsed and an equivalent number of shares of the GBC common stock was distributed to the named individuals. The total number of the restricted stock units awarded in 2002 and their aggregate market value at December 31, 2004 was: Mr. Turner, 6,371 units valued at $83,205; and Mr. Rubin, 1,911 units valued at $24,958. The aggregate market value is based on the fair market value of the GBC common stock as of December 31, 2004 of $13.06. |
(7) | These amounts represent contributions by GBC to GBC’s 401(k) Savings and Retirement Plan on behalf of the named individuals and to their respective accounts established pursuant to GBC’s non-tax qualified Supplemental Deferred Compensation Plan. |
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ACCO World |
Percent of Total | ||||||||||||||||||||
Number of | Options/SARs | |||||||||||||||||||
Securities | Granted to | |||||||||||||||||||
Underlying | ACCO World | Grant Date | ||||||||||||||||||
Options/SARs | Employees in | Exercise or Base | Expiration | Present | ||||||||||||||||
Name | Granted (#)(1) | Fiscal year(2) | Price ($/SH) | Date | Value ($)(3) | |||||||||||||||
David Campbell | 75,000 | 19.0 | 72.75 | 10/28/14 | 16.44 | |||||||||||||||
Neal V. Fenwick | 18,000 | 4.6 | 72.75 | 10/28/14 | 16.44 | |||||||||||||||
Dennis Chandler | 18,000 | 4.6 | 72.75 | 10/28/14 | 16.44 |
(1) | All options are for shares of common stock of Fortune Brands. No stock appreciation rights (“SARs”) were granted during 2004. Options are generally not exercisable for one year after the date of grant. The options granted during 2004 become exercisable in three equal annual installments beginning one year after the date of grant. |
(2) | The percentage reported for Messrs. Campbell, Fenwick and Chandler represents the percentage of Fortune Brands stock options granted in 2004 to ACCO World employees, not to employees of Fortune Brands as a whole. |
(3) | “Grant Date Present Value” for Messrs. Campbell, Fenwick and Chandler were determined using the Black-Scholes option pricing model based on the following assumptions: |
(a) | an expected option term of four and a half years which is less than the actual ten-year term of the options, reflecting the historical data regarding the average length of time an optionee holds the option before exercising; | |
(b) | a risk-free weighted-average rate of return of 3.2%, the rate of a five-year U.S. Treasury Zero Coupon Bond corresponding to the expected option term; | |
(c) | stock price volatility of 26.7% based on daily closing stock market quotations for the period March 2000 to September 2004; and | |
(d) | a yield of 1.8% based on the annual dividend rate of $1.32 per share at the date of grant. |
The Grant Date Present Values in the table are only theoretical values and may not accurately determine present value. The actual value, if any, to be realized by an optionee will depend on the excess of the market value of the common stock over the exercise price on the date the option is exercised. |
GBC |
Number of | Percent of Total | |||||||||||||||||||
Securities | Options/SARs | |||||||||||||||||||
Underlying | Granted to GBC | Grant Date | ||||||||||||||||||
Options/SARs | Employees in | Exercise or Base | Expiration | Present | ||||||||||||||||
Name | Granted (#)(1) | Fiscal Year | Price ($/SH) | Date | Value ($)(2) | |||||||||||||||
John Turner | 20,000 | 4.2 | 16.61 | 2/25/14 | 12.02 | |||||||||||||||
Steven Rubin | 7,500 | 1.6 | 16.61 | 2/25/14 | 12.02 |
(1) | All options granted to the named individuals were granted under GBC’s 2001 Stock Incentive Plan for Employees. Twenty-five percent (25%) of each option first becomes exercisable one (1) year after |
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the respective grant date and an additional 25% vests on each successive anniversary of the grant date. All of these options were granted at the fair market value of GBC’s common stock on the grant date in the NASDAQ stock market. No SARs were granted in connection with these option grants. Completion of the merger would result in accelerated vesting of these options. | |
(2) | Based on the Black-Scholes stock option pricing model. Option term was assumed to be ten years and various assumptions were made for volatility (59.2%) and risk free interest rates (4.41%). The actual value, if any, a named individual may realize will depend on the market value of the underlying shares at the time the option is exercised, so there is no assurance the value realized will be at or near the value estimated by the Black-Scholes model. GBC’s use of this model should not be construed as an endorsement of its accuracy at valuing stock options. |
ACCO World |
Value of Unexercised | ||||||||||||||||
Number of Securities | In-The-Money | |||||||||||||||
Underlying Unexercised | Options/SARs at | |||||||||||||||
Shares | Options/SARs at FY-End | FY-End ($) | ||||||||||||||
Acquired on | Value | (#) Exercisable/ | Exercisable/ | |||||||||||||
Name | Exercise (#)(1) | Realized($) | Unexercisable | Unexercisable(2) | ||||||||||||
David Campbell | 79,184 | 3,635,019 | 145,109/147,233 | 5,255,272/1,942,553 | ||||||||||||
Neal V. Fenwick | 1,250 | 54,844 | 57,284/33,116 | 2,308,540/420,597 | ||||||||||||
Dennis Chandler | 11,000 | 485,643 | 44,467/32,233 | 1,802,530/395,803 |
(1) | No SARs were exercised during 2004 and no SARs were outstanding as of December 31, 2004. |
(2) | Based on fair market value of $71.49 per share of Fortune Brands common stock on December 31, 2004. |
GBC |
Number of | Value of | |||||||||||||||
Securities Underlying | Unexercised | |||||||||||||||
Unexercised | In-The-Money | |||||||||||||||
Options/SARs | Options/SARs | |||||||||||||||
Shares | at FY-End (#) | at FY-End ($) | ||||||||||||||
Acquired on | Value | Exercisable/ | Exercisable/ | |||||||||||||
Name | Exercise (#)(1) | Realized ($) | Unexercisable | Unexercisable(2) | ||||||||||||
John Turner | 9,000 | 85,500 | 62,250/78,375 | 206,890/218,030 | ||||||||||||
Steven Rubin | 3,805 | 30,607 | 19,813/21,350 | 67,005/37,500 |
(1) | No SARs were exercised during 2004 and no SARs were outstanding as of December 31, 2004. |
(2) | Based on fair market value of $13.06 per share of GBC common stock on December 31, 2004. |
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Estimated Future Payouts | ||||||||||||||||||||
Performance or | Under Non-Stock | |||||||||||||||||||
Number of Shares, | Other Period Until | Price-Based Plans | ||||||||||||||||||
Units or Other | Maturation or | |||||||||||||||||||
Name | Rights (#)(1) | Payout | Threshold ($) | Target ($) | Maximum ($) | |||||||||||||||
David Campbell | 750 | 3 yrs. | 75,000 | 300,000 | 750,000 | |||||||||||||||
Neal V. Fenwick | 225 | 3 yrs. | 22,500 | 90,000 | 225,000 | |||||||||||||||
Dennis Chandler | 250 | 3 yrs. | 25,000 | 100,000 | 250,000 |
(1) | The payout figures represent the number of dollars that will be awarded upon attainment of the Operating Income, Return on Net Tangible Assets, Reductions in Sales, General and Administrative costs, and Net Sales Growth targets for the performance period 2004-2006. |
(A) For credited service accrued prior to January 1, 2002: |
0.75% of Final Average Base Earnings up to Social Security Covered Compensation, plus 1.25% of Final Average Base Earnings in excess of Social Security Covered Compensation, multiplied by the number of years of Credited Service accrued prior to January 1, 2002 (up to a maximum of 30 years). | |
“Final Average Base Earnings” is defined as average base compensation (base rate of pay) during the five consecutive calendar years within the 10 years of service prior to the date of termination that provide the highest average. |
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“Covered Compensation” is defined as the 35 year average of the FICA taxable wage bases ending with the earlier of the year the participant reaches Social Security retirement age or the year of termination or retirement. |
(B) For credited service accrued after December 31, 2001: |
1.25% of Final Average Total Earnings multiplied by the number of years of Credited Service accrued after December 31, 2001. | |
“Final Average Total Earnings” is defined as average total earnings (base rate of pay plus annual bonus) during the five consecutive calendar years within the 10 years of service prior to the date of termination that provide the highest average. |
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Estimated Annual Retirement Benefits | ||||||||||||||||||||||||
for Representative Years of Credited Service | ||||||||||||||||||||||||
Remuneration | 10 | 15 | 20 | 25 | 30 | 35 | ||||||||||||||||||
$ 500,000 | $ | 87,500 | $ | 131,250 | $ | 156,250 | $ | 187,500 | $ | 225,000 | $ | 262,500 | ||||||||||||
600,000 | 105,000 | 157,500 | 187,500 | 225,000 | 270,000 | 315,000 | ||||||||||||||||||
700,000 | 122,500 | 183,750 | 218,750 | 262,500 | 315,000 | 367,500 | ||||||||||||||||||
800,000 | 140,000 | 210,000 | 250,000 | 300,000 | 360,000 | 420,000 | ||||||||||||||||||
900,000 | 157,500 | 236,250 | 281,250 | 337,500 | 405,000 | 472,500 | ||||||||||||||||||
1,000,000 | 175,000 | 262,500 | 312,500 | 375,000 | 450,000 | 525,000 | ||||||||||||||||||
1,100,000 | 192,500 | 288,750 | 343,750 | 412,500 | 495,000 | 577,500 | ||||||||||||||||||
1,200,000 | 210,000 | 315,000 | 375,000 | 450,000 | 540,000 | 630,000 | ||||||||||||||||||
1,300,000 | 227,500 | 341,250 | 406,250 | 487,500 | 585,000 | 682,500 | ||||||||||||||||||
1,400,000 | 245,000 | 367,500 | 437,500 | 525,000 | 630,000 | 735,000 | ||||||||||||||||||
1,600,000 | 280,000 | 420,000 | 500,000 | 600,000 | 720,000 | 840,000 | ||||||||||||||||||
1,800,000 | 315,000 | 472,500 | 562,500 | 675,000 | 810,000 | 945,000 | ||||||||||||||||||
2,000,000 | 350,000 | 525,000 | 625,000 | 750,000 | 900,000 | 1,050,000 |
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Estimated Annual Retirement Benefits | ||||||||||||||||||||||||
for Representative Years of Credited Service | ||||||||||||||||||||||||
Remuneration | 10 | 15 | 20 | 25 | 30 | 35 | ||||||||||||||||||
$ 188,400 | $ | 35,500 | $ | 53,300 | $ | 71,100 | $ | 88,800 | $ | 106,600 | $ | 124,400 | ||||||||||||
282,500 | 53,300 | 80,000 | 106,600 | 133,300 | 159,900 | 186,600 | ||||||||||||||||||
376,700 | 71,100 | 106,600 | 142,200 | 177,700 | 213,200 | 248,800 | ||||||||||||||||||
470,900 | 88,800 | 133,300 | 177,700 | 222,100 | 266,500 | 311,000 | ||||||||||||||||||
565,100 | 106,600 | 159,900 | 213,200 | 266,500 | 319,900 | 373,200 | ||||||||||||||||||
659,300 | 124,400 | 186,600 | 248,800 | 311,000 | 373,200 | 435,400 | ||||||||||||||||||
753,400 | 142,200 | 213,200 | 284,300 | 355,400 | 426,500 | 497,600 | ||||||||||||||||||
847,600 | 159,900 | 239,900 | 319,900 | 399,800 | 479,800 | 559,700 | ||||||||||||||||||
941,800 | 177,700 | 266,500 | 355,400 | 444,200 | 533,100 | 621,900 | ||||||||||||||||||
1,036,000 | 195,500 | 293,200 | 390,900 | 488,700 | 586,400 | 684,100 | ||||||||||||||||||
1,130,200 | 213,200 | 319,900 | 426,500 | 533,100 | 639,700 | 746,300 |
(1) | The table above assumes the exchange rate of £1.00 = $1.884, which was in effect on May 9, 2005. |
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• | each person who will beneficially own more than 5% of the outstanding shares of ACCO Brands common stock immediately after completion of the merger; | |
• | the individuals who will be the chief executive officer and the other four most highly compensated executive officers of ACCO Brands; | |
• | the individuals who will be the directors of ACCO Brands; and | |
• | the individuals who will be the directors and executive officers of ACCO Brands as a group. |
Number of | ||||||||||||||||
Number of Shares | Restricted Stock | |||||||||||||||
Name | Number of Shares | Subject to Options(1) | Units | Percent | ||||||||||||
Lane Industries, Inc. One Lane Center Northbrook, IL 60062(2) | 9,873,237 | 0 | 0 | 19.2 | % | |||||||||||
Ariel Capital Management, Inc. 307 N. Michigan Ave. Chicago, IL 60601(2) | 4,162,383 | (3) | 0 | 0 | 8.1 | |||||||||||
David D. Campbell(4) | 5,749 | 0 | 0 | * | ||||||||||||
George V. Bayly(2) | 0 | 25,000 | (5) | 0 | * | |||||||||||
Dr. Patricia O. Ewers(4) | 1,451 | 0 | 0 | * | ||||||||||||
G. Thomas Hargrove(2) | 10,000 | 15,000 | (5) | 0 | * | |||||||||||
Robert J. Keller(4) | 0 | 0 | 0 | * | ||||||||||||
Pierre E. Leroy(4) | 313 | 0 | 0 | * | ||||||||||||
Gordon R. Lohman(4) | 347 | 0 | 0 | * | ||||||||||||
Forrest M. Schneider(2) | 20,474 | (6) | 30,000 | (5)(7) | 0 | * | ||||||||||
Norman H. Wesley(4) | 29,240 | 0 | 0 | * | ||||||||||||
Neal V. Fenwick(4) | 1,773 | 0 | 0 | * | ||||||||||||
Dennis Chandler(4) | 2,652 | 0 | 0 | * |
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Number of | ||||||||||||||||
Number of Shares | Restricted Stock | |||||||||||||||
Name | Number of Shares | Subject to Options(1) | Units | Percent | ||||||||||||
John Turner(2) | 22,692 | (8) | 119,750 | (5) | 5,689 | * | ||||||||||
Steven Rubin(2) | 24,302 | (8)(9) | 38,286 | (5) | 2,134 | * | ||||||||||
All directors and executive officers as a group (13 persons) | 118,993 | 228,036 | 7,823 | * |
* | Less than 1% |
(1) | Indicates the projected number of shares of the ACCO Brands common stock issuable upon the exercise of options exercisable within 60 days of July 12, 2005. |
(2) | Amounts shown are based on GBC stock ownership, GBC restricted share unit ownership and GBC stock subject to options, which will equal ACCO Brands stock ownership, ACCO Brands restricted stock unit ownership and ACCO Brands stock subject to options, multiplied by one, the exchange ratio in the merger. |
(3) | Based on information provided in Schedule 13G filed with the Securities and Exchange Commission on February 14, 2005, Ariel Capital has sole dispositive power over 4,159,333 of these shares and sole voting power over 2,634,133 of these shares. |
(4) | Amounts shown are based on Fortune Brands stock ownership. As of July 11, 2005, Fortune Brands estimates that one share of ACCO Brands common stock will be distributed in the spin-off for each 4.32 shares of Fortune Brands common stock held on the distribution date. |
(5) | Includes unvested GBC options which will be converted into ACCO Brands options upon completion of the merger and which will become fully exercisable upon completion of the merger. |
(6) | Includes 2,375 shares owned by Mr. Schneider’s wife and 600 shares owned by Mr. Schneider’s children. |
(7) | Includes options to acquire up to 15,000 shares from Lane Industries, Inc. |
(8) | Includes GBC restricted stock units which will be converted into ACCO Brands common stock upon the completion of the merger. |
(9) | Includes 46 shares distributed in the spin-off based upon Mr. Rubin’s ownership of 200 shares of Fortune Brands stock on July 11, 2005. |
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• | establish a classified board of directors; | |
• | permit the board of directors to issue shares of preferred stock in one or more series without further authorization of the stockholders of ACCO Brands; | |
• | prohibit stockholder action by written consent; | |
• | require stockholders to provide advance notice of any stockholder nomination of directors or any proposal of new business to be considered at any meeting of stockholders; | |
• | require a supermajority vote for the removal of directors and then only for cause; | |
• | require a supermajority vote of the board of directors to increase the size of the board to a number greater than nine or to replace “GBC” directors until the company’s annual meeting in 2008; and | |
• | contain a fair price provision. |
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• | the designation of the series, which may be by distinguishing number, letter or title; | |
• | the number of shares of the series, which number the board of directors may thereafter (except where otherwise provided in the preferred stock designation) increase or decrease (but not below the number of shares of the series then outstanding); | |
• | whether dividends, if any, shall be cumulative or noncumulative and the dividend rate of the series; | |
• | the dates at which dividends, if any, shall be payable; | |
• | the redemption rights and price or prices, if any, for shares of the series; | |
• | the terms and amount of any sinking fund provided for the purchase or redemption of shares of the series; | |
• | the amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of ACCO Brands; | |
• | whether the shares of the series shall be convertible into shares of any other class or series, or any other security, of ACCO Brands or any other corporation, and, if so, the specification of such other class or series or such other security, the conversion price or prices or rate or rates, any adjustments thereof, the date or dates as of which such shares shall be convertible and all other terms and conditions upon which such conversion may be made; | |
• | restrictions on the issuance of shares of the same series or of any other class or series; and | |
• | the voting rights, if any, of the holders of shares of the series. |
• | promote the stability of the company’s stockholder base; and | |
• | render more difficult certain unsolicited or hostile attempts to take the company over which could disrupt the company, divert the attention of its directors, officers and employees and adversely affect the independence and integrity of the ACCO Brands business. |
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• | after the interested stockholder had become an interested stockholder and before the consummation of such business combination, the interested stockholder must not have become the beneficial owner of any additional shares of ACCO Brands common stock, except as part of the transaction resulting in such interested stockholder becoming an interested stockholder, or in a transaction that would not result in any increase in the interested stockholder’s percentage beneficial ownership of any class or series of ACCO Brands capital stock; | |
• | after the interested stockholder had become an interested stockholder and before the consummation of such business combination, the company must not have (1) failed to pay full quarterly dividends on payable in accordance with the terms of any outstanding ACCO Brands capital stock, if any, (2) reduced the rate of dividends paid on ACCO Brands common stock or (3) failed to increase such annual rate of dividends as necessary to reflect any reclassification, recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of ACCO Brands common stock, unless such failure, reduction or reclassification was approved by two-thirds of the continuing directors; | |
• | the interested stockholder must not have received (other than proportionately as a stockholder) at any time after becoming an interested stockholder, the benefit of any loans, advances, guarantees, pledges or other financial assistance or any tax advantages provided by ACCO Brands; | |
• | a proxy or information statement describing the proposed business combination and complying with the requirements of the Exchange Act must have been mailed to all stockholders of the company at least 30 days prior to the consummation of the business combination and such proxy or information statement must have contained any recommendation as to the advisability or inadvisability of the |
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business combination which any of the continuing directors wish to make and, if deemed advisable by at least two-thirds of the continuing directors, a fairness opinion from an investment bank; and | ||
• | the interested stockholder shall not have made any material change in ACCO Brands’ business or equity capital structure without approval of at least two-thirds of the continuing directors. |
• | amend or repeal the provisions of the restated certificate of incorporation relating to the number, election and removal of directors, the classified board, amendments to the company’s restated certificate of incorporation or amended by-laws, or the right to act by written consent; or | |
• | adopt any provision inconsistent with such provisions. |
• | 10 business days following a public announcement that a person or group has acquired 15% or more of the outstanding shares of ACCO Brands common stock (thereby becoming an “acquiring person” under the stockholder rights plan); or | |
• | 10 business days following the commencement of a tender offer or exchange offer that would result in a person or group becoming an acquiring person. |
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ACCO Brands Corporation |
General Binding Corporation |
• | participate on a share-for-share basis, in such dividends as may be declared by the corporation from time to time out of the funds legally available; and | |
• | share ratably in the assets of the corporation in the event of any liquidation, dissolution, or winding up of the affairs of the corporation. |
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ACCO Brands Corporation |
• | one class will be initially elected for a term expiring at the annual meeting of stockholders in 2006; | |
• | another class will be initially elected for a term expiring at the end at the annual meeting of stockholders in 2007; and | |
• | another class will be initially elected for a term expiring at the annual stockholders meeting in 2008. |
• | such vacancy may be filled only by a majority vote of the directors then in office, though less than a quorum, and directors chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of office to which they have been elected expires and until such director’s successor shall have been duly elected and qualified; | |
• | however, prior to the annual meeting of stockholders to be held in 2008, any vacancy on the board of directors of a director named by the board of directors of GBC pursuant to terms of the merger agreement and any successor appointed pursuant to such provision shall be filled and require the vote of at least 80% of the directors then in office. |
General Binding Corporation |
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ACCO Brands Corporation |
General Binding Corporation |
ACCO Brands Corporation |
General Binding Corporation |
ACCO Brands Corporation |
General Binding Corporation |
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ACCO Brands Corporation |
• | by the company in its notice of meeting; | |
• | by or at the direction of the board of directors; or | |
• | by any stockholder of the company who was a stockholder of record at the time of giving notice provided for in the by-laws, who is entitled to vote at the meeting and complies with certain notice procedures in the by-laws discussed below. |
• | in the case where a stockholder wishes to nominate a person for a directorship, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest or is otherwise required pursuant to Regulation 14A of the Securities Exchange Act of 1934; | |
• | with respect to other business that the stockholder wishes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and | |
• | as to the stockholder making the proposal or nomination and the beneficial owner on whose behalf the proposal or nomination is being made, the name and address of the stockholder as they appear on the company’s books and of the beneficial owner and the class and number of shares of the company which are owned beneficially and of record by the stockholder or the beneficial owner. |
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• | the board of directors; or | |
• | provided that the board of directors has determined that directors will be elected at a special meeting, any stockholder of the company eligible to vote at the meeting in accordance with the by-laws who complies with the notice provisions of the by-laws applicable to special meetings. |
General Binding Corporation |
ACCO Brands Corporation |
General Binding Corporation |
ACCO Brands Corporation |
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General Binding Corporation |
ACCO Brands Corporation |
General Binding Corporation |
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• | Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2005 filed with the Securities and Exchange Commission on May 10, 2005; | |
• | Annual Report on Form 10-K/ A for the fiscal year ended December 31, 2004 filed with the Securities and Exchange Commission on April 29, 2005; | |
• | Annual Report on Form 10-K for the fiscal year ended December 31, 2004 filed with the Securities and Exchange Commission on March 15, 2005; | |
• | Current Report on Form 8-K filed with the Securities and Exchange Commission on May 18, 2005; | |
• | Current Report on Form 8-K filed with the Securities and Exchange Commission on April 20, 2005; | |
• | Current Report on Form 8-K filed with the Securities and Exchange Commission on March 21, 2005; | |
• | Current Report on Form 8-K filed with the Securities and Exchange Commission on March 16, 2005; | |
• | Current Report on Form 8-K filed with the Securities and Exchange Commission on March 15, 2005; | |
• | Current Report on Form 8-K filed with the Securities and Exchange Commission on February 4, 2005. |
General Binding Corporation | |
One GBC Plaza | |
Northbrook, Illinois 60062 | |
Attn: Investor Relations | |
Telephone: (847) 272-3700 |
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Page | ||||
ACCO WORLD CORPORATION AND SUBSIDIARIES | ||||
Report of Independent Registered Public Accounting Firm | F-2 | |||
Consolidated Balance Sheets as of December 27, 2004, 2003 and 2002 | F-3 | |||
Consolidated Statements of Income for the years ended December 27, 2004, 2003 and 2002 | F-4 | |||
Consolidated Statements of Cash Flows for the years ended December 27, 2004, 2003 and 2002 | F-5 | |||
Consolidated Statements of Stockholders’ Equity for the years ended December 27, 2004, 2003 and 2002 | F-6 | |||
Notes to Consolidated Financial Statements | F-7 | |||
Unaudited Condensed Consolidated Balance Sheets as of March 25, 2005 and December 27, 2004 | F-30 | |||
Unaudited Condensed Consolidated Statements of Income for the Three Months Ended March 25, 2005 and 2004 | F-31 | |||
Unaudited Condensed Consolidated Statement of Cash Flows for the Three Months Ended March 25, 2005 and 2004 | F-32 | |||
Notes to Unaudited Condensed Consolidated Financial Statements | F-33 | |||
Selected Quarterly Financial Data | F-38 |
F-1
Table of Contents
F-2
Table of Contents
2004 | 2003 | 2002 | |||||||||||||
(in millions of dollars) | |||||||||||||||
Assets | |||||||||||||||
Current assets | |||||||||||||||
Cash and cash equivalents | $ | 79.8 | $ | 60.5 | $ | 43.3 | |||||||||
Accounts receivable less allowances for discounts, doubtful accounts and returns; $18.5, $19.3 and $24.4 for 2004, 2003 and 2002 | 320.1 | 258.2 | 249.4 | ||||||||||||
Inventories, net | |||||||||||||||
Raw materials and supplies | 24.7 | 25.7 | 26.2 | ||||||||||||
Work in process | 5.8 | 7.4 | 8.1 | ||||||||||||
Finished products | 142.0 | 123.1 | 101.8 | ||||||||||||
172.5 | 156.2 | 136.1 | |||||||||||||
Deferred income taxes | 4.2 | 3.9 | 6.5 | ||||||||||||
Income taxes receivable | — | — | 2.0 | ||||||||||||
Other current assets | 19.9 | 21.4 | 19.5 | ||||||||||||
Total current assets | 596.5 | 500.2 | 456.8 | ||||||||||||
Property, plant and equipment | |||||||||||||||
Land and improvements | 13.2 | 14.4 | 20.5 | ||||||||||||
Buildings and improvements to leaseholds | 117.8 | 132.7 | 135.6 | ||||||||||||
Machinery and equipment | 346.5 | 399.5 | 398.6 | ||||||||||||
Construction in progress | 15.0 | 4.4 | 4.7 | ||||||||||||
492.5 | 551.0 | 559.4 | |||||||||||||
Less accumulated depreciation | 334.8 | 381.0 | 364.1 | ||||||||||||
Property, plant and equipment, net | 157.7 | 170.0 | 195.3 | ||||||||||||
Deferred income taxes | 21.7 | 25.2 | 18.9 | ||||||||||||
Intangibles resulting from business acquisitions, net of accumulated amortization; $63.3, $61.0 and $59.6 for 2004, 2003 and 2002 | 117.6 | 117.3 | 128.8 | ||||||||||||
Property, plant and equipment held for sale | — | 7.0 | 13.9 | ||||||||||||
Prepaid pension expense | 87.1 | 60.1 | 40.0 | ||||||||||||
Other assets | 3.9 | 6.9 | 6.8 | ||||||||||||
Total assets | $ | 984.5 | $ | 886.7 | $ | 860.5 | |||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||
Current liabilities | |||||||||||||||
Notes payable to banks | $ | 0.1 | $ | 2.8 | $ | 4.3 | |||||||||
Current portion of long-term debt | — | — | 0.4 | ||||||||||||
Accounts payable | 120.6 | 96.4 | 87.2 | ||||||||||||
Accrued income taxes due to Parent | 14.3 | 6.6 | — | ||||||||||||
Accrued customer programs | 81.6 | 54.8 | 62.1 | ||||||||||||
Accrued compensation, restructuring and other liabilities | 108.2 | 105.2 | 97.1 | ||||||||||||
Total current liabilities | 324.8 | 265.8 | 251.1 | ||||||||||||
Postretirement and other liabilities | 42.9 | 87.8 | 80.6 | ||||||||||||
Total liabilities | 367.7 | 353.6 | 331.7 | ||||||||||||
Stockholders’ equity | |||||||||||||||
Common stock, par value $1 per share and 53,476 shares authorized, issued and outstanding at December 27, 2004, 2003 and 2002 | 0.1 | 0.1 | 0.1 | ||||||||||||
Parent company investment | (269.5 | ) | (225.1 | ) | (167.6 | ) | |||||||||
Paid-in capital | 1,835.1 | 1,832.6 | 1,829.8 | ||||||||||||
Accumulated other comprehensive income (loss) | 15.9 | (41.2 | ) | (73.5 | ) | ||||||||||
Accumulated deficit | (964.8 | ) | (1,033.3 | ) | (1,060.0 | ) | |||||||||
Total stockholders’ equity | 616.8 | 533.1 | 528.8 | ||||||||||||
Total liabilities and stockholders’ equity | $ | 984.5 | $ | 886.7 | $ | 860.5 | |||||||||
F-3
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2004 | 2003 | 2002 | |||||||||||
(in millions of dollars, except per share data) | |||||||||||||
Net sales | $ | 1,175.7 | $ | 1,101.9 | $ | 1,105.4 | |||||||
Cost of products sold | 714.3 | 686.8 | 698.9 | ||||||||||
Advertising, selling, general and administrative expenses | 347.8 | 337.8 | 351.5 | ||||||||||
Amortization of intangibles | 1.3 | 1.7 | 2.1 | ||||||||||
Write-down of intangibles | — | 12.0 | — | ||||||||||
Restructuring charges | 19.4 | 17.3 | 34.3 | ||||||||||
Interest expense, including allocation from Parent | 8.5 | 8.0 | 12.3 | ||||||||||
Other (income) expense, net | (5.2 | ) | (1.6 | ) | 0.8 | ||||||||
Income before income taxes | 89.6 | 39.9 | 5.5 | ||||||||||
Income taxes | 21.1 | 13.2 | 1.3 | ||||||||||
Net income | $ | 68.5 | $ | 26.7 | $ | 4.2 | |||||||
Basic earnings per common share | $ | 1,281 | $ | 499 | $ | 79 | |||||||
Unaudited pro forma earnings per share (see Note 15) | |||||||||||||
Basic | $ | 1.44 | |||||||||||
Diluted | $ | 1.42 | |||||||||||
F-4
Table of Contents
2004 | 2003 | 2002 | |||||||||||
(in millions of dollars) | |||||||||||||
Operating activities | |||||||||||||
Net income | $ | 68.5 | $ | 26.7 | $ | 4.2 | |||||||
Write-down of intangibles | — | 12.0 | — | ||||||||||
Restructuring non-cash charges | 6.4 | 9.7 | 12.1 | ||||||||||
Loss on disposal of fixed assets | 1.5 | 9.2 | 0.1 | ||||||||||
Depreciation | 28.2 | 33.3 | 37.0 | ||||||||||
Amortization | 1.3 | 1.7 | 2.1 | ||||||||||
Decrease in deferred income taxes | (13.7 | ) | (3.9 | ) | (9.7 | ) | |||||||
(Increase) decrease in accounts receivable | (51.1 | ) | 6.7 | 7.1 | |||||||||
(Increase) decrease in inventories | (9.6 | ) | (10.6 | ) | 38.2 | ||||||||
Increase (decrease) in accounts payable, accrued expense and other liabilities | 35.8 | (11.6 | ) | 16.2 | |||||||||
Increase in accrued taxes | 12.0 | 9.4 | 26.5 | ||||||||||
Other operating activities, net | (15.6 | ) | (15.4 | ) | 28.1 | ||||||||
Net cash provided from operating activities | 63.7 | 67.2 | 161.9 | ||||||||||
Investing activities | |||||||||||||
Additions to property, plant and equipment | (27.6 | ) | (16.3 | ) | (22.0 | ) | |||||||
Proceeds from the disposition of property, plant and equipment | 21.5 | 14.6 | 4.8 | ||||||||||
Net cash used by investing activities | (6.1 | ) | (1.7 | ) | (17.2 | ) | |||||||
Financing activities | |||||||||||||
Intercompany financing | (42.6 | ) | (54.8 | ) | (128.3 | ) | |||||||
Repayments on long-term debt | — | (0.4 | ) | (0.9 | ) | ||||||||
Repayments of short-term debt | (2.7 | ) | (1.6 | ) | — | ||||||||
Borrowings of short-term debt | — | — | 0.5 | ||||||||||
Net cash used by financing activities | (45.3 | ) | (56.8 | ) | (128.7 | ) | |||||||
Effect of foreign exchange rate changes on cash | 7.0 | 8.5 | 2.4 | ||||||||||
Net increase in cash and cash equivalents | 19.3 | 17.2 | 18.4 | ||||||||||
Cash and cash equivalents | |||||||||||||
Beginning of year | 60.5 | 43.3 | 24.9 | ||||||||||
End of year | $ | 79.8 | $ | 60.5 | $ | 43.3 | |||||||
Cash paid during the year for | |||||||||||||
Interest | $ | 0.3 | $ | 0.4 | $ | 0.5 | |||||||
Income taxes | $ | 16.9 | $ | 14.1 | $ | 11.4 | |||||||
F-5
Table of Contents
Accumulated | ||||||||||||||||||||||||||
Parent | Other | Accumulated | ||||||||||||||||||||||||
Common | Company | Paid-in | Comprehensive | Earnings | ||||||||||||||||||||||
Stock | Investment | Capital | Income (Loss) | Deficit | Total | |||||||||||||||||||||
(in millions of dollars) | ||||||||||||||||||||||||||
Balance at December 27, 2001 | $ | 0.1 | $ | (42.7 | ) | $ | 1,826.9 | $ | (55.7 | ) | $ | (1,064.2 | ) | $ | 664.4 | |||||||||||
Comprehensive income | ||||||||||||||||||||||||||
Net income | — | — | — | — | 4.2 | 4.2 | ||||||||||||||||||||
Minimum pension liability adjustment | — | — | — | (29.8 | ) | — | (29.8 | ) | ||||||||||||||||||
Changes in currency translation adjustment and other | — | — | 0.4 | 12.0 | — | 12.4 | ||||||||||||||||||||
Total comprehensive income (loss) | — | — | 0.4 | (17.8 | ) | 4.2 | (13.2 | ) | ||||||||||||||||||
Net transfers to Parent | — | (124.9 | ) | — | — | — | (124.9 | ) | ||||||||||||||||||
Tax benefit from stock options | — | — | 2.5 | — | — | 2.5 | ||||||||||||||||||||
Balance at December 27, 2002 | 0.1 | (167.6 | ) | 1,829.8 | (73.5 | ) | (1,060.0 | ) | 528.8 | |||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||
Net income | — | — | — | — | 26.7 | 26.7 | ||||||||||||||||||||
Minimum pension liability adjustment | — | — | — | (3.0 | ) | — | (3.0 | ) | ||||||||||||||||||
Changes in currency translation adjustment | — | — | — | 35.3 | — | 35.3 | ||||||||||||||||||||
Total comprehensive income | — | — | — | 32.3 | 26.7 | 59.0 | ||||||||||||||||||||
Net transfers to Parent | — | (57.5 | ) | — | — | — | (57.5 | ) | ||||||||||||||||||
Tax benefit from stock options | — | — | 2.8 | — | — | 2.8 | ||||||||||||||||||||
Balance at December 27, 2003 | 0.1 | (225.1 | ) | 1,832.6 | (41.2 | ) | (1,033.3 | ) | 533.1 | |||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||
Net income | — | — | — | — | 68.5 | 68.5 | ||||||||||||||||||||
Minimum pension liability adjustment | — | — | — | 32.8 | — | 32.8 | ||||||||||||||||||||
Changes in currency translation adjustment | — | — | — | 24.3 | — | 24.3 | ||||||||||||||||||||
Total comprehensive income (loss) | — | — | — | 57.1 | 68.5 | 125.6 | ||||||||||||||||||||
Net transfers to Parent | — | (44.4 | ) | (0.4 | ) | — | — | (44.8 | ) | |||||||||||||||||
Tax benefit from stock options | — | — | 2.9 | — | — | 2.9 | ||||||||||||||||||||
Balance at December 27, 2004 | $ | 0.1 | $ | (269.5 | ) | $ | 1,835.1 | $ | 15.9 | $ | (964.8 | ) | $ | 616.8 | ||||||||||||
F-6
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F-7
Table of Contents
Buildings | 40 to 50 years | |||
Leasehold improvements | 1 to 10 years | |||
Machinery, equipment and furniture | 3 to 10 years | |||
Computer hardware and software | 3 to 7 years | |||
Automobiles | 2 to 4 years |
F-8
Table of Contents
2004 | 2003 | 2002 | ||||||||||
(in millions of dollars) | ||||||||||||
Reserve balance at the beginning of the year | $ | (1.2 | ) | $ | (0.7 | ) | $ | (0.9 | ) | |||
Provision for warranties issued | (3.4 | ) | (1.6 | ) | (1.7 | ) | ||||||
Settlements made (in cash or in kind) | 1.9 | 1.1 | 1.9 | |||||||||
Reserve balance at the end of year | $ | (2.7 | ) | $ | (1.2 | ) | $ | (0.7 | ) | |||
F-9
Table of Contents
F-10
Table of Contents
F-11
Table of Contents
F-12
Table of Contents
F-13
Table of Contents
Pension Benefits | Postretirement Benefits | ||||||||||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | ||||||||||||||||||||
(in millions of dollars) | |||||||||||||||||||||||||
Change in projected benefit obligation (PBO) | |||||||||||||||||||||||||
Projected benefit obligation at beginning of year | $ | 294.0 | $ | 244.3 | $ | 217.5 | $ | 10.8 | $ | 12.6 | $ | 10.8 | |||||||||||||
Service cost | 7.2 | 6.3 | 7.1 | 0.2 | 0.2 | 0.3 | |||||||||||||||||||
Interest cost | 17.4 | 15.0 | 14.4 | 0.7 | 0.7 | 0.7 | |||||||||||||||||||
Actuarial loss (gain) | 7.9 | 24.7 | 6.7 | — | (3.0 | ) | 0.7 | ||||||||||||||||||
Participants’ contributions | 1.3 | 1.2 | 1.0 | — | 0.1 | 0.1 | |||||||||||||||||||
Foreign exchange rate changes | 19.2 | 16.7 | 9.9 | 0.7 | 0.8 | 0.6 | |||||||||||||||||||
Benefits paid | (16.9 | ) | (14.2 | ) | (12.3 | ) | (0.7 | ) | (0.6 | ) | (0.6 | ) | |||||||||||||
Curtailments | — | — | — | (0.6 | ) | — | — | ||||||||||||||||||
Projected benefit obligation at end of year | 330.1 | 294.0 | 244.3 | 11.1 | 10.8 | 12.6 | |||||||||||||||||||
Change in plan assets | |||||||||||||||||||||||||
Fair value of plan assets at beginning of year | 264.4 | 214.6 | 240.4 | — | — | — | |||||||||||||||||||
Actual return on plan assets | 18.9 | 26.9 | (25.1 | ) | — | — | — | ||||||||||||||||||
Employer contributions | 30.9 | 22.8 | 2.2 | 0.6 | 0.5 | 0.5 | |||||||||||||||||||
Participants’ contributions | 1.3 | 1.2 | 1.0 | 0.1 | 0.1 | 0.1 | |||||||||||||||||||
Foreign exchange rate changes | 16.9 | 13.6 | 8.8 | — | — | — | |||||||||||||||||||
Benefits paid | (16.9 | ) | (14.2 | ) | (12.3 | ) | (0.7 | ) | (0.6 | ) | (0.6 | ) | |||||||||||||
Other Items | 0.5 | (0.5 | ) | (0.4 | ) | — | — | — | |||||||||||||||||
Fair value of plan assets at end of year | 316.0 | 264.4 | 214.6 | — | — | — | |||||||||||||||||||
Funded status (Fair value of plan assets less PBO) | (14.1 | ) | (29.6 | ) | (29.7 | ) | (11.2 | ) | (10.8 | ) | (12.6 | ) | |||||||||||||
Unrecognized actuarial loss (gain) | 94.1 | 83.6 | 67.1 | (6.1 | ) | (6.5 | ) | (3.9 | ) | ||||||||||||||||
Unrecognized prior service cost (benefit) | 4.4 | 3.0 | 1.0 | (0.2 | ) | (0.2 | ) | (0.2 | ) | ||||||||||||||||
Net amount recognized | $ | 84.4 | $ | 57.0 | $ | 38.4 | $ | (17.5 | ) | $ | (17.5 | ) | $ | (16.7 | ) | ||||||||||
F-14
Table of Contents
Pension Benefits | Postretirement Benefits | ||||||||||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | ||||||||||||||||||||
(in millions of dollars) | |||||||||||||||||||||||||
Prepaid pension benefit | $ | 87.1 | $ | 60.1 | $ | 11.9 | $ | — | $ | — | $ | — | |||||||||||||
Accrued benefit liability | (2.7 | ) | (53.9 | ) | (19.7 | ) | (17.5 | ) | (17.5 | ) | (16.7 | ) | |||||||||||||
Intangible assets | — | 3.8 | 2.0 | — | — | — | |||||||||||||||||||
Accumulated other comprehensive income | — | 47.0 | 44.2 | — | — | — | |||||||||||||||||||
Net amount recognized | $ | 84.4 | $ | 57.0 | $ | 38.4 | $ | (17.5 | ) | $ | (17.5 | ) | $ | (16.7 | ) | ||||||||||
2004 | 2003 | 2002 | ||||||||||
(in millions of dollars) | ||||||||||||
Projected benefit obligation | $ | 2.3 | $ | 174.9 | $ | 231.7 | ||||||
Accumulated benefit obligation | 1.6 | 163.0 | 212.2 | |||||||||
Fair value of plan assets | — | 140.8 | 192.9 |
Pension Benefits | Postretirement Benefits | |||||||||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||||||||||||||
(in millions of dollars) | ||||||||||||||||||||||||
Service cost | $ | 7.2 | $ | 6.3 | $ | 7.1 | $ | 0.2 | $ | 0.2 | $ | 0.3 | ||||||||||||
Interest cost | 17.4 | 15.0 | 14.4 | 0.7 | 0.7 | 0.7 | ||||||||||||||||||
Expected return on plan assets | (21.9 | ) | (19.7 | ) | (21.0 | ) | (0.6 | ) | (0.2 | ) | — | |||||||||||||
Amortization of prior service cost | 0.9 | 1.3 | 0.2 | — | — | — | ||||||||||||||||||
Amortization of net loss (gain) | 4.3 | 2.0 | — | (1.0 | ) | (0.6 | ) | (0.4 | ) | |||||||||||||||
Net periodic benefit cost (income) | $ | 7.9 | $ | 4.9 | $ | 0.7 | $ | (0.7 | ) | $ | 0.1 | $ | 0.6 | |||||||||||
2004 | 2003 | 2002 | ||||||||||
(in millions of dollars) | ||||||||||||
(Decrease) increase in minimum liability included in intangible assets, liabilities and other comprehensive income | $ | (32.8 | ) | $ | 3.0 | $ | 44.2 |
Postretirement | ||||||||||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||||||||||||||
Discount rate | 5.7 | % | 5.9 | % | 6.3 | % | 5.7 | % | 5.9 | % | 6.2 | % | ||||||||||||
Rate of compensation increase | 4.0 | % | 3.5 | % | 3.5 | % | — | — | — |
F-15
Table of Contents
Postretirement | ||||||||||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||||||||||||||
Discount rate | 5.9 | % | 6.3 | % | 6.7 | % | 5.9 | % | 6.2 | % | 6.7 | % | ||||||||||||
Expected long-term rate of return on plan assets | 7.9 | % | 8.0 | % | 8.0 | % | — | — | — | |||||||||||||||
Rate of compensation increase | 3.8 | % | 3.5 | % | 4.0 | % | — | — | — |
Postretirement Benefits | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Health care cost trend rate assumed for next year | 10 | % | 10 | % | 10 | % | ||||||
Rate that the cost trend rate is assumed to decline (the ultimate trend rate) | 5 | % | 5 | % | 5 | % | ||||||
Year that the rate reaches the ultimate trend rate | 2015 | 2014 | 2008 |
1-Percentage- | 1-Percentage- | 1-Percentage- | ||||||||||
Point Increase | Point Decrease | Point Decrease | ||||||||||
(in millions of dollars) | ||||||||||||
Effect on total of service and interest cost | $ | 0.1 | $ | (0.1 | ) | $ | (0.1 | ) | ||||
Effect on postretirement benefit obligation | 1.0 | (1.0 | ) | (1.0 | ) |
Pension Plan Assets | |||||||||||||
at December 27 | |||||||||||||
2004 | 2003 | 2002 | |||||||||||
Asset category | |||||||||||||
Cash | 4 | % | 1 | % | 1 | % | |||||||
Equity securities | 70 | 73 | 61 | ||||||||||
Fixed income | 26 | 26 | 38 | ||||||||||
Total | 100 | % | 100 | % | 100 | % | |||||||
�� |
F-16
Table of Contents
Pension | Postretirement | |||||||
Benefits | Benefits | |||||||
(in millions of dollars) | ||||||||
2005 | $ | 13.9 | $ | 0.7 | ||||
2006 | 14.1 | 0.7 | ||||||
2007 | 14.2 | 0.7 | ||||||
2008 | 20.3 | 0.8 | ||||||
2009 | 15.1 | 0.8 | ||||||
Years 2010 — 2013 | 90.9 | 4.6 |
(in millions of dollars) | ||||
2005 | $ | 16.8 | ||
2006 | 14.8 | |||
2007 | 14.0 | |||
2008 | 12.2 | |||
2009 | 11.6 | |||
Remainder | 53.3 | |||
Total minimum rental payments | 122.7 | |||
Less minimum rentals to be received under noncancelable subleases | (2.5 | ) | ||
$ | 120.2 | |||
F-17
Table of Contents
2004 | 2003 | 2002 | ||||||||||
(in millions of dollars) | ||||||||||||
Domestic operations | $ | 30.0 | $ | (10.1 | ) | $ | (24.7 | ) | ||||
Foreign operations | 59.6 | 50.0 | 30.2 | |||||||||
$ | 89.6 | $ | 39.9 | $ | 5.5 | |||||||
2004 | 2003 | 2002 | |||||||||||
(in millions of dollars) | |||||||||||||
Income taxes computed at federal statutory income tax rate | $ | 31.2 | $ | 13.9 | $ | 1.8 | |||||||
Other income taxes, net of federal tax benefit | 1.3 | 0.3 | (0.6 | ) | |||||||||
Intangible write-down and amortization not deductible for income tax purposes | 0.4 | 0.9 | 0.7 | ||||||||||
Foreign income taxed at lower effective tax rate | (3.4 | ) | (3.2 | ) | (0.5 | ) | |||||||
Release of valuation allowance | (3.7 | ) | — | — | |||||||||
Reversal of reserves for items resolved more favorably than anticipated | (3.7 | ) | — | — | |||||||||
Effect of foreign earnings repatriation under the American Jobs Creation Act of 2004 | 1.2 | — | — | ||||||||||
Miscellaneous | (2.2 | ) | 1.3 | (0.1 | ) | ||||||||
Income taxes as reported | $ | 21.1 | $ | 13.2 | $ | 1.3 | |||||||
2004 | 2003 | 2002 | ||||||||||
(in millions of dollars) | ||||||||||||
Currently payable | ||||||||||||
Federal | $ | 17.8 | $ | 2.7 | $ | .2 | ||||||
Foreign | 15.3 | 13.9 | 11.7 | |||||||||
Other | 1.7 | 0.5 | (0.9 | ) | ||||||||
Deferred | ||||||||||||
Federal and other | (10.3 | ) | (4.2 | ) | (9.2 | ) | ||||||
Foreign | (3.4 | ) | 0.3 | (0.5 | ) | |||||||
$ | 21.1 | $ | 13.2 | $ | 1.3 | |||||||
F-18
Table of Contents
2004 | 2003 | 2002 | |||||||||||
(in millions of dollars) | |||||||||||||
Current assets | |||||||||||||
Compensation and benefits | $ | 0.9 | $ | 0.1 | $ | 0.6 | |||||||
Other reserves | 4.8 | 3.7 | 3.8 | ||||||||||
Restructuring | 1.2 | 0.8 | 2.7 | ||||||||||
Accounts receivable | 3.6 | 5.3 | 6.0 | ||||||||||
Miscellaneous | 4.2 | 3.9 | 4.4 | ||||||||||
14.7 | 13.8 | 17.5 | |||||||||||
Current liabilities | |||||||||||||
Dividends receivable | (2.0 | ) | — | — | |||||||||
Pensions | (8.1 | ) | (8.6 | ) | (8.6 | ) | |||||||
Miscellaneous | (0.4 | ) | (0.3 | ) | (1.4 | ) | |||||||
Current deferred income taxes | 4.2 | 4.9 | 7.5 | ||||||||||
Noncurrent assets | |||||||||||||
Net operating loss carryforwards | 12.4 | 12.7 | 10.8 | ||||||||||
Compensation and benefits | 11.5 | 8.1 | 4.5 | ||||||||||
Pension | — | 9.9 | 14.4 | ||||||||||
Goodwill basis | 18.0 | 19.6 | 21.1 | ||||||||||
Miscellaneous | 3.1 | 2.5 | 3.0 | ||||||||||
45.0 | 52.8 | 53.8 | |||||||||||
Noncurrent liabilities | |||||||||||||
Depreciation | (1.0 | ) | (7.6 | ) | (10.0 | ) | |||||||
Pensions | (6.6 | ) | — | (2.5 | ) | ||||||||
Identifiable intangibles | (4.0 | ) | (3.6 | ) | (7.2 | ) | |||||||
Miscellaneous | (2.0 | ) | (3.7 | ) | (4.4 | ) | |||||||
Noncurrent deferred income taxes | 31.4 | 37.9 | 29.7 | ||||||||||
Valuation allowance | (9.7 | ) | (13.7 | ) | (11.8 | ) | |||||||
Net deferred tax asset | $ | 25.9 | $ | 29.1 | $ | 25.4 | |||||||
F-19
Table of Contents
F-20
Table of Contents
Balance at | Balance at | ||||||||||||||||||||
December 27, | 2004 | Cash | Non-Cash | December 27, | |||||||||||||||||
(in millions of dollars) | 2003 | Provision | Expenditures | Write-Offs | 2004 | ||||||||||||||||
Rationalization of operations | |||||||||||||||||||||
Employee termination costs | $ | 1.3 | $ | 12.9 | $ | (14.1 | ) | $ | — | $ | 0.1 | ||||||||||
Other | 0.2 | (0.1 | ) | (0.4 | ) | 0.4 | 0.1 | ||||||||||||||
International distribution and | |||||||||||||||||||||
lease agreements | 1.1 | (0.5 | ) | (0.3 | ) | — | 0.3 | ||||||||||||||
Loss on disposal of assets | — | 7.6 | 1.1 | (8.7 | ) | — | |||||||||||||||
$ | 2.6 | $ | 19.9 | $ | (13.7 | ) | $ | (8.3 | ) | $ | 0.5 | ||||||||||
Balance at | Balance at | ||||||||||||||||||||
December 27, | 2003 | Cash | Non-Cash | December 27, | |||||||||||||||||
(in millions of dollars) | 2002 | Provision | Expenditures | Write-Offs | 2003 | ||||||||||||||||
Rationalization of operations | |||||||||||||||||||||
Employee termination costs | $ | — | $ | 8.8 | $ | (7.5 | ) | $ | — | $ | 1.3 | ||||||||||
Other | — | 0.5 | (0.3 | ) | — | 0.2 | |||||||||||||||
International distribution and | |||||||||||||||||||||
lease agreements | — | 1.2 | (0.2 | ) | 0.1 | 1.1 | |||||||||||||||
Loss on disposal of assets | — | 8.8 | 5.1 | (13.9 | ) | 0.0 | |||||||||||||||
$ | — | $ | 19.3 | $ | (2.9 | ) | $ | (13.8 | ) | $ | 2.6 | ||||||||||
F-21
Table of Contents
Balance at | Balance at | |||||||||||||||||||||
December 27, | Total | Cash | Noncash | December 27, | ||||||||||||||||||
(in millions of dollars) | 2003 | Provision | Expenditures | Write-Offs | 2004 | |||||||||||||||||
Rationalization of operations | ||||||||||||||||||||||
Employee termination costs | $ | 2.6 | $ | 12.5 | $ | (15.0 | ) | $ | 0.1 | $ | 0.2 | |||||||||||
Other | 0.8 | — | (0.8 | ) | — | — | ||||||||||||||||
International distribution and | ||||||||||||||||||||||
lease agreements | 4.3 | (0.7 | ) | (1.1 | ) | 0.2 | 2.7 | |||||||||||||||
Loss on disposal of assets | 0.2 | 7.6 | 1.0 | (8.8 | ) | — | ||||||||||||||||
$ | 7.9 | $ | 19.4 | $ | (15.9 | ) | $ | (8.5 | ) | $ | 2.9 | |||||||||||
Balance at | Balance at | ||||||||||||||||||||
December 27, | Total | Cash | Noncash | December 27, | |||||||||||||||||
(in millions of dollars) | 2002 | Provision | Expenditures | Write-Offs | 2003 | ||||||||||||||||
Rationalization of operations | |||||||||||||||||||||
Employee termination costs | $ | 9.0 | $ | 6.8 | $ | (13.7 | ) | $ | 0.5 | $ | 2.6 | ||||||||||
Other | (0.2 | ) | 0.9 | (0.6 | ) | 0.7 | 0.8 | ||||||||||||||
International distribution and | |||||||||||||||||||||
lease agreements | 4.3 | 1.1 | (1.5 | ) | 0.4 | 4.3 | |||||||||||||||
Loss on disposal of assets | 0.8 | 8.5 | 11.8 | (20.9 | ) | 0.2 | |||||||||||||||
$ | 13.9 | $ | 17.3 | $ | (4.0 | ) | $ | (19.3 | ) | $ | 7.9 | ||||||||||
Balance at | Balance at | ||||||||||||||||||||
December 27, | Total | Cash | Non-Cash | December 27, | |||||||||||||||||
(in millions of dollars) | 2001 | Provision | Expenditures | Write-Offs | 2002 | ||||||||||||||||
Rationalization of operations | |||||||||||||||||||||
Employee termination costs | $ | 7.6 | $ | 19.8 | $ | (18.7 | ) | $ | 0.3 | $ | 9.0 | ||||||||||
Other | 0.4 | (0.2 | ) | (0.4 | ) | — | (0.2 | ) | |||||||||||||
International distribution and | |||||||||||||||||||||
lease agreements | 5.2 | 1.5 | (2.7 | ) | 0.3 | 4.3 | |||||||||||||||
Loss on disposal of assets | 2.1 | 13.2 | — | (14.5 | ) | 0.8 | |||||||||||||||
$ | 15.3 | $ | 34.3 | $ | (21.8 | ) | $ | (13.9 | ) | $ | 13.9 | ||||||||||
F-22
Table of Contents
(in millions of dollars, except per share data) | 2004 | 2003 | 2002 | |||||||||
Net income — as reported | $ | 68.5 | $ | 26.7 | $ | 4.2 | ||||||
Add: Stock based employee compensation (performance awards) included in reported net income, net of tax | 0.5 | 0.5 | 0.3 | |||||||||
Deduct: Total stock based employee compensation (stock options and performance awards) determined under the fair-value based method for all awards, net of tax | (3.7 | ) | (3.0 | ) | (2.7 | ) | ||||||
Pro forma net income | $ | 65.3 | $ | 24.2 | $ | 1.8 | ||||||
Pro forma net earnings per basic share | $ | 1,221 | $ | 453 | $ | 34 | ||||||
F-23
Table of Contents
Weighted- | ||||||||
Average | ||||||||
Exercise | ||||||||
Options | Price | |||||||
Outstanding at December 31, 2001 | 1,920,726 | $ | 30.31 | |||||
Granted | 395,200 | 49.00 | ||||||
Exercised | (687,324 | ) | 30.29 | |||||
Lapsed | (152,321 | ) | 32.71 | |||||
Outstanding at December 31, 2002 | 1,476,281 | 35.07 | ||||||
Granted | 393,100 | 57.30 | ||||||
Exercised | (374,055 | ) | 31.03 | |||||
Lapsed | (45,458 | ) | 40.50 | |||||
Outstanding at December 31, 2003 | 1,449,868 | 41.97 | ||||||
Granted | 392,100 | 72.87 | ||||||
Exercised | (259,718 | ) | 32.78 | |||||
Lapsed | (22,509 | ) | 50.19 | |||||
Outstanding at December 31, 2004 | 1,559,741 | $ | 51.15 | |||||
2004 | 2003 | 2002 | ||||||||||
Expected dividend yield | 1.8 | % | 2.1 | % | 2.3 | % | ||||||
Expected volatility | 26.7 | % | 29.4 | % | 30.6 | % | ||||||
Risk-free interest rate | 3.2 | % | 2.8 | % | 2.7 | % | ||||||
Expected term | 4.5 years | 4.5 years | 4.5 years |
Weighted- | ||||||||||||
Average | Weighted- | |||||||||||
Remaining | Average | |||||||||||
Number | Contractual | Exercise | ||||||||||
Range of Exercise Prices | Outstanding | Life | Price | |||||||||
$22.78 to $32.05 | 343,642 | 6.1 | $ | 29.24 | ||||||||
34.18 to 49.10 | 464,246 | 6.5 | 44.13 | |||||||||
57.46 to 78.09 | 751,853 | 9.3 | 65.49 | |||||||||
$22.78 to $78.09 | 1,559,741 | 7.8 | $ | 51.15 | ||||||||
F-24
Table of Contents
Weighted- | ||||||||
Average | ||||||||
Options | Exercise | |||||||
Exercisable | Price | |||||||
December 31, 2004 | 802,939 | $ | 38.92 | |||||
December 31, 2003 | 717,659 | $ | 32.74 | |||||
December 31, 2002 | 735,212 | $ | 30.47 |
Weighted- | ||||||
Average | ||||||
Number | Exercise | |||||
Exercisable | Price | |||||
343,642 | $ | 29.24 | ||||
348,207 | 42.56 | |||||
111,090 | 57.46 | |||||
802,939 | $ | 38.92 | ||||
Minimum | Accumulated | |||||||||||
Foreign | Pension | Other | ||||||||||
Currency | Liability | Comprehensive | ||||||||||
(in millions of dollars) | Adjustments | Adjustment | Income (Loss) | |||||||||
Balance at December 27, 2001 | $ | (55.7 | ) | $ | — | $ | (55.7 | ) | ||||
Changes during the year (net of taxes of $1.3) | 12.0 | (29.8 | ) | (17.8 | ) | |||||||
Balance at December 27, 2002 | (43.7 | ) | (29.8 | ) | (73.5 | ) | ||||||
Changes during the year (net of taxes of $1.3) | 35.3 | (3.0 | ) | 32.3 | ||||||||
Balance at December 27, 2003 | (8.4 | ) | (32.8 | ) | (41.2 | ) | ||||||
Changed during the year (net of taxes of $14.5) | 24.3 | 32.8 | 57.1 | |||||||||
Balance at December 27, 2004 | $ | 15.9 | $ | — | $ | 15.9 | ||||||
F-25
Table of Contents
ACCO U.S. — ACCO U.S. sells to U.S. customers and serves as one of two primary product ’hubs’ for the business, driving much of the new product development and innovation opportunities for the North American region. The two ’hubs’ coordinate product development activities to avoid duplication of effort while maintaining both global and local consumer focus. | |
ACCO Europe — In Europe, ACCO U.K. sells to customers in the United Kingdom, and serves as the primary product ’hub’ for the European offerings. ACCO Europe businesses in France, Germany, Italy, Holland, Ireland, Spain, Poland, the Czech Republic, Sweden, Belgium, Austria, Switzerland and Hungary are principally engaged in selling products that are global or products that have been localized for their geographic market. These products are sourced from ACCO World’s U.K. product ’hub’ (manufactured product), supplied by third party vendors, or manufactured regionally. | |
Trading companies — The Company’s businesses in Australia, New Zealand, Canada, Mexico, and Chile, referred to as our “Trading Companies”, are principally engaged in selling product which is either global or products that have been localized for their geographic market. These products are sourced from ACCO World’s business ’hubs’ in the U.S. and Europe (manufactured product), supplied by third party vendors, or manufactured locally. | |
Day-Timers — The Company’s Day-Timers business is based in the U.S. and includes subsidiaries in Australia, New Zealand and the United Kingdom. They manufacture a significant amount of their paper-based product in the United States, and source the remaining materials and finished goods from third parties. |
F-26
Table of Contents
(in millions of dollars) | 2004 | 2003 | 2002 | |||||||||
ACCO U.S. | $ | 549.0 | $ | 532.8 | $ | 554.4 | ||||||
ACCO Europe | 365.1 | 318.0 | 296.1 | |||||||||
Trading Companies | 183.6 | 169.6 | 146.7 | |||||||||
Day-Timers | 78.0 | 80.1 | 103.2 | |||||||||
Other | — | 1.4 | 5.0 | |||||||||
$ | 1,175.7 | $ | 1,101.9 | $ | 1,105.4 | |||||||
(in millions of dollars) | 2004 | 2003 | 2002 | ||||||||||
ACCO U.S. | $ | 40.3 | $ | 8.0 | $ | 1.4 | |||||||
ACCO Europe | 24.0 | 18.8 | 11.0 | ||||||||||
Trading Companies | 32.8 | 24.4 | 18.8 | ||||||||||
Day-Timers | 10.9 | 11.1 | 2.0 | ||||||||||
Corporate expenses | (15.1 | ) | (16.0 | ) | (14.6 | ) | |||||||
Total income from operations | $ | 92.9 | $ | 46.3 | $ | 18.6 | |||||||
Interest expense | 8.5 | 8.0 | 12.3 | ||||||||||
Other (income) expense | (5.2 | ) | (1.6 | ) | 0.8 | ||||||||
Income before taxes | $ | 89.6 | $ | 39.9 | $ | 5.5 | |||||||
(in millions of dollars) | 2004 | 2003 | 2002 | |||||||||
ACCO U.S. | $ | 367.3 | $ | 337.8 | $ | 369.4 | ||||||
ACCO Europe | 302.3 | 267.8 | 219.2 | |||||||||
Trading Companies | 152.8 | 128.1 | 106.3 | |||||||||
Day-Timers | 35.6 | 29.5 | 29.7 | |||||||||
$ | 858.0 | $ | 763.2 | $ | 724.6 | |||||||
(a) | Represents total assets excluding intangible assets, net. |
(in millions of dollars) | 2004 | 2003 | 2002 | |||||||||
Segment assets | $ | 858.0 | $ | 763.2 | $ | 723.6 | ||||||
Intangible assets | 117.6 | 117.3 | 128.8 | |||||||||
Corporate | 8.9 | 6.2 | 8.1 | |||||||||
$ | 984.5 | $ | 886.7 | $ | 860.5 | |||||||
F-27
Table of Contents
(in millions of dollars) | 2004 | 2003 | 2002 | |||||||||
United States | $ | 79.1 | $ | 88.7 | $ | 109.0 | ||||||
United Kingdom | 40.4 | 42.2 | 48.5 | |||||||||
Australia | 15.9 | 15.4 | 11.6 | |||||||||
Canada | 4.9 | 4.8 | 4.5 | |||||||||
Other countries | 17.4 | 18.9 | 21.7 | |||||||||
$ | 157.7 | $ | 170.0 | $ | 195.3 | |||||||
(b) | Represents property, plant and equipment, net. |
(in millions of dollars) | 2004 | 2003 | 2002 | |||||||||
United States | $ | 608.8 | $ | 581.7 | $ | 631.7 | ||||||
United Kingdom | 184.5 | 186.6 | 163.3 | |||||||||
Australia | 94.2 | 82.4 | 66.0 | |||||||||
Canada | 68.1 | 80.0 | 73.8 | |||||||||
Other countries | 220.1 | 171.2 | 170.6 | |||||||||
$ | 1,175.7 | $ | 1,101.9 | $ | 1,105.4 | |||||||
(in millions of dollars) | 2004 | 2003 | 2002 | |||||||||
ACCO U.S. | $ | 15.9 | $ | 6.1 | $ | 9.3 | ||||||
ACCO Europe | 6.1 | 6.6 | 10.9 | |||||||||
Trading Companies | 5.0 | 3.1 | 1.6 | |||||||||
Day-Timers | 0.6 | 0.5 | 0.2 | |||||||||
$ | 27.6 | $ | 16.3 | $ | 22.0 | |||||||
(in millions of dollars, except share and | ||||||||||||
per share amounts) | 2004 | 2003 | 2002 | |||||||||
Net income | $ | 68.5 | $ | 26.7 | $ | 4.2 | ||||||
Weighted average number of common shares outstanding | 53,476 | 53,476 | 53,476 | |||||||||
Basic earnings per common share | $ | 1,281 | $ | 499 | $ | 79 | ||||||
F-28
Table of Contents
(in millions, except per share data) | 2004 | |||
Net Income, as reported | $ | 68.5 | ||
Less: Pro-forma interest expense(1) | (23.3 | ) | ||
Pro-forma net income | $ | 45.2 | ||
Pro-forma common shares outstanding — basic(2) | 31.5 | |||
Exercise of stock options(3) | 0.4 | |||
Pro-forma common shares outstanding — diluted | 31.9 | |||
Basic pro-forma earnings per share | $ | 1.44 | ||
Diluted pro-forma earnings per share | $ | 1.42 |
(1) | Pro-forma interest expense ($35.9 million) is calculated based upon assumed financing of the company of $625 million to fund the dividend payable to the shareholders at an interest rate of 5.75%, net of tax of $12.6 million. |
(2) | Pro-forma common shares outstanding was calculated by taking total Parent shares outstanding as of April 30, 2005 of 145 million divided by 4.6, which is based on the estimated ratio of ACCO Brands shares to be issued to shareholders of the Parent. |
(3) | Assumes that pro-forma outstanding common shares were increased by shares of those unvested stock options in the Parent company stock, for which market price of the Parent exceeds exercise price of the option, less shares which could have been purchased by the Company with related proceeds. This amount is then multiplied by the estimated 4.6 ratio of Parent company shares to ACCO Brands shares upon spin-off to arrive at the pro-forma dilutive impact of unvested stock options at year-end. |
F-29
Table of Contents
Pro forma | |||||||||||||||
March 25, | |||||||||||||||
2005 | March 25, | December 27, | |||||||||||||
(Note 3) | 2005 | 2004 | |||||||||||||
(in millions of dollars) | |||||||||||||||
(Unaudited) | |||||||||||||||
Assets | |||||||||||||||
Current assets | |||||||||||||||
Cash and cash equivalents | $ | 65.8 | $ | 65.8 | $ | 79.8 | |||||||||
Accounts receivable, net | 266.0 | 266.0 | 320.1 | ||||||||||||
Inventories, net | |||||||||||||||
Raw materials and supplies | 24.8 | 24.8 | 24.7 | ||||||||||||
Work in process | 6.7 | 6.7 | 5.8 | ||||||||||||
Finished products | 150.6 | 150.6 | 142.0 | ||||||||||||
182.1 | 182.1 | 172.5 | |||||||||||||
Deferred income taxes | 4.2 | 4.2 | 4.2 | ||||||||||||
Income taxes receivable | 3.0 | 3.0 | — | ||||||||||||
Other current assets | 27.2 | 27.2 | 19.9 | ||||||||||||
Total current assets | 548.3 | 548.3 | 596.5 | ||||||||||||
Property, plant and equipment | |||||||||||||||
Land and improvements | 13.3 | 13.3 | 13.2 | ||||||||||||
Buildings and improvements to leaseholds | 118.4 | 118.4 | 117.8 | ||||||||||||
Machinery and equipment | 354.6 | 354.6 | 346.5 | ||||||||||||
Construction in progress | 6.7 | 6.7 | 15.0 | ||||||||||||
493.0 | 493.0 | 492.5 | |||||||||||||
Less accumulated depreciation | 335.8 | 335.8 | 334.8 | ||||||||||||
Property, plant and equipment, net | 157.2 | 157.2 | 157.7 | ||||||||||||
Deferred income taxes | 11.9 | 11.9 | 21.7 | ||||||||||||
Intangibles resulting from business acquisitions, net | 117.1 | 117.1 | 117.6 | ||||||||||||
Prepaid pension expense | 86.8 | 86.8 | 87.1 | ||||||||||||
Other assets | 6.2 | 6.2 | 3.9 | ||||||||||||
Total assets | $ | 927.5 | $ | 927.5 | $ | 984.5 | |||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||
Current liabilities | |||||||||||||||
Notes payable to banks | $ | 0.3 | $ | 0.3 | $ | 0.1 | |||||||||
Accounts payable | 100.3 | 100.3 | 120.6 | ||||||||||||
Accrued income taxes due to Parent | — | — | 14.3 | ||||||||||||
Accrued customer programs | 71.3 | 71.3 | 81.6 | ||||||||||||
Accrued compensation, restructuring and other liabilities | 62.5 | 62.5 | 108.2 | ||||||||||||
Dividend payable to shareholders | 625.0 | — | — | ||||||||||||
Total current liabilities | 859.4 | 234.4 | 324.8 | ||||||||||||
Postretirement and other liabilities | 36.6 | 36.6 | 42.9 | ||||||||||||
Total liabilities | 896.0 | 271.0 | 367.7 | ||||||||||||
Stockholders’ equity | |||||||||||||||
Common stock, par value $1 per share, 53,476 shares authorized, issued and outstanding at March 25, 2005 and December 27, 2004 | 0.1 | 0.1 | 0.1 | ||||||||||||
Parent company investment | (245.5 | ) | (245.5 | ) | (269.5 | ) | |||||||||
Paid-in capital | 1,210.1 | 1,835.1 | 1,835.1 | ||||||||||||
Accumulated other comprehensive income | 18.2 | 18.2 | 15.9 | ||||||||||||
Accumulated deficit | (951.4 | ) | (951.4 | ) | (964.8 | ) | |||||||||
Total stockholders’ equity | 31.5 | 656.5 | 616.8 | ||||||||||||
Total liabilities and stockholders’ equity | $ | 927.5 | $ | 927.5 | $ | 984.5 | |||||||||
F-30
Table of Contents
Three months ended | |||||||||
March 25, | |||||||||
(Unaudited) | |||||||||
2005 | 2004 | ||||||||
(in millions of dollars, except per share data) | |||||||||
Net sales | $ | 275.2 | $ | 270.9 | |||||
Cost of products sold | 168.5 | 169.8 | |||||||
Advertising, selling, general and administrative expenses | 82.5 | 84.6 | |||||||
Amortization of intangibles | 0.6 | 0.3 | |||||||
Restructuring charges | — | 2.6 | |||||||
Interest expense, including allocation from Parent | 2.1 | 2.2 | |||||||
Other (income) expense, net | 1.2 | 0.3 | |||||||
Income before income taxes | 20.3 | 11.1 | |||||||
Income taxes | 9.8 | 2.5 | |||||||
Net income | $ | 10.5 | $ | 8.6 | |||||
Basic earnings per common share | $ | 196 | $ | 161 | |||||
Unaudited pro forma earnings per common share (Note 11) | |||||||||
Basic | $ | 0.15 | |||||||
Diluted | $ | 0.14 | |||||||
F-31
Table of Contents
Three months ended | |||||||||
March 25, | |||||||||
(Unaudited) | |||||||||
2005 | 2004 | ||||||||
(in millions of dollars) | |||||||||
Net cash used in operating activities | (34.2 | ) | (2.0 | ) | |||||
Investing activities | |||||||||
Additions to property, plant and equipment | (5.1 | ) | (5.0 | ) | |||||
Other investing activities | 0.4 | 1.3 | |||||||
Net cash used by investing activities | (4.7 | ) | (3.7 | ) | |||||
Financing activities | |||||||||
Intercompany financing | 23.7 | 7.6 | |||||||
Other financing activities | 0.2 | (1.6 | ) | ||||||
Net cash provided by financing activities | 23.9 | 6.0 | |||||||
Effect of foreign exchange rate changes on cash | 1.0 | 5.3 | |||||||
Net (decrease) increase in cash and cash equivalents | (14.0 | ) | 5.6 | ||||||
Cash and cash equivalents | |||||||||
Beginning of year | 79.8 | 60.5 | |||||||
End of period | $ | 65.8 | $ | 66.1 | |||||
F-32
Table of Contents
1. | Basis of Presentation |
2. | Stock Based Compensation |
Three months | ||||||||
ended | ||||||||
March 25, | ||||||||
2005 | 2004 | |||||||
(in millions of dollars, except per share data) | ||||||||
Net income — as reported | $ | 10.5 | $ | 8.6 | ||||
Add: Stock based employee compensation (performance awards) included in reported net income, net of tax | 0.1 | 0.1 | ||||||
Deduct: Total stock based employee compensation (stock options and performance awards) determined under the fair-value based method for all awards, net of tax | (1.1 | ) | (0.9 | ) | ||||
Pro forma net income | $ | 9.5 | $ | 7.8 | ||||
Pro forma net earnings per share | $ | 178 | $ | 146 | ||||
3. | Spin-off of the Company and Pending Acquisition |
F-33
Table of Contents
4. | Parent Company Investment |
5. | Pension and Other Retiree Benefits |
Three months ended March 25, | ||||||||||||||||
Pension | Postretirement | |||||||||||||||
Benefits | Benefits | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
(in millions of dollars) | ||||||||||||||||
Service cost | $ | 2.0 | $ | 1.8 | $ | — | $ | — | ||||||||
Interest cost | 4.6 | 4.4 | 0.2 | 0.2 | ||||||||||||
Expected return on plan assets | (6.1 | ) | (5.6 | ) | — | — | ||||||||||
Amortization of prior service cost | 0.3 | 0.2 | — | — | ||||||||||||
Amortization of net loss (gain) | 1.2 | 1.1 | (0.2 | ) | (0.2 | ) | ||||||||||
Curtailment (gain)/loss | — | 0.1 | — | (0.1 | ) | |||||||||||
Net periodic benefit cost (income) | $ | 2.0 | $ | 2.0 | $ | — | $ | (0.1 | ) | |||||||
F-34
Table of Contents
6. | Product Warranties |
2005 | 2004 | |||||||
(in millions of dollars) | ||||||||
Reserve balance as of year end | $ | (2.7 | ) | $ | (1.2 | ) | ||
Provision for warranties issued | (0.9 | ) | (0.4 | ) | ||||
Settlements made (in cash or in kind) | 0.9 | 0.4 | ||||||
Reserve balance as of March 25 | $ | (2.7 | ) | $ | (1.2 | ) | ||
7. | Income Taxes |
Balance at | Balance at | ||||||||||||||||||||
December 27, | 2005 | Cash | Non-Cash | March 25, | |||||||||||||||||
2004 | Provision | Expenditures | Write-Offs | 2005 | |||||||||||||||||
(in millions of dollars) | |||||||||||||||||||||
Rationalization of operations | |||||||||||||||||||||
Employee termination costs | $ | 0.2 | — | $ | (0.1 | ) | $ | — | $ | 0.1 | |||||||||||
International distribution and lease agreements | 2.7 | — | — | (0.1 | ) | 2.6 | |||||||||||||||
$ | 2.9 | $ | — | $ | (.1 | ) | $ | (.1 | ) | $ | 2.7 | ||||||||||
Three months | ||||||||
ended | ||||||||
March 25, | ||||||||
2005 | 2004 | |||||||
(in millions of dollars) | ||||||||
ACCO U.S. | $ | 123.5 | $ | 120.0 | ||||
ACCO Europe | 92.8 | 92.9 | ||||||
Trading Companies | 44.7 | 43.9 | ||||||
Day-Timers | 14.2 | 14.1 | ||||||
$ | 275.2 | $ | 270.9 | |||||
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Three months | |||||||||
ended | |||||||||
March 25, | |||||||||
2005 | 2004 | ||||||||
(in millions of dollars) | |||||||||
ACCO U.S. | $ | 8.8 | $ | 1.4 | |||||
ACCO Europe | 10.5 | 9.2 | |||||||
Trading Companies | 6.6 | 6.5 | |||||||
Day-Timers | 0.3 | (0.1 | ) | ||||||
Corporate expenses | (2.6 | ) | (3.4 | ) | |||||
$ | 23.6 | $ | 13.6 | ||||||
Interest expense | 2.1 | 2.2 | |||||||
Other (income) expense | 1.2 | 0.3 | |||||||
Income before taxes | $ | 20.3 | $ | 11.1 | |||||
Three months | ||||||||
ended | ||||||||
March 25, | ||||||||
(in millions of dollars, except share and | 2005 | 2004 | ||||||
per share amounts) | ||||||||
Net income | $ | 10.5 | $ | 8.6 | ||||
Weighted average number of common shares outstanding | 53,476 | 53,476 | ||||||
Basic earnings per common share | $ | 196 | $ | 161 | ||||
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2005 | ||||
(in millions, except per share data) | ||||
Net Income, as reported | $ | 10.5 | ||
Less: Pro-forma interest expense(1) | (5.9 | ) | ||
Pro-forma net income | $ | 4.6 | ||
Pro-forma common shares outstanding — basic(2) | 31.5 | |||
Exercise of stock options(3) | 0.5 | |||
Pro-forma common shares outstanding — diluted | 32.0 | |||
Basic pro-forma earnings per share | $ | 0.15 | ||
Diluted pro-forma earnings per share | $ | 0.14 | ||
(1) | Pro-forma interest expense ($9.0 million) is calculated based upon assumed financing of the company of $625.0 million to fund the dividend payable to the shareholders at an interest rate of 5.75%, net of tax of $3.1 million. |
(2) | Pro-forma common shares outstanding was calculated by taking total Parent shares outstanding as of April 30, 2005 of 145 million divided by 4.6, which is based on the estimated ratio of ACCO Brands shares to be issued to shareholders of the Parent. |
(3) | Assumes that pro-forma outstanding common shares were increased by shares of those unvested stock options in the Parent company stock, for which market price of the Parent exceeds exercise price of the option, less shares which could have been purchased by the Company with related proceeds. This amount is them multiplied by the estimated 4.6 ratio of Parent company shares to ACCO Brands shares upon spin-off to arrive at the pro-forma dilutive impact of unvested stock options at year-end. |
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Mar-03 | Jun-03 | Sep-03 | Dec-03 | Mar-04 | Jun-04 | Sep-04 | Dec-04 | |||||||||||||||||||||||||
Qtr | Qtr | Qtr | Qtr | Qtr | Qtr | Qtr | Qtr | |||||||||||||||||||||||||
Net Sales | 249.9 | 252.7 | 286.7 | 312.6 | 270.9 | 268.7 | 303.8 | 332.3 | ||||||||||||||||||||||||
Cost of products sold | 158.5 | 167.5 | 175.1 | 185.7 | 169.8 | 170.6 | 183.2 | 190.7 | ||||||||||||||||||||||||
Operating Income/(Loss)(1) | 5.0 | (4.8 | ) | 15.4 | 30.7 | 13.6 | (4.8 | ) | 36.1 | 48.0 | ||||||||||||||||||||||
Net Income (Loss) | 4.2 | (2.5 | ) | 6.8 | 18.2 | 8.6 | (6.5 | ) | 38.5 | 27.9 |
(1) | Included in Operating Income (Loss) above were the following business repositioning costs: |
Restructuring Charges | 2.1 | 3.7 | 9.4 | 2.1 | 2.6 | 16.8 | — | — | ||||||||||||||||||||||||
Restructuring implementation costs | 7.6 | 2.8 | 3.6 | 6.2 | 4.6 | 12.8 | 1.5 | 3.3 | ||||||||||||||||||||||||
Write-down of intangibles | — | 12.0 | — | — | — | — | — | — | ||||||||||||||||||||||||
Total | 9.7 | 18.5 | 13.0 | 8.3 | 7.2 | 29.6 | 1.5 | 3.3 | ||||||||||||||||||||||||
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Page | |||||||
ARTICLE IDefinitions | A-1 | ||||||
SECTION 1.1 | DEFINITIONS | A-1 | |||||
ARTICLE IIThe Merger | A-6 | ||||||
SECTION 2.1 | The Merger | A-6 | |||||
SECTION 2.2 | The Closing | A-6 | |||||
SECTION 2.3 | Effective Time | A-6 | |||||
SECTION 2.4 | Effects of the Merger | A-6 | |||||
SECTION 2.5 | Conversion of GBC Common Stock and GBC Class B Common Stock | A-6 | |||||
SECTION 2.6 | Acquisition Sub Common Stock | A-7 | |||||
SECTION 2.7 | Converted Options | A-7 | |||||
SECTION 2.8 | GBC Stock Options; GBC Restricted Stock Units | A-8 | |||||
SECTION 2.9 | Certificate of Incorporation and By-Laws | A-8 | |||||
SECTION 2.10 | Rights Agreement | A-9 | |||||
SECTION 2.11 | Tax Consequences | A-9 | |||||
SECTION 2.12 | Officers | A-9 | |||||
SECTION 2.13 | Board of Directors | A-9 | |||||
SECTION 2.14 | Name; Corporate Offices | A-9 | |||||
ARTICLE IIIExchange of Shares | A-9 | ||||||
SECTION 3.1 | ACCO to Make Shares Available | A-9 | |||||
SECTION 3.2 | Exchange of Shares | A-9 | |||||
SECTION 3.3 | Affiliates | A-12 | |||||
ARTICLE IVCertain Pre-Merger Transactions | A-12 | ||||||
SECTION 4.1 | Fortune/ Acco Ancillary Agreements | A-12 | |||||
SECTION 4.2 | Lane/ GBC Ancillary Agreements | A-12 | |||||
SECTION 4.3 | Distribution | A-12 | |||||
ARTICLE VRepresentations and Warranties | A-12 | ||||||
SECTION 5.1 | Representation and Warranties of GBC | A-12 | |||||
SECTION 5.2 | Representations and Warranties of Fortune | A-22 | |||||
SECTION 5.3 | Representations and Warranties of ACCO | A-23 | |||||
ARTICLE VICovenants Relating to Conduct of Business | A-32 | ||||||
SECTION 6.1 | Covenants of GBC | A-32 | |||||
SECTION 6.2 | Covenants of Fortune, ACCO and Acquisition Sub | A-34 | |||||
SECTION 6.3 | SEC Reports | A-37 | |||||
SECTION 6.4 | Control of Other Party’s Business | A-37 | |||||
ARTICLE VIIAdditional Agreements | A-38 | ||||||
SECTION 7.1 | Preparation of Proxy Statement; Stockholder’s Meeting | A-38 | |||||
SECTION 7.2 | ACCO Board of Directors and Management | A-39 | |||||
SECTION 7.3 | Access to Information | A-39 | |||||
SECTION 7.4 | Reasonable Best Efforts | A-39 | |||||
SECTION 7.5 | Acquisition Proposals | A-41 | |||||
SECTION 7.6 | Financing | A-43 | |||||
SECTION 7.7 | Fees and Expenses | A-43 | |||||
SECTION 7.8 | Directors’ and Officers’ Indemnification and Insurance | A-43 | |||||
SECTION 7.9 | Public Announcements | A-44 |
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Page | |||||||
SECTION 7.10 | Accounting Matters | A-44 | |||||
SECTION 7.11 | Listing of Shares of Acco Common Stock | A-44 | |||||
SECTION 7.12 | Affiliates | A-44 | |||||
SECTION 7.13 | Section 16 Matters | A-45 | |||||
SECTION 7.14 | Takeover Statutes | A-45 | |||||
SECTION 7.15 | Advice of Changes | A-45 | |||||
SECTION 7.16 | Covenant Not to Compete | A-45 | |||||
SECTION 7.17 | Interim Financial Information | A-46 | |||||
ARTICLE VIIIConditions Precedent | A-46 | ||||||
SECTION 8.1 | Conditions to Each Party’s Obligation to Effect the Merger | A-46 | |||||
SECTION 8.2 | Additional Conditions to Obligations of GBC | A-47 | |||||
SECTION 8.3 | Additional Conditions to Obligations of ACCO and Acquisition Sub | A-48 | |||||
ARTICLE IXTermination and Amendment | A-48 | ||||||
SECTION 9.1 | Termination | A-48 | |||||
SECTION 9.2 | Effect of Termination | A-49 | |||||
SECTION 9.3 | Amendment | A-50 | |||||
SECTION 9.4 | Extension; Waiver | A-50 | |||||
ARTICLE XGeneral Provisions | A-51 | ||||||
SECTION 10.1 | Non-Survival of Representations, Warranties, Covenants and Agreements | A-51 | |||||
SECTION 10.2 | Notices | A-51 | |||||
SECTION 10.3 | Interpretation | A-52 | |||||
SECTION 10.4 | Counterparts | A-52 | |||||
SECTION 10.5 | Entire Agreement; No Third Party Beneficiaries | A-52 | |||||
SECTION 10.6 | Governing Law | A-52 | |||||
SECTION 10.7 | Severability | A-52 | |||||
SECTION 10.8 | Assignment | A-52 | |||||
SECTION 10.9 | Submission to Jurisdiction; Waivers | A-52 | |||||
SECTION 10.10 | Enforcement | A-53 | |||||
SECTION 10.11 | Disclosure Schedule | A-53 |
Exhibit A | — | Distribution Agreement | ||
Exhibit B | — | Form of ACCO Restated Certificate | ||
Exhibit C | — | Form of ACCO By-Laws | ||
Exhibit D | — | Form of ACCO Rights Agreement | ||
Exhibit E | — | Form of Fortune/ ACCO Tax Allocation Agreement | ||
Exhibit F | — | Services Covered by Transition Services Agreement | ||
Exhibit G | — | Employee Matters Agreement | ||
Exhibit H | — | Form of Lane/ GBC Tax Allocation Agreement | ||
Exhibit I | — | Form of GBC Affiliate Agreement |
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(n) A “Multiemployer Plan” means any “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA. | |
(o) “NYSE” means The New York Stock Exchange, Inc. | |
(p) “Person” means an individual, corporation, limited liability entity, partnership, association, joint venture, trust, unincorporated organization, other entity or group (as defined in the Exchange Act), including any Governmental Entity. | |
(q) “Pre-Distribution Fortune Common Stock Price” means the volume weighted average of the trading price per share of Fortune Common Stock trading on a “regular way” basis (i.e., with due bills and including the value of the ACCO Common Stock to be distributed in respect thereof) as reported on the NYSE Composite Transactions reporting system on the last full NYSE trading day immediately preceding the Time of Distribution (which may be the Distribution Date). | |
(r) “Restricted Geography” means North America, South America, Europe, Asia (including Japan) and Australia and New Zealand. | |
(s) “Subsidiary” when used with respect to any Person means any corporation or other organization, whether incorporated or unincorporated, at least a majority of the securities or other interests of which having by their terms ordinary voting power to elect a majority of the Board of Directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries. | |
(t) “Tax” (and, with correlative meaning, “Taxes” and “Taxable”) shall mean (i) any federal, state, local or foreign net income, gross income, receipts, windfall profit, severance, property, production, sales, use, license, excise, franchise, employment, payroll, withholding, alternative or add-on minimum, ad valorem, transfer, stamp, or environmental tax, or any other tax, customs, duty or other like assessment or charge of any kind whatsoever, together with any interest or penalty, addition to tax or additional amount imposed by any governmental authority; (ii) any liability for payments of a type described in clause (i) as a result of being a member of an affiliated, consolidated, combined, unitary or similar group; and (iii) any liability for the payment of any amounts as a result of being party to a tax sharing arrangement or as a result of any express or implied obligation to indemnify any Person with respect to the payment of amounts of the type described in clause (i) or clause (ii). | |
(u) “Transaction Agreements” means collectively, this Agreement, the Distribution Agreement, the Employee Matters Agreement, the Fortune/ ACCO Tax Allocation Agreement, the Transition Services Agreement and the other agreements, if any, entered into or to be entered into in connection with the Distribution. |
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Term | Section | |
ACCO | Preamble | |
ACCO By-Laws | 2.9 | |
ACCO Common Stock | Recitals | |
ACCO Disclosure Schedule | 5.3 | |
ACCO Financial Statements | 5.3(d)(ii) | |
ACCO Necessary Consents | 5.3(c)(vi) | |
ACCO Permits | 5.3(f)(ii) | |
ACCO Restated Certificate | 2.9 | |
ACCO Restricted Business | 7.16 | |
ACCO Significant Subsidiaries | 5.3(a)(iii) | |
ACCO Voting Debt | 5.3(b)(ii) | |
Acquisition Sub | Preamble | |
Acquisition Sub Common Stock | 2.6 | |
Actions | 5.1(j) | |
Agreement | Preamble | |
Certificate of Merger | 2.3 | |
Change in the GBC Recommendation | 7.1(b) | |
Closing | 2.2 | |
Closing Date | 2.2 | |
Code | 2.7(c) | |
Commitment Letter | Recitals | |
Confidentiality Agreement | 7.3 | |
Contract | 5.1(c)(ii) | |
Credit Facilities | 7.6 | |
Delaware Secretary | 2.3 | |
Deutsche Bank | 5.1(m) | |
DGCL | 2.1 | |
Distribution | Recitals | |
Distribution Agreement | Recitals | |
Distribution Date | Distribution Agreement | |
DOJ | 7.4(b) | |
Effective Time | 2.3 | |
Employee Matters Agreement | 4.1 | |
Engagement Letter | Recitals | |
Environmental Laws | 5.1(j) | |
Environmental Liabilities | 5.1(j) | |
Excess ACCO Shares | 3.2(e)(ii) | |
Exchange Act | 5.1(c)(iii) | |
Exchange Agent | 3.1 | |
Exchange Fund | 3.1 | |
Exchange Ratio | 2.5(a) | |
Expenses | 7.7 |
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Term | Section | |
Financing | 7.6 | |
Foreign Competition Laws | 7.4(a) | |
Form S-4 | 7.1(a) | |
Fortune | Preamble | |
Fortune Common Stock | Distribution Agreement | |
Fortune Converted Option | 2.7(a) | |
Fortune Necessary Consents | 5.2(b)(iii) | |
Fortune Option | 2.7(a) | |
Fortune SEC Reports | 5.3(d)(i) | |
Fortune Stock Plans | 2.7(a) | |
Fortune/ ACCO Tax Allocation Agreement | 4.1 | |
FTC | 7.4(b) | |
GAAP | 5.1(d)(i) | |
GBC | Preamble | |
GBC 2004 Financial Statements | 5.1(d)(i) | |
GBC Acquisition Proposal | 7.5(b) | |
GBC Affiliate Agreement | 7.12 | |
GBC Certificate | 2.5(b) | |
GBC Class B Common Stock | 2.5(a) | |
GBC Common Stock | 2.5(a) | |
GBC Converted Option | 2.8(a) | |
GBC Disclosure Schedule | 5.1 | |
GBC Filed SEC Reports | 5.1(d)(ii) | |
GBC Necessary Consents | 5.1(c)(iii) | |
GBC Permits | 5.1(h)(ii) | |
GBC Recommendation | 7.1(b) | |
GBC Restricted Stock Unit | 2.8(c) | |
GBC SEC Reports | 5.1(d)(i) | |
GBC Stock Options | 5.1(b)(i) | |
GBC Stockholders Meeting | 7.1(b) | |
GBC Voting Debt | 5.1(b)(ii) | |
Goldman Sachs | 5.1(m) | |
Governmental Entity | 5.1(c)(iii) | |
Hazardous Materials | 5.1(j) | |
HSR Act | 5.1(c)(iii) | |
Injunction | 8.1(b) | |
Intellectual Property | 5.1(k) | |
Lane | Recitals | |
Lane/ GBC Tax Allocation Agreement | 4.2 | |
Liens | 5.1(a)(ii) | |
Material Contract | 5.1(p) | |
Merger | Recitals | |
Proxy Statement/ Prospectus | 7.1(a) | |
Required Approvals | 7.4(a) |
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Term | Section | |
Required GBC Vote | 5.1(g) | |
Sarbanes Act | 5.1(d)(i) | |
SEC | 5.1(a)(ii) | |
Securities | Recitals | |
Securities Act | 3.3 | |
Superior GBC Proposal | 7.5(d) | |
Surviving Corporation | Recitals | |
Termination Date | 9.1(b) | |
Time of Distribution | Distribution Agreement | |
Transition Services Agreement | 4.1 | |
Violation | 5.1(c)(ii) |
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(ii) As promptly as practicable following the Effective Time, the Exchange Agent shall determine the excess of (x) the number of full shares of ACCO Common Stock delivered to the |
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Exchange Agent by ACCO pursuant to Section 3.1 for issuance to holders of GBC Certificates pursuant to Section 2.5 over (y) the aggregate number of full shares of ACCO Common Stock to be distributed to holders of GBC Certificates pursuant to this Section 3.2 (such excess being herein referred to as the “Excess ACCO Shares”). As soon as reasonably practicable after the Effective Time, the Exchange Agent, as agent for such holders of GBC Certificates, shall sell the Excess ACCO Shares at then prevailing prices on the NYSE, all in the manner provided in clause (iii) of this Section 3.2(e). | |
(iii) The sale of the Excess ACCO Shares by the Exchange Agent shall be executed on the NYSE through one or more member firms of the NYSE and shall be executed in round lots to the extent practicable. Until the net proceeds of any such sale or sales have been distributed to the holders of GBC Certificates, the Exchange Agent will hold such proceeds in trust for such holders of GBC Certificates as part of the Exchange Fund. ACCO shall pay all commissions, transfer taxes and other out-of-pocket transaction costs of the Exchange Agent incurred in connection with such sale or sales of Excess ACCO Shares. In addition, ACCO shall pay the Exchange Agent’s compensation and expenses in connection with such sale or sales. The Exchange Agent shall determine the portion of such net proceeds to which each holder of GBC Certificates shall be entitled, if any, by multiplying the amount of the aggregate net proceeds by a fraction, the numerator of which is the amount of the fractional share interest to which such holder of GBC Certificates is entitled (after taking into account all GBC Certificates then held by such holder) and the denominator of which is the aggregate amount of fractional share interests to which all holders of GBC Certificates are entitled. As soon as practicable after the determination of the amount of cash, if any, to be paid to holders of GBC Certificates with respect to any fractional share interests, the Exchange Agent shall promptly pay such amounts to such holders of GBC Certificates subject to and in accordance with this Section 3.2, provided that no such cash in lieu of fractional shares of ACCO Common Stock shall be paid to any holder of GBC Common Stock or GBC Class B Common Stock until GBC Certificates formerly representing such GBC Common Stock or GBC Class B Common Stock are surrendered and exchanged in accordance with this Section 3.2. |
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(a) Organization, Standing and Power; Subsidiaries. |
(i) Each of GBC and its Subsidiaries is a corporation or other organization duly organized, validly existing and in good standing (where applicable) under the laws of its jurisdiction of incorporation or organization, has the requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted and as it will be conducted through the Effective Time, except where the failure to be so organized, existing and in good standing or to have such power and authority, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on GBC, and is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, other than in such jurisdictions where the failure so to qualify or to be in good standing, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on GBC. The copies of the certificate of incorporation and by-laws of GBC which were previously furnished or made available to Fortune and ACCO are true, complete and correct copies of such documents as in effect on the date of this Agreement. | |
(ii) Section 5.1(a)(ii) of the GBC Disclosure Schedule sets forth a list of all the Subsidiaries of GBC which as of the date of this Agreement are Significant Subsidiaries of GBC (as defined in Rule 1-02 of Regulation S-X of the Securities and Exchange Commission (the “SEC”)). All the outstanding shares of capital stock of, or other equity interests in, each such Significant Subsidiary have been validly issued and are fully paid and nonassessable and are owned directly or indirectly by GBC, free and clear of all material pledges, claims, liens, charges, encumbrances and security interests of any kind or nature whatsoever (collectively, “Liens”) and free of any other material restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other equity interests, but excluding restrictions under the Securities Act). None of GBC or any of its Subsidiaries directly or indirectly owns any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity (other than Subsidiaries of GBC), that is or would reasonably be expected to be material to GBC and its Subsidiaries taken as a whole. |
(b) Capital Structure. |
(i) The authorized capital stock of GBC consists of 40,000,000 shares of GBC Common Stock and 4,796,550 shares of GBC Class B Common Stock. As of March 13, 2005, 13,921,221 shares of GBC Common Stock and 2,398,275 shares of GBC Class B Common Stock were issued and outstanding and no other shares of capital stock of GBC were issued and outstanding. As of March 13, 2005, (A) 3,102,741 shares of GBC Common Stock and no shares of GBC Class B Common Stock were reserved for issuance upon exercise of options outstanding under GBC Stock Plans (“GBC Stock Options”) and the vesting of GBC Restricted Stock Units outstanding under GBC Stock Plans and (B) 2,680,753 shares of GBC Common Stock were subject to issuance upon exercise of outstanding GBC Stock Options and 257,775 shares of GBC Common Stock were subject to issuance upon the vesting of outstanding GBC Restricted Stock Units. As of March 13, 2005, 1,775,339 shares of GBC Common Stock and no shares of GBC Class B Common Stock were held as treasury shares. Since March 13, 2005 to the date of this Agreement, no shares of capital stock of GBC or any other securities of GBC have been issued other than shares of GBC Common Stock issued pursuant to options or rights outstanding as of March 13, 2005 under the GBC Stock Plans. All issued and outstanding shares of capital stock of GBC are duly authorized, validly issued, fully paid and nonassessable, and no class of capital stock of GBC is entitled to preemptive rights. There are outstanding as of the date hereof, and there will be outstanding at the Effective Time, no options, warrants or other rights to acquire capital stock from GBC other than GBC Stock Options and GBC Restricted Stock Units under the GBC Stock |
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Plans and rights to acquire GBC Common Stock upon conversion of shares of GBC Class B Common Stock. Section 5.1(b) of the GBC Disclosure Schedule sets forth a complete and correct list as of a recent date of all outstanding GBC Stock Options and the exercise prices thereof and all outstanding GBC Restricted Stock Units and the terms of the vesting thereof. | |
(ii) No bonds, debentures, notes or other indebtedness of GBC having the right to vote on any matters on which stockholders of GBC may vote (“GBC Voting Debt”) are issued or outstanding. | |
(iii) Except as otherwise set forth in this Section 5.1(b), as of the date of this Agreement, there are no, and as of the Effective Time (except as permitted pursuant to Section 6.1) there will not be any, securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which GBC or any of its Subsidiaries is a party or by which any of them is bound obligating GBC or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other voting securities of GBC or any of its Subsidiaries or obligating GBC or any of its Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking. As of the date of this Agreement, there are no, and as of the Effective Time (except as permitted pursuant to Section 6.1) there will not be any, outstanding obligations of GBC or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of GBC or any of its Subsidiaries, other than rights to convert shares of GBC Class B Common Stock outstanding on the date hereof into GBC Common Stock in accordance with the present terms of the GBC Class B Common Stock. |
(c) Authority; No Conflicts. |
(i) GBC has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby, subject, in the case of the consummation of the Merger, to the approval and adoption of this Agreement and the Merger by the Required GBC Vote (as defined in Section 5.1(g)). The execution and delivery of this Agreement, the Employee Matters Agreement and the Lane/ GBC Tax Allocation Agreement by GBC and the consummation by GBC of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of GBC, subject in the case of the consummation of the Merger, to the approval and adoption of this Agreement and the Merger by the Required GBC Vote. This Agreement and the Employee Matters Agreement have been, and the Lane/ GBC Tax Allocation Agreement will be, duly executed and delivered by GBC and, assuming the due authorization and valid execution and delivery of this Agreement by each of Fortune, ACCO and Acquisition Sub, the due authorization and valid execution and delivery by Fortune and ACCO of the Employee Matters Agreement and the due authorization and valid execution and delivery of the Lane/ GBC Tax Allocation Agreement by Lane, as applicable, constitute or will constitute valid and binding agreements of GBC, enforceable against GBC in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and similar Applicable Laws relating to or affecting creditors generally or by general equity principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). | |
(ii) The execution and delivery of this Agreement and the Employee Matters Agreement by GBC does not, the execution and delivery of the Lane/ GBC Tax Allocation Agreement by GBC will not, and the consummation by GBC of the Merger and the other transactions contemplated hereby and thereby will not, conflict with, or result in any breach or violation of, or constitute a default (with or without notice or lapse of time, or both) under, or give rise to a right of or result by its terms in the termination, amendment, cancellation or acceleration of any obligation or the loss of a material benefit under, or the creation of a Lien, charge, “put” or “call” right or other encumbrance on, or the loss of, any assets (any such conflict, breach, violation, default, right of termination, amendment, cancellation or acceleration, loss or creation, a “Violation”) pursuant to: |
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(A) any provision of the certificate of incorporation or by-laws or similar organizational documents of GBC or any Significant Subsidiary of GBC or (B) except as, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on GBC or, to the Knowledge of GBC, ACCO after giving effect to the Merger, subject to obtaining or making the GBC Necessary Consents (as defined in paragraph (iii) below), (I) any loan or credit agreement, note, instrument, mortgage, bond, indenture, lease, benefit plan or other contract, agreement or obligation (a “Contract”) to which GBC or any of its Subsidiaries is a party or by which any of them or any of their respective properties or assets is bound or (II) any permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to GBC or any Subsidiary of GBC or their respective properties or assets. | |
(iii) No consent, approval, order or authorization of, or registration, declaration or filing with, any supranational, national, federal, state, municipal, local or foreign government, any instrumentality, subdivision, court, administrative agency, board, commission or other authority thereof, any arbitral tribunal, or any quasi-governmental or private body exercising any regulatory, taxing, importing or other governmental or quasi-governmental authority (a “Governmental Entity”) or any other Person is required by or with respect to GBC or any Subsidiary of GBC in connection with the execution and delivery of this Agreement, the Employee Matters Agreement and the Lane/ GBC Tax Allocation Agreement by GBC or the consummation by GBC of the Merger and the other transactions contemplated hereby and thereby, except for those required under or in relation to (A) the Required GBC Vote, (B) the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), (C) state securities or “blue sky” laws, (D) the Securities Act, (E) the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (F) the DGCL with respect to the filing of the Certificate of Merger with the Delaware Secretary, (G) the rules and regulations of The Nasdaq Stock Market, Inc., (H) antitrust or other competition laws of other jurisdictions and (I) such consents, approvals, orders, authorizations, registrations, declarations and filings the failure of which to make or obtain, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on GBC. Consents, approvals, orders, authorizations, registrations, declarations and filings required under or in relation to any of the foregoing clauses (A) through (H) or set forth in Section 5.1(c)(iii) of the GBC Disclosure Schedule are hereinafter referred to as “GBC Necessary Consents”. |
(d) Reports and Financial Statements. |
(i) Each of GBC and its Subsidiaries has filed all registration statements, prospectuses, reports, schedules, forms, statements and other documents required to be filed by it with the SEC since January 1, 2002 (collectively, including all exhibits thereto, the “GBC SEC Reports”). No Subsidiary of GBC is required to file any form, report, registration statement, prospectus or other document with the SEC. None of the GBC SEC Reports, at the time it was filed (or, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing), contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Included in Section 5.1(d)(i) of the GBC Disclosure Schedule are the consolidated balance sheet of GBC and its Subsidiaries as of December 31, 2004 and the related consolidated statements of income, cash flows and stockholders’ equity for the year ended December 31, 2004 (such statements, together with the notes thereto, the “GBC 2004 Financial Statements”). Each of the GBC 2004 Financial Statements and each of the financial statements (including the related notes) included in the GBC SEC Reports fairly presents, in all material respects, the consolidated financial position and consolidated results of operations and cash flows of GBC and its consolidated Subsidiaries as of the respective dates or for the respective periods set forth therein, all in conformity with generally accepted accounting principles (“GAAP”) consistently applied during the periods involved except as otherwise noted therein, and subject, in the case of unaudited interim financial statements, to normal and recurring year-end adjustments. All GBC SEC Reports, as of their respective filing dates (and as of the date of any amendment to |
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the respective GBC SEC Report), complied as to form in all material respects to the extent in effect at the time of filing, with the applicable requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act of 2002 (the “Sarbanes Act”) and the rules and regulations promulgated thereunder. | |
(ii) Except as disclosed in the GBC SEC Reports filed and publicly available prior to the date hereof (the “GBC Filed SEC Reports”) or in the GBC 2004 Financial Statements, since January 1, 2005, GBC and its Subsidiaries have not incurred any liabilities that are of a nature that would be required to be disclosed on a consolidated balance sheet of GBC and its Subsidiaries or in the footnotes thereto prepared in conformity with GAAP, other than liabilities incurred in the ordinary course of business or that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on GBC. | |
(iii) Each of the principal executive officer of GBC and the principal financial officer of GBC (or each former principal executive officer of GBC and each former principal financial officer of GBC, as applicable) has made all certifications required by Rule 13a-14 or 15d-14 under the Exchange Act and Sections 302 and 906 of the Sarbanes Act with respect to the GBC SEC Reports and the statements contained in such certifications are true, complete and correct. For purposes of this Section 5.1(d), “principal executive officer” and “principal financial officer” shall have the meanings given to such terms in the Sarbanes Act. | |
(iv) GBC and its Subsidiaries have designed and maintain a system of internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. GBC (A) has designed and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) to ensure that material information required to be disclosed by GBC in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to GBC’s management as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the principal executive officer and principal financial officer of GBC required under the Exchange Act with respect to such reports and (B) has disclosed, based on its most recent evaluation of such disclosure controls and procedures prior to the date hereof to GBC’s auditors and the audit committee of GBC’s Board of Directors (x) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect in any material respect GBC’s ability to record, process, summarize and report financial information and (y) any fraud, whether or not material, that involves management or other employees who have a significant role in GBC’s internal controls over financial reporting. GBC has made available to Fortune and ACCO any such disclosure made by management to GBC’s auditors and the audit committee of GBC’s Board of Directors. |
(e) Information Supplied. |
(i) None of the information supplied or to be supplied by GBC for inclusion or incorporation by reference in (A) the Form S-4 (as defined in Section 7.1(a)) will, at the time the Form S-4 is filed with the SEC, at any time it is amended or supplemented or at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and (B) the Proxy Statement/ Prospectus (as defined in Section 7.1(a)) will, on the date it is first mailed to Fortune stockholders or GBC stockholders or at the time of the GBC Stockholders Meeting (as defined in Section 7.1(b)), contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. |
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(ii) Notwithstanding the foregoing provisions of this Section 5.1(e), no representation or warranty is made by GBC with respect to statements made or incorporated by reference in the Form S-4 or the Proxy Statement/ Prospectus based on information supplied by or on behalf of Fortune, ACCO or Acquisition Sub for inclusion or incorporation by reference therein. |
(f) Board Approval. The Board of Directors of GBC, by resolutions duly adopted by unanimous vote at a meeting duly called and held and, other than as provided for in Section 7.5, notsubsequently rescinded or modified in any way, has duly (i) determined that this Agreement and the Merger are advisable and in the best interests of GBC and its stockholders, (ii) approved this Agreement and the Merger, (iii) resolved to recommend that the stockholders of GBC approve and adopt this Agreement and the Merger and directed that this Agreement and the Merger be submitted for consideration by GBC’s stockholders at the GBC Stockholders Meeting and (iv) taken all other action necessary to render the limitations on business combinations contained in Section 203 of the DGCL (or any similar provision) inapplicable to the transactions contemplated hereby. To the Knowledge of GBC, except for the limitations on business combinations contained in Section 203 of the DGCL (which have been rendered inapplicable), no “fair price”, “moratorium”, “control share acquisition” or other form of antitakeover statute or regulation is applicable to the Merger or the other transactions contemplated hereby. | |
(g) Vote Required. The affirmative vote of shares representing a majority in voting power of the outstanding shares of GBC Common Stock and GBC Class B Common Stock, voting together as a single class (the “Required GBC Vote”) to approve and adopt this Agreement and the Merger is the only vote of the holders of any class or series of GBC capital stock necessary to approve or adopt this Agreement and the Merger and the other transactions contemplated hereby. | |
(h) Litigation; Compliance with Laws. |
(i) Except as set forth in the GBC Filed SEC Reports or in the GBC 2004 Financial Statements, there is no suit, action, proceeding, charge or regulatory investigation pending or, to the Knowledge of GBC, threatened against GBC or any Subsidiary of GBC or any property or asset of GBC or any Subsidiary of GBC which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on GBC, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against GBC or any Subsidiary of GBC which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on GBC. | |
(ii) Except as, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on GBC, GBC and its Subsidiaries hold all permits, licenses, franchises, variances, exemptions, orders and approvals of all Governmental Entities which are necessary for the operation of the businesses of GBC and its Subsidiaries, taken as a whole (the “GBC Permits”), and no suspension or cancellation of any of the GBC Permits is pending or, to the Knowledge of GBC, threatened, except for suspensions or cancellations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on GBC. GBC and its Subsidiaries are in compliance with the terms of the GBC Permits, except where the failure so to comply, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on GBC. None of GBC or any of its Subsidiaries is in violation of, and GBC and its Subsidiaries have not received since January 1, 2002 any written notices of violations with respect to, any Applicable Laws, except for violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on GBC. |
(i) Absence of Certain Changes or Events. Except as set forth in the GBC Filed SEC Reports or in the GBC 2004 Financial Statements, since January 1, 2005, (i) GBC and its Subsidiaries have conducted their business only in the ordinary course, consistent with past practice, and (ii) there has not been any event, change, circumstance or development which, individually or in the aggregate, hashad, or would reasonably be expected to have, a Material Adverse Effect on GBC. Since January 1, 2005 through the date of this Agreement, none of GBC or any of its Subsidiaries has taken any action |
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that, if taken during the period from the date of this Agreement through the Effective Time, would constitute a breach of Section 6.1. | |
(j) Environmental Matters. Except as, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on GBC, (i) the operations of GBC and its Subsidiaries have been and are in compliance with all applicable Environmental Laws (as defined below) and with all GBC Permits required by applicable Environmental Laws, (ii) there are no pending or, to the Knowledge of GBC, threatened, actions, suits, claims, investigations or other proceedings (collectively, “Actions”) under or pursuant to Environmental Laws against GBC, its Subsidiaries, or, to the Knowledge of GBC, any other Person whose Environmental Liabilities (as defined below) GBC or any of its Subsidiaries has or may have retained or assumed by contract or operation of law, or involving any real property currently or, to the Knowledge of GBC, formerly owned, operated or leased by GBC or its Subsidiaries, and (iii) GBC, its Subsidiaries and, to the Knowledge of GBC, Persons whose Environmental Liabilities GBC or any of its Subsidiaries has or may have retained or assumed by contract or operation of law are not subject to any Environmental Liabilities, and, to the Knowledge of GBC, there are no facts, circumstances or conditions (including without limitation the presence, release or threatened release of Hazardous Materials at any location whether or not owned or operated by GBC or its Subsidiaries) which would reasonably be expected to result in Environmental Liabilities for GBC, its Subsidiaries, or, to the Knowledge of GBC, any other Person whose Environmental Liabilities GBC or any of its Subsidiaries has or may have retained or assumed by contract or operation of law. The representations and warranties in this Section 5.1(j) constitute the sole representations and warranties of GBC concerning environmental matters in this Agreement. | |
As used in this Agreement, “Environmental Laws” means any and all foreign, federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decisions, injunctions, orders, decrees, requirements of any Governmental Entity, any and all common law requirements, rules and bases of liability regulating, relating to or imposing liability or standards of conduct, in each case, concerning pollution, Hazardous Materials (as defined below) or protection of human health or the environment, and includes the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601et seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901et seq., the Clean Water Act, 33 U.S.C. Section 1251et seq., the Clean Air Act, 33 U.S.C. Section 2601et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601et seq., the Occupational Safety and Health Act, 29 U.S.C. Section 651et seq. (but solely as it relates to the exposure of Hazardous Materials) and the Oil Pollution Act of 1990, 33 U.S.C. Section 2701et seq., as such laws have been amended or supplemented, and the regulations promulgated pursuant thereto, and all analogous state or local statutes. As used in this Agreement, “Environmental Liabilities” with respect to any Person means any and all liabilities of or relating to such Person or any of its Subsidiaries (including any entity which is, in whole or in part, a predecessor of such Person or any of such Subsidiaries), whether vested or unvested, contingent or fixed, actual or potential, known or unknown, which (i) arise under or relate to matters covered or regulated by, or for which liability is imposed under, Environmental Laws and (ii) relate to actions occurring or conditions existing on or prior to the Closing Date. As used in this Agreement, “Hazardous Materials” means all substances defined as Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R. § 300.5., any toxic mold or any substances defined as such by, or regulated as such under, any Environmental Law. | |
(k) Intellectual Property. Except as set forth in the GBC Filed SEC Reports and except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on GBC: (i) GBC and each of its Subsidiaries own, or are licensed to use, all Intellectual Property (as defined below) used in the conduct of its business as currently conducted; (ii) to the Knowledge of GBC, the use of any Intellectual Property by GBC and its Subsidiaries does not infringe on or otherwise violate the rights of any Person; (iii) the use by or, to the Knowledge of GBC, on behalf of, GBC and its Subsidiaries of Intellectual Property which is licensed to GBC or any Subsidiary is in |
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substantial accordance with the terms of the applicable license agreement pursuant to which GBC or its Subsidiaries acquired the right to use such Intellectual Property; (iv) to the Knowledge of GBC, no Person is infringing or otherwise violating any right of GBC or any of its Subsidiaries with respect to any Intellectual Property owned by and/or licensed to GBC or its Subsidiaries; (v) to the Knowledge of GBC, there is no claim or proceeding pending against GBC or any Subsidiary challenging their respective use of Intellectual Property, and (vi) to the Knowledge of GBC, no Intellectual Property owned and/or licensed by GBC or its Subsidiaries is being used or enforced by GBC or any Subsidiary in a manner that would reasonably be expected to result in the abandonment, cancellation or unenforceability of such Intellectual Property. For purposes of this Agreement, “Intellectual Property” shall mean trademarks, service marks, brand names, certification marks, trade dress and other indications of origin, the goodwill connected with or symbolized by the foregoing, and registrations in any jurisdiction of, and applications in any jurisdiction to register, the foregoing, including any extension, modification or renewal of any such registration or application; Internet domain names and the registrations therefore; inventions and discoveries, whether patentable or not, in any jurisdiction; patents, applications for patents (including divisions, continuations and continuations in part), and any reissues or reexaminations thereof and rights to apply for any of the foregoing, in any jurisdiction; nonpublic information, trade secrets and confidential information to the extent that rights exist in any jurisdiction to limit the use or disclosure thereof by any Person; writings and other works that are protected by copyright in any jurisdiction (including, but not limited to, computer software and databases); registrations or applications for registration of copyrights in any jurisdiction, and any renewals or extensions thereof; and any similar intellectual property or proprietary rights. | |
(l) Title to Properties; Assets/Services. |
(i) Each of GBC and its Subsidiaries has good and valid title to, or, in the case of leased properties and assets, valid leasehold interests in, all of its tangible properties and assets, except where the failure to have such good and valid title, or valid leasehold interest, would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on GBC. | |
(ii) Except as otherwise contemplated by this Agreement (including as permitted pursuant to Section 6.1), immediately prior to the consummation of the Merger, GBC and its Subsidiaries, taken as a whole, will own, lease, license or have the legal right to use all of the material assets, rights and properties used or held for use by GBC and its Subsidiaries in the conduct of their businesses as currently conducted. | |
(iii) Section 5.1(l) of the GBC Disclosure Schedule lists all material services provided to GBC or any of its Subsidiaries by Lane or any of its Subsidiaries (other than GBC or any of its Subsidiaries) as of the date hereof. |
(m) Brokers or Finders. No agent, broker, investment banker, financial advisor or other firm or Person is or will be entitled to any broker’s or finder’s fee or any other similar commission or fee in connection with any of the transactions contemplated by this Agreement based upon arrangementsmade by or on behalf of GBC or any of its Subsidiaries, except Goldman, Sachs & Co. (“Goldman Sachs”) and Deutsche Bank Securities Inc. (“Deutsche Bank”), each of whose fees and expenses will be paid by GBC at the Closing. | |
(n) Opinion of GBC Financial Advisor. GBC has received the opinions of Goldman Sachs and Deutsche Bank, each dated the date of this Agreement, to the effect that, as of such date, the consideration to be received by GBC’s stockholders in the Merger is fair, from a financial point of view, to GBC’s stockholders. | |
(o) Taxes. |
(i) All tax returns and reports required to be filed with respect to each of GBC and its Subsidiaries have been timely filed, or requests for extensions to file such returns or reports have been timely filed, granted and have not expired, and all such returns and reports are complete and correct, except to the extent that such failures to file, to have extensions granted that remain in |
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effect or to be complete or correct, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on GBC. All Taxes shown as due on such returns have been paid. | |
(ii) No deficiencies for any Taxes have been proposed, asserted or assessed in writing in respect of or against GBC or any of its Subsidiaries that are not adequately reserved for on the books of GBC, except for deficiencies that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on GBC. The applicable statutes of limitations have expired for all Tax periods through 1992 for the federal income tax returns of GBC and each of its Subsidiaries consolidated in such returns. | |
(iii) None of GBC or any of its Subsidiaries has taken any action, and GBC has no Knowledge of any fact, agreement, plan or other circumstance, that is reasonably likely to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code. |
(iv) None of GBC or any of its Subsidiaries is a party to any Tax sharing or Tax indemnity agreements (other than agreements between or among GBC and its Subsidiaries). | |
(v) Within the past five years, none of GBC or any of its Subsidiaries has been a “distributing corporation” or a “controlled corporation” in a distribution intended to qualify under Section 355(a) of the Code. |
(vi) Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on GBC, none of GBC or any of its Subsidiaries is obligated to make any payments, or is a party to any contract that could obligate it to make any payments, that would not be deductible by reason of Section 162(m) or Section 280G of the Code. | |
(vii) None of GBC or any of its Subsidiaries has agreed to make, or is required to make, any material adjustment under Section 481(a) of the Code or any similar provision of state, local or foreign law by reason of a change in accounting methods or otherwise. | |
(viii) Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on GBC, neither GBC or any of its Subsidiaries has any deferred intercompany gains or losses as defined in Treasury Regulations section 1.1502-13 (nor any gains or losses treated as deferred intercompany gains or losses for income tax purposes). |
(p) Certain Contracts. As of the date hereof, none of GBC or any of its Subsidiaries is a party to or bound by (i) any contract, lease or compensatory plan, contract or arrangement of the type required to be disclosed pursuant to Item 601(b)(10) of Regulation S-K of the SEC (without giving effect to any ordinary course of business exception set forth therein) (“Material Contracts”) or (ii) any non-competition agreement or any other Contract that limits or otherwise restricts GBC or any of its Subsidiaries or any of their respective affiliates or any successor thereto, or that would, after the Effective Time, to the Knowledge of GBC, limit or restrict ACCO or any of its Subsidiaries or any of their respective affiliates or any successor thereto, from engaging or competing in any line of business in any geographic area, which agreements or other Contracts, to the Knowledge of GBC, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on ACCO, after giving effect to the Merger. All Material Contracts of GBC and its Subsidiaries are valid and binding on GBC and its Subsidiaries, as applicable, and in full force and effect except to the extent they have previously expired in accordance with their terms or if the failure to be in full force and effect, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on GBC. None of GBC or any of its Subsidiaries (or, to the Knowledge of GBC, any other party thereto) has violated any provision of, or committed or failed to perform any act which with or without notice, lapse of time or both would constitute a default under the provisions of, any Contract of GBC or any of its Subsidiaries, except in each case for those violations and defaults which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on GBC. |
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(q) Employee Benefits. |
(i) Section 5.1(q)(i) of the GBC Disclosure Schedule contains a true and complete list of the GBC Plans. With respect to each GBC Plan, except for GBC Plans the liabilities under which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on GBC, GBC has made available to Fortune and ACCO a true, correct and complete copy of: (A) all plan documents, trust agreements, and insurance contracts and other funding vehicles; (B) the two most recent Annual Reports (Form 5500 Series) and accompanying schedules and exhibits, if any; (C) the current summary plan description and any material modifications thereto, if any (in each case, whether or not required to be furnished under ERISA); (D) the two most recent annual financial reports, if any; (E) the two most recent actuarial reports, if any; (F) the most recent determination letter from the IRS, if any; and (G) the annual compliance testing under Sections 401(a) through 416 of the Code for the two most recently completed plan years, if any. | |
(ii) Except in each case as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on GBC, as of the date hereof, (A) with respect to each GBC Plan, GBC and its ERISA Affiliates and other Subsidiaries have complied with, and are now in compliance with, to the extent applicable, all provisions of ERISA, the Code and all other Applicable Laws and regulations applicable to such GBC Plans and each GBC Plan has been operated and administered in accordance with its terms, (B) no liability under Title IV or Section 302 of ERISA has been incurred by GBC or any of its ERISA Affiliates and other Subsidiaries that has not been satisfied in full, and no condition exists that presents a material risk to GBC or any of its ERISA Affiliates and other Subsidiaries of incurring any such liability, other than liability for premiums due the Pension Benefit Guaranty Corporation, (C) with respect to each GBC Plan that is subject to Section 302 or Title IV of ERISA or Section 412 of the Code, the present value of accrued benefits under such GBC Plan, based upon the actuarial assumptions used for funding purposes in the most recent actuarial report prepared by such GBC Plan’s actuary with respect to such GBC Plan did not exceed, as of its latest valuation date, the then current value of the assets of such GBC Plan allocable to such accrued benefits, and (D) all GBC Plans subject to the Applicable Laws of any jurisdiction outside of the United States (1) have been maintained in accordance with all applicable requirements, (2) if they are intended to qualify for special tax treatment meet all requirements for such treatment, and (3) if they are intended to be funded and/or book-reserved are fully funded and/or book-reserved, as appropriate, based upon reasonable actuarial assumptions. | |
(iii) As of the date hereof, none of GBC or any of its Subsidiaries has any liability under or obligation to any Multiemployer Plan. The GBC Plans provide benefits only to employees and former employees of GBC and its Subsidiaries. | |
(iv) The consummation of the transactions contemplated by this Agreement will not, either alone or in combination with another event, (i) entitle any current or former employee or officer of GBC or any of its Subsidiaries to material severance pay, unemployment compensation or any other payment or (ii) accelerate the time of payment or vesting of benefits, or materially increase the amount of compensation, due any such employee or officer. |
(r) Labor Relations. As of the date of this Agreement: (i) none of GBC or any of its Subsidiaries is a party to any collective bargaining agreement, work rules or practices, or any other labor-related agreements or arrangements with any labor union, labor organization or works council; there are no labor agreements, collective bargaining agreements, work rules or practices, or any other labor-related agreements or arrangements that pertain to any of the employees of GBC or any of its Subsidiaries; and no employees of GBC or any of its Subsidiaries are represented by any labor organization with respect to their employment with GBC or any of its Subsidiaries; (ii) except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on GBC, no labor organization or group of employees of GBC or any of its Subsidiaries has made a |
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pending demand for recognition or certification, and there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or, to the Knowledge of GBC, threatened to be brought or filed, with the National Labor Relations Board or any other domestic or foreign labor relations tribunal or authority, and to the Knowledge of GBC, there are no labor union organizing activities with respect to any employees of GBC or any of its Subsidiaries and (iii) except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on GBC, since January 1, 2002, there have been no actual, or to the Knowledge of GBC, threatened strikes, work stoppages, slowdowns, lockouts, arbitrations, grievances or other labor disputes against or involving GBC or any of its Subsidiaries. | |
(s) Insurance. GBC maintains insurance coverage with reputable insurers in such amounts and covering such risks as are in accordance with normal industry practice for companies engaged in businesses similar to that of GBC (taking into account the cost and availability of such insurance). | |
(t) Liens. No Liens exist on any assets of GBC or any of its Subsidiaries, except as would not, individuallyor in the aggregate, reasonably be expected to have a Material Adverse Effect on GBC. | |
(u) Affiliate Transactions. Except as set forth in the GBC Filed SEC Reports, there is not, and since January 1, 2004, there has not been, any transaction, series ofsimilar transactions, proposed transaction, contract, arrangement, commitment, understanding or relationship of a type that would be required to be disclosed by GBC under Item 404 of SEC Regulation S-K. |
(a) Organization. Fortune is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. | |
(b) Authority; No Conflicts. |
(i) Fortune has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby, subject to the further action of the Board of Directors of Fortune to establish the Record Date and the Distribution Date (each as defined in the Distribution Agreement) and provided that the effectiveness of the declaration of the Distribution by the Board of Directors of Fortune is subject to the satisfaction of the conditions set forth in the Distribution Agreement. The execution and delivery of this Agreement and the other Transaction Agreements to which Fortune is a party by Fortune and the consummation by Fortune of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of Fortune, subject to the further action of the Board of Directors of Fortune to establish the Record Date and the Distribution Date and provided that the effectiveness of the declaration of the Distribution by the Board of Directors of Fortune is subject to the satisfaction of the conditions set forth in the Distribution Agreement. The approval of Fortune’s stockholders is not required to effect the transactions contemplated by this Agreement or any other Transaction Agreement. This Agreement has been, and the other Transaction Agreements to which Fortune is a party will be, duly executed and delivered by Fortune and, assuming the due authorization and valid execution and delivery of this Agreement and the other Transaction Agreements to which Fortune is a party by the other parties hereto and thereto, as applicable, constitute or will constitute valid and binding agreements of Fortune, enforceable against Fortune in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and similar Applicable Laws relating to or affecting creditors generally or by general equity principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). | |
(ii) The execution and delivery by Fortune of this Agreement does not, the execution and delivery by Fortune of the other Transaction Agreements to which Fortune is a party will not, and the consummation by Fortune of the Distribution and the other transactions contemplated hereby and thereby will not result in a Violation pursuant to: (A) any provision of the certificate of |
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incorporation or by-laws of Fortune or (B) except as, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on ACCO as of the date hereof or, to the Knowledge of Fortune, after giving effect to the Merger, or to have a material adverse effect on the ability of Fortune to consummate the Distribution and the other transactions contemplated by the other Transaction Agreements, subject to obtaining or making the Fortune Necessary Consents (as defined in paragraph (iii) below), (I) any Contract to which Fortune, ACCO or any of their respective Subsidiaries is a party or by which any of their respective properties or assets is bound or (II) any permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Fortune, ACCO or any Subsidiary of Fortune or ACCO or their respective properties or assets. | |
(iii) No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity or any other Person is required by or with respect to Fortune in connection with the execution and delivery of this Agreement and the other Transaction Agreements to which Fortune is a party by Fortune or the consummation by Fortune of the Distribution and the other transactions contemplated hereby and thereby, except for those required under or in relation to (A) the HSR Act, (B) state securities or “blue sky” laws, (C) the Securities Act, (D) the Exchange Act, (E) the DGCL with respect to the filing of the Certificate of Merger with the Delaware Secretary, (F) the rules and regulations of the NYSE, (G) antitrust or other competition laws of other jurisdictions, (H) further action of the Board of Directors of Fortune to establish the Record Date and the Distribution Date, and the effectiveness of the declaration of the Distribution by the Board of Directors of Fortune (which is subject to the satisfaction of the conditions set forth in the Distribution Agreement) and (I) such consents, approvals, orders, authorizations, registrations, declarations and filings the failure of which to make or obtain, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on ACCO or to have a material adverse effect on the ability of Fortune to consummate the Distribution and the other transactions contemplated by the other Transaction Agreements. Consents, approvals, orders, authorizations, registrations, declarations and filings required under or in relation to any of the foregoing clauses (A) through (H) are hereinafter referred to as the “Fortune Necessary Consents”. | |
(iv) The Board of Directors of Fortune, by resolutions duly adopted by unanimous vote at a meeting duly called and held and not subsequently rescinded or modified in any way, has duly (A) determined that this Agreement and the Distribution Agreement are advisable and in the best interests of Fortune and its stockholders and (B) approved this Agreement and the Distribution Agreement. |
(a) Organization, Standing and Power; Subsidiaries. |
(i) Each of ACCO and its Subsidiaries is a corporation or other organization duly organized, validly existing and in good standing (where applicable) under the laws of its jurisdiction of incorporation or organization, has the requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted and as it will be conducted through the Effective Time, except where the failure to be so organized, existing and in good standing or to have |
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such power and authority, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on ACCO, and is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, other than in such jurisdictions where the failure so to qualify or to be in good standing, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on ACCO. The copies of the certificate of incorporation and by-laws of ACCO which were previously furnished or made available to GBC are true, complete and correct copies of such documents as in effect on the date of this Agreement. | |
(ii) Acquisition Sub is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Acquisition Sub is a direct wholly-owned subsidiary of ACCO. The copies of the certificate of incorporation and by-laws of Acquisition Sub which were previously furnished or made available to GBC are true, complete and correct copies of such documents as in effect on the date of this Agreement. | |
(iii) Section 5.3(a)(iii) of the ACCO Disclosure Schedule sets forth a list of the Subsidiaries of ACCO which as of the date of this Agreement would be Significant Subsidiaries of ACCO (as defined in Rule 1-02 of Regulation S-X of the SEC) if the Distribution had occurred immediately prior to the date hereof (the “ACCO Significant Subsidiaries”). All the outstanding shares of capital stock of, or other equity interests in, each ACCO Significant Subsidiary have been validly issued and are fully paid and nonassessable and are owned directly or indirectly by ACCO, free and clear of all material Liens and free of any other material restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other equity interests, but excluding restrictions under the Securities Act). None of ACCO or any of its Subsidiaries directly or indirectly owns any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity (other than Subsidiaries of ACCO) that is or would reasonably be expected to be material to ACCO and its Subsidiaries taken as a whole. |
(b) Capital Structure. |
(i) On the date hereof, the authorized capital stock of ACCO consists of 100,000 shares of ACCO Common Stock. On the date hereof, 53,476 shares of ACCO Common Stock are issued and outstanding and no other shares of capital stock of ACCO are issued and outstanding. All issued and outstanding shares of capital stock of ACCO are duly authorized, validly issued, fully paid and nonassessable, and no class of capital stock of ACCO is entitled to preemptive rights. There are outstanding as of the date hereof, and except as provided for in or permitted by the Transaction Agreements, there will be outstanding at the Effective Time, no options, warrants or other rights to acquire capital stock from ACCO. Section 5.3(b)(i) of the ACCO Disclosure Schedule sets forth a complete and correct list as of the date of this Agreement of (A) all holders of record of shares of ACCO Common Stock and (B) the number of shares of ACCO Common Stock held of record by each such holder, and a complete and correct list as of a recent date of all outstanding Fortune Options and the exercise prices thereof. | |
(ii) No bonds, debentures, notes or other indebtedness of ACCO having the right to vote on any matters on which stockholders of ACCO may vote (“ACCO Voting Debt”) are issued or outstanding. | |
(iii) On the date hereof, the authorized capital stock of Acquisition Sub consists of 1,000 shares of Acquisition Sub Common Stock. | |
(iv) Except as otherwise set forth in this Section 5.3(b) or as provided for in the Transaction Agreements, as of the date of this Agreement, there are no, and except as provided for in or permitted by the Transaction Agreements, as of the Effective Time there will not be any, securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which ACCO or any of its Subsidiaries is a party or by which any of them is bound |
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obligating ACCO or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other voting securities of ACCO or any of its Subsidiaries or obligating ACCO or any of its Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking. As of the date of this Agreement, there are no, and except as provided for in or permitted by the Transaction Agreements, as of the Effective Time there will not be any, outstanding obligations of ACCO or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of ACCO or any of its Subsidiaries. |
(c) Authority; No Conflicts. |
(i) ACCO has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the other Transaction Agreements to which ACCO is a party by ACCO and the consummation by ACCO of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of ACCO. The majority stockholder of ACCO has duly approved and adopted this Agreement and the Merger and has duly approved the transactions contemplated hereby, such approval being the only approval of stockholders of ACCO necessary to adopt this Agreement. No approval of ACCO’s stockholders after the Distribution Date will be required to effect the transactions contemplated by this Agreement. This Agreement has been, and the other Transaction Agreements to which ACCO is a party will be, duly executed and delivered by ACCO and, assuming the due authorization and valid execution and delivery of this Agreement and the other Transaction Agreements to which ACCO is a party by the other parties hereto and thereto, as applicable, constitute or will constitute valid and binding agreements of ACCO, enforceable against ACCO in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and similar Applicable Laws relating to or affecting creditors generally or by general equity principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). | |
(ii) Acquisition Sub has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Acquisition Sub and the consummation by Acquisition Sub of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Acquisition Sub. ACCO, as the sole stockholder of Acquisition Sub, has duly approved and adopted this Agreement and the Merger and has duly approved the transactions contemplated hereby. This Agreement has been duly executed and delivered by Acquisition Sub and, assuming the due authorization and valid execution and delivery of this Agreement by the other parties hereto, constitutes a valid and binding agreement of Acquisition Sub, enforceable against Acquisition Sub in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and similar Applicable Laws relating to or affecting creditors generally or by general equity principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). | |
(iii) The execution and delivery by ACCO of this Agreement does not, the execution and delivery by ACCO of the other Transaction Agreements to which ACCO is a party will not, and the consummation by ACCO of the Distribution, the Merger and the other transactions contemplated hereby and thereby will not result in a Violation pursuant to: (A) any provision of the certificate of incorporation or by-laws or similar organizational documents of ACCO, any ACCO Significant Subsidiary or Acquisition Sub or (B) except as, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on ACCO as of the date hereof or, to the Knowledge of ACCO, after giving effect to the Merger, subject to obtaining or making the ACCO Necessary Consents (as defined in paragraph (vi) below), (I) any Contract to which ACCO or any of its Subsidiaries is a party or by which any of them or any of their respective properties or assets is bound or (II) any permit, concession, franchise, license, judgment, |
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order, decree, statute, law, ordinance, rule or regulation applicable to ACCO or any Subsidiary of ACCO or their respective properties or assets. | |
(iv) The Board of Directors of ACCO, by resolutions duly adopted by unanimous written consent and not subsequently rescinded or modified in any way, has duly (A) determined that this Agreement and the Merger are advisable and in the best interests of ACCO and its stockholders and (B) approved this Agreement, the Merger and the Distribution Agreement. | |
(v) The execution, delivery and performance by Acquisition Sub of this Agreement and the consummation by Acquisition Sub of the transactions contemplated hereby will not contravene or conflict with Acquisition Sub’s certificate of incorporation or Acquisition Sub’s by-laws. | |
(vi) No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity or any other Person is required by or with respect to ACCO or any Subsidiary of ACCO in connection with the execution and delivery of this Agreement and the other Transaction Agreements to which ACCO is a party by ACCO or the consummation by ACCO of the Distribution and the Merger and the other transactions contemplated hereby and thereby, except for those required under or in relation to (A) the HSR Act, (B) state securities or “blue sky” laws, (C) the Securities Act, (D) the Exchange Act, (E) the DGCL with respect to the filing of the Certificate of Merger with the Delaware Secretary, (F) the rules and regulations of the NYSE, (G) antitrust or other competition laws of other jurisdictions, (H) further action of the Board of Directors of Fortune to establish the Record Date and the Distribution Date, and the effectiveness of the declaration of the Distribution by the Board of Directors of Fortune (which is subject to the satisfaction of the conditions set forth in the Distribution Agreement) and (I) such consents, approvals, orders, authorizations, registrations, declarations and filings the failure of which to make or obtain, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on ACCO. Consents, approvals, orders, authorizations, registrations, declarations and filings required under or in relation to any of the foregoing clauses (A) through (H) or set forth in Section 5.3(c)(vi) of the ACCO Disclosure Schedule are hereinafter referred to as the “ACCO Necessary Consents”. |
(i) As of the date hereof, neither ACCO nor any of its Subsidiaries is required to file any form, report, registration statement, prospectus or other document with the SEC. With respect to ACCO and its Subsidiaries, none of the registration statements, prospectuses, reports, schedules, forms, statements and other documents required to be filed by Fortune and its Subsidiaries with the SEC since January 1, 2002 (collectively, including all exhibits thereto, the “Fortune SEC Reports”), at the time it was filed (or, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing), contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. | |
(ii) Included in Section 5.3(d)(ii) of the ACCO Disclosure Schedule are the consolidated balance sheets of ACCO and Subsidiaries as of December 27, 2004, 2003 and 2002, and the consolidated statements of income, cash flows and stockholders’ equity for the years ended December 27, 2004, 2003 and 2002 (such statements, together with the notes thereto, the “ACCO Financial Statements”). The ACCO Financial Statements (including the related notes) fairly present, in all material respects, the consolidated financial position and consolidated results of operations and cash flows of ACCO and its consolidated Subsidiaries as of the respective dates or for the respective periods set forth therein, all in conformity with GAAP consistently applied during the periods involved except as otherwise noted therein. | |
(iii) Except as disclosed in the ACCO Financial Statements, since January 1, 2005, ACCO and its Subsidiaries have not incurred any liabilities that are of a nature that would be required to be disclosed on a consolidated balance sheet of ACCO and its Subsidiaries or in the footnotes thereto |
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prepared in conformity with GAAP, other than liabilities incurred in the ordinary course of business or that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on ACCO. | |
(iv) ACCO and its Subsidiaries have designed and maintain a system of internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. ACCO (A) has designed and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) to ensure that material information required to be disclosed by Fortune (with respect to ACCO and its Subsidiaries) in the reports that Fortune files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to Fortune’s management as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the principal executive officer and principal financial officer of Fortune required under the Exchange Act with respect to such reports and (B) has disclosed, based on its most recent evaluation of such disclosure controls and procedures prior to the date hereof to Fortune’s auditors and the audit committee of Fortune’s Board of Directors (x) any significant deficiencies and material weaknesses in the design or operation of ACCO’s internal controls over financial reporting that are reasonably likely to adversely affect in any material respect Fortune’s ability to record, process, summarize and report financial information and (y) any fraud, whether or not material, that involves management or other employees of ACCO who have a significant role in Fortune’s internal controls over financial reporting. ACCO has made available to GBC any such disclosure made by management to Fortune’s auditors and the audit committee of Fortune’s Board of Directors. ACCO has disclosed to its Knowledge, based on its most recent evaluation of ACCO’s disclosure controls and procedures prior to the date hereof, to GBC any fraud, whether or not material, that involves management or other employees of ACCO in the United States who have a significant role in ACCO’s internal controls over financial reporting. |
(i) None of the information supplied or to be supplied by Fortune, ACCO or Acquisition Sub for inclusion or incorporation by reference in (A) the Form S-4 will, at the time the Form S-4 is filed with the SEC, at any time it is amended or supplemented or at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and (B) the Proxy Statement/ Prospectus will, on the date it is first mailed to Fortune stockholders or GBC stockholders or at the time of the GBC Stockholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. | |
(ii) Notwithstanding the foregoing provisions of this Section 5.3(e), no representation or warranty is made by Fortune with respect to statements made or incorporated by reference in the Form S-4 or the Proxy Statement/ Prospectus based on information supplied by or on behalf of GBC for inclusion or incorporation by reference therein. |
(i) Except as set forth in the ACCO Financial Statements, there is no suit, action, proceeding, charge or regulatory investigation pending or, to the Knowledge of ACCO, threatened against ACCO or any Subsidiary of ACCO or any property or asset of ACCO or any Subsidiary of ACCO which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on ACCO, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against ACCO or any Subsidiary of ACCO which, |
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individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on ACCO. | |
(ii) Except as, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on ACCO, ACCO and its Subsidiaries hold all permits, licenses, franchises, variances, exemptions, orders and approvals of all Governmental Entities which are necessary for the operation of the businesses of ACCO and its Subsidiaries, taken as a whole (the “ACCO Permits”), and no suspension or cancellation of any of the ACCO Permits is pending or, to the Knowledge of ACCO, threatened, except for suspensions or cancellations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on ACCO. ACCO and its Subsidiaries are in compliance with the terms of the ACCO Permits, except where the failure so to comply, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on ACCO. None of ACCO or any of its Subsidiaries is in violation of, and ACCO and its Subsidiaries have not received since January 1, 2002 any written notices of violations with respect to, any Applicable Laws, except for violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on ACCO. |
(g) Absence of Certain Changes or Events. Except as set forth in the ACCO Financial Statements, since January 1, 2005, (i) ACCO and its Subsidiaries have conducted their business only in the ordinary course, consistent with past practice, and (ii) there has not been any event, change, circumstance or development which, individually or in the aggregate, has had, or would reasonably be expected to have, a Material Adverse Effect on ACCO. Since January 1, 2005 through the date of this Agreement, none of ACCO or any of its Subsidiaries has taken any action that, if taken during the period from the date of this Agreement through the Effective Time, would constitute a breach of Section 6.2. Acquisition Sub has not conducted any activities other than in connection with the organization of Acquisition Sub, the negotiation, execution and performance of this Agreement and the Transaction Agreements and the consummation of the transactions contemplated hereby and thereby. | |
(h) Environmental Matters. Except as, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on ACCO, (i) the operations of ACCO and its Subsidiaries have been and are in compliance with all applicable Environmental Laws and with all ACCO Permits required by applicable Environmental Laws, (ii) there are no pending or, to the Knowledge of ACCO, threatened, Actions under or pursuant to Environmental Laws against ACCO, its Subsidiaries, or, to the Knowledge of ACCO, any other Person whose Environmental Liabilities ACCO or any of its Subsidiaries has or may have retained or assumed by contract or operation of law, or involving any real property currently or, to the Knowledge of ACCO, formerly owned, operated or leased by ACCO or its Subsidiaries, and (iii) ACCO, its Subsidiaries and, to the Knowledge of ACCO, Persons whose Environmental Liabilities ACCO or any of its Subsidiaries has or may have retained or assumed by contract or operation of law are not subject to any Environmental Liabilities and, to the Knowledge of ACCO, there are no facts, circumstances or conditions (including without limitation the presence, release or threatened release of Hazardous Materials at any location whether or not owned or operated by ACCO or its Subsidiaries) which would reasonably be expected to result in Environmental Liabilities for ACCO, its Subsidiaries, or, to the Knowledge of ACCO, any other Person whose Environmental Liabilities ACCO or any of its Subsidiaries has or may have retained or assumed by contract or operation of law. The representations and warranties in this Section 5.3(h) constitute the sole representations and warranties of Fortune, ACCO or Acquisition Sub concerning environmental matters in this Agreement. | |
(i) Intellectual Property. Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on ACCO: (i) ACCO and each of its Subsidiaries own, or are licensed to use, all Intellectual Property used in the conduct of its business as currently conducted and, immediately following the consummation of the Distribution will own, or be licensed to use, all Intellectual Property used in the conduct of its business immediately prior to the consummation of the Distribution; (ii) to the Knowledge of ACCO, the use of any Intellectual |
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Property by ACCO and its Subsidiaries does not infringe on or otherwise violate the rights of any Person; (iii) the use by or, to the Knowledge of ACCO, on behalf of, ACCO and its Subsidiaries of Intellectual Property which is licensed to ACCO or any Subsidiary is in substantial accordance with the terms of the applicable license agreement pursuant to which ACCO or its Subsidiaries acquired the right to use such Intellectual Property; (iv) to the Knowledge of ACCO, no Person is infringing or otherwise violating any right of ACCO or any of its Subsidiaries with respect to any Intellectual Property owned by and/or licensed to ACCO or its Subsidiaries; (v) to the Knowledge of ACCO, there is no claim or proceeding pending against ACCO or any Subsidiary challenging their respective use of Intellectual Property, and (vi) to the Knowledge of ACCO, no Intellectual Property owned and/or licensed by ACCO or its Subsidiaries is being used or enforced by ACCO or any Subsidiary in a manner that would reasonably be expected to result in the abandonment, cancellation or unenforceability of such Intellectual Property. | |
(j) Title to Properties; Assets/ Services. |
(i) Each of ACCO and its Subsidiaries has good and valid title to, or, in the case of leased properties and assets, valid leasehold interests in, all of its tangible properties and assets, except where the failure to have such good and valid title, or valid leasehold interest, would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on ACCO. | |
(ii) Except (A) for cash, cash on hand, cash equivalents, funds, certificates of deposit, similar instruments and travelers checks, (B) for the services to be provided pursuant to the Transition Services Agreement and (C) as otherwise contemplated by the Transaction Agreements (including as permitted pursuant to Section 6.2), immediately following the consummation of the Distribution, ACCO and its Subsidiaries, taken as a whole, will own, lease, license or have the legal right to use all of the material assets, rights and properties used or held for use by ACCO and its Subsidiaries in the conduct of their businesses as conducted immediately prior to the Time of Distribution. | |
(iii) Section 5.3(j)(iii) of the ACCO Disclosure Schedule lists all material services provided to ACCO or any of its Subsidiaries by Fortune or any of its Subsidiaries (other than ACCO or any of its Subsidiaries) as of the date hereof. |
(i) All tax returns or reports required to be filed with respect to each of ACCO and its Subsidiaries have been timely filed, or requests for extensions to file such returns or reports have been timely filed, granted and have not expired, and all such returns and reports are complete and correct, except to the extent that such failures to file, to have extensions granted that remain in effect or to be complete or correct, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on ACCO. All Taxes shown as due on such returns have been paid. | |
(ii) No deficiencies for any Taxes have been proposed, asserted or assessed in writing in respect of or against ACCO or any of its Subsidiaries that are not adequately reserved for on the books of ACCO, except for deficiencies that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on ACCO. | |
(iii) None of Fortune or its Subsidiaries has taken any action, and Fortune has no Knowledge of any fact, agreement, plan or other circumstance, that is reasonably likely to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code. | |
(iv) None of ACCO or any of its Subsidiaries is a party to any Tax sharing or Tax indemnity agreements (other than agreements between or among ACCO and its Subsidiaries) that will be in effect after the Time of Distribution. |
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(v) Within the past five years, none of ACCO or any of its Subsidiaries has been a “distributing corporation” or a “controlled corporation” in a distribution intended to qualify under Section 355(a) of the Code. | |
(vi) Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on ACCO, none of ACCO or any of its Subsidiaries is obligated to make any payments, or is a party to any contract that could obligate it to make any payments, that would not be deductible by reason of Section 162(m) or Section 280G of the Code. | |
(vii) None of ACCO or any of its Subsidiaries has agreed to make, or is required to make, any material adjustment under Section 481(a) of the Code or any similar provision of state, local or foreign law by reason of a change in accounting methods or otherwise. | |
(viii) Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on ACCO, neither ACCO or any of its Subsidiaries has any deferred intercompany gains or losses as defined in Treasury Regulations section 1.1502-13 (nor any gains or losses treated as deferred intercompany gains or losses for income tax purposes). |
(l) Certain Contracts. As of the date hereof, none of ACCO or any of its Subsidiaries is a party to or bound by (i) any Material Contract (assuming ACCO was subject to Regulation S-K of the SEC as of the date hereof) or (ii) any non-competition agreement or any other Contract that limits orotherwise restricts ACCO or any of its Subsidiaries or any of their respective affiliates or any successor thereto, or that would, after the Effective Time, to the Knowledge of ACCO, limit or restrict ACCO or any of its Subsidiaries or any of their respective affiliates or any successor thereto, from engaging or competing in any line of business in any geographic area, which agreements or other Contracts, to the Knowledge of ACCO, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on ACCO after giving effect to the Merger. All Material Contracts of ACCO and its Subsidiaries are valid and binding on ACCO and its Subsidiaries, as applicable, and in full force and effect except to the extent they have previously expired in accordance with their terms or if the failure to be in full force and effect, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on ACCO. None of ACCO or any of its Subsidiaries (or, to the Knowledge of ACCO, any other party thereto) has violated any provision of, or committed or failed to perform any act which with or without notice, lapse of time or both would constitute a default under the provisions of, any Contract of ACCO or any of its Subsidiaries, except in each case for those violations and defaults which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on ACCO. |
(i) Section 5.3(m)(i) of the ACCO Disclosure Schedule contains a true and complete list of the ACCO Plans. With respect to each ACCO Plan, except for ACCO Plans the liabilities under which, individually or in the aggregate, would not reasonably be expected to have a Material AdverseEffect on ACCO, ACCO has made available to GBC a true, correct and complete copy of: (A) all plan documents, trust agreements, and insurance contracts and other funding vehicles; (B) the two most recent Annual Reports (Form 5500 Series) and accompanying schedules and exhibits, if any; (C) the current summary plan description and any material modifications thereto, if any (in each case, whether or not required to be furnished under ERISA); (D) the two most recent annual financial reports, if any; (E) the two most recent actuarial reports, if any; (F) the most recent determination letter from the IRS, if any; and (G) the annual compliance testing under Sections 401(a) through 416 of the Code for the two most recently completed plan years, if any. | |
(ii) Except in each case as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on ACCO, as of the date hereof, (A) with respect to each ACCO Plan, ACCO and its ERISA Affiliates and other Subsidiaries have complied with, and are now in compliance with, to the extent applicable, all provisions of ERISA, the Code and all |
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other Applicable Laws and regulations applicable to such ACCO Plans and each ACCO Plan has been operated and administered in accordance with its terms, (B) no liability under Title IV or Section 302 of ERISA has been incurred by ACCO or any of its ERISA Affiliates and other Subsidiaries that has not been satisfied in full, and no condition exists that presents a material risk to ACCO or any of its ERISA Affiliates and other Subsidiaries of incurring any such liability, other than liability for premiums due the Pension Benefit Guaranty Corporation, (C) with respect to each ACCO Plan that is subject to Section 302 or Title IV of ERISA or Section 412 of the Code, the present value of accrued benefits under such ACCO Plan, based upon the actuarial assumptions used for funding purposes in the most recent actuarial report prepared by such ACCO Plan’s actuary with respect to such ACCO Plan did not exceed, as of its latest valuation date, the then current value of the assets of such ACCO Plan allocable to such accrued benefits, and (D) all ACCO Plans subject to the Applicable Laws of any jurisdiction outside of the United States (1) have been maintained in accordance with all applicable requirements, (2) if they are intended to qualify for special tax treatment meet all requirements for such treatment, and (3) if they are intended to be funded and/or book-reserved are fully funded and/or book-reserved, as appropriate, based upon reasonable actuarial assumptions. | |
(iii) As of the date hereof, none of ACCO or any of its Subsidiaries has any liability under or obligation to any Multiemployer Plan. | |
(iv) The consummation of the transactions contemplated by this Agreement will not, either alone or in combination with another event, (i) entitle any current or former employee or officer of ACCO or any of its Subsidiaries to material severance pay, unemployment compensation or any other payment or (ii) accelerate the time of payment or vesting of benefits, or materially increase the amount of compensation, due any such employee or officer. |
(n) Labor Relations. As of the date of this Agreement: (i) none of Fortune (with respect to employees of ACCO or any of its Subsidiaries), ACCO or any of its Subsidiaries is a party to any collective bargaining agreement, work rules or practices, or any other labor-related agreements or arrangements with any labor union, labor organization or works council; there are no labor agreements, collective bargaining agreements, work rules or practices, or any other labor-related agreements or arrangements that pertain to any of the employees of ACCO or any of its Subsidiaries; and no employees of ACCO or any of its Subsidiaries are represented by any labor organization with respect to their employment with ACCO or any of its Subsidiaries; (ii) except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on ACCO, no labor organization or group of employees of ACCO or any of its Subsidiaries has made a pending demand for recognition or certification, and there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or, to the Knowledge of ACCO, threatened to be brought or filed, with the National Labor Relations Board or any other domestic or foreign labor relations tribunal or authority, and to the Knowledge of ACCO, there are no labor union organizing activities with respect to any employees of ACCO or any of its Subsidiaries and (iii) except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on ACCO, since January 1, 2002, there have been no actual, or to the Knowledge of ACCO, threatened strikes, work stoppages, slowdowns, lockouts, arbitrations, grievances or labor disputes against or involving ACCO or any of its Subsidiaries. | |
(o) Insurance. ACCO maintains insurance coverage with reputable insurers in such amounts and covering such risks as are in accordance with normal industry practice for companies engaged in businesses similar to that of ACCO (taking into account the cost and availability of such insurance). | |
(p) Liens. No Liens exist on any assets of ACCO or any of its Subsidiaries, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on ACCO. | |
(q) Real Property. Section 5.3(q) of the ACCO Disclosure Schedule sets forth a correct and complete list and the location of the principal plants and other materially important physical |
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properties of ACCO and its Subsidiaries, and whether such property is held in fee (and if not, the manner in which such property is held). |
(a) Ordinary Course. |
(i) GBC and its Subsidiaries shall carry on their respective businesses in the ordinary course, in substantially the same manner as heretofore conducted, and shall use all reasonable efforts to preserve intact their present business organizations, keep available the services of their current officers and other key employees and preserve their relationships with customers, suppliers and others having business dealings with them to the end that their ongoing businesses shall not be materially impaired at the Effective Time; provided, however, that no action by GBC or its Subsidiaries with respect to matters specifically addressed by any other provision of this Section 6.1 shall be deemed a breach of this Section 6.1(a)(i) unless such action would constitute a breach of one or more of such other provisions. | |
(ii) Other than in connection with acquisitions permitted by Section 6.1(e) or investments permitted by Section 6.1(g), GBC shall not, and shall not permit any of its Subsidiaries to, (A) enter into any new material line of business or (B) incur or commit to any capital expenditures or any obligations or liabilities in connection with any capital expenditures other than capital expenditures and obligations or liabilities in connection therewith incurred or committed to in the ordinary course of business consistent with past practice. |
(b) Dividends; Changes in Share Capital. GBC shall not, and shall not permit any of its Subsidiaries to, and shall not propose to, (i) declare or pay any dividends on or make other distributions (whether in cash, stock or property) in respect of any of its capital stock, except for dividends by any direct or indirect wholly-owned Subsidiary of GBC, (ii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for, shares of its capital stock, except for any such transaction by a wholly-owned Subsidiary of GBC which remains a wholly-owned Subsidiary after consummation of such transaction or upon conversion of GBC Class B Common Stock outstanding on the date hereof into GBC Common Stock in accordance with the present terms of the GBC Class B Common Stock or (iii) repurchase, redeem or otherwise acquire any shares of its capital stock or any securities convertible into or exercisable for any shares of its capital stock other than upon conversion of GBC Class B Common Stock outstanding on the date hereof into GBC Common Stock in accordance with the present terms of the GBC Class B Common Stock. | |
(c) Issuance of Securities. GBC shall not, and shall not permit any of its Subsidiaries to, issue, deliver, sell, pledge or otherwise encumber, or authorize or propose the issuance, delivery, sale, pledge or encumbrance of, any shares of its capital stock of any class, any GBC Voting Debt or any securities convertible into or exercisable for, or any rights, warrants, calls or options to acquire, any such shares or GBC Voting Debt, or enter into any commitment, arrangement, undertaking or agreement with respect to any of the foregoing, other than (i) (A) the issuance of GBC Common Stock upon the exercise of GBC Stock Options outstanding on the date hereof in accordance with their present terms, (B) the issuance of GBC Common Stock upon vesting of GBC Restricted Stock Units outstanding on the date hereof in accordance with their present terms or (C) pursuant to GBC |
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Stock Options, GBC Restricted Stock Units or other stock based awards granted pursuant to clause (ii) below, (ii) the granting of GBC Stock Options, GBC Restricted Stock Units or other stock based awards of or to acquire not more than 50,000 shares of GBC Common Stock granted under GBC Stock Plans in effect on the date hereof in the ordinary course of business consistent with past practice, (iii) issuances by a wholly-owned Subsidiary of GBC of capital stock of such Subsidiary to such Subsidiary’s parent or another wholly-owned Subsidiary of GBC or (iv) the issuance of GBC Common Stock upon conversion of GBC Class B Common Stock outstanding on the date hereof into GBC Common Stock in accordance with the present terms of the GBC Class B Common Stock. | |
(d) Governing Documents. Except to the extent required to comply with its obligations hereunder or with Applicable Laws, GBC shall not amend or propose to so amend its certificate of incorporation, by-laws or other governing documents. | |
(e) No Acquisitions. GBC shall not, and shall not permit any of its Subsidiaries to, acquire or agree to acquire by merger or consolidation, or by purchasing a substantial equity interest in or a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, limited liability entity, joint venture, association or other business organization or division thereof or otherwise acquire or agree to acquire any material assets (excluding the acquisition of assets used in the operations of the business of GBC and its Subsidiaries in the ordinary course consistent with past practice, which assets do not constitute a business unit, division or all or substantially all of the assets of the transferor); provided, however, that the foregoing shall not prohibit (x) internal reorganizations or consolidations only involving existing Subsidiaries of GBC which remain Subsidiaries of GBC (with respect to which GBC shall reasonably consult with Fortune and ACCO) or (y) the creation of new direct or indirect wholly-owned Subsidiaries of GBC organized to conduct or continue activities otherwise permitted by this Agreement. | |
(f) No Dispositions. Other than (i) internal reorganizations or consolidations only involving existing Subsidiaries of GBC which remain Subsidiaries of GBC (with respect to which GBC shall reasonably consult with Fortune and ACCO) or (ii) as may be required by or in conformance with Applicable Laws in order to permit or facilitate the consummation of the transactions contemplated hereby, GBC shall not, and shall not permit any of its Subsidiaries to, sell, lease, license or otherwise encumber or subject to any Lien or otherwise dispose of, or agree to sell, lease, license or otherwise encumber or subject to any Lien or otherwise dispose of, any of its assets (including capital stock of Subsidiaries of GBC but excluding licenses of Intellectual Property and inventory and obsolete equipment, in each case, in the ordinary course of business consistent with past practice); provided that GBC may fail to maintain applications or registrations for Intellectual Property in accordance with Section 6.1(l). | |
(g) Investments; Indebtedness. GBC shall not, and shall not permit any of its Subsidiaries to, (i) make any loans, advances or capital contributions to, or investments in, any other Person, other than (A) loans or investments by GBC or a Subsidiary of GBC to or in GBC or a Subsidiary of GBC, (B) pursuant to any Contract or other legal obligation of GBC or any of its Subsidiaries as in effect at the date of this Agreement (all of which Contracts or other legal obligations are set forth in Section 6.1(g) of the GBC Disclosure Schedule), (C) employee loans or advances for travel, business, relocation or other reimbursable expenses made in the ordinary course of business or (D) loans, advances, capital contributions or investments in the ordinary course of business which are not, individually or in the aggregate, material to GBC and its Subsidiaries taken as a whole or (ii) create, incur, assume or suffer to exist any indebtedness, issuances of debt securities, guarantees, loans or advances not in existence as of the date of this Agreement except in the ordinary course of business which are not, individually or in the aggregate, material to GBC and its Subsidiaries taken as a whole. | |
(h) Tax-Free Qualification. GBC shall use its reasonable best efforts not to, and shall use its reasonable best efforts not to permit any of its Subsidiaries to, take any action (including any action |
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otherwise permitted by this Section 6.1) that would prevent or impede the Merger from qualifying as a “reorganization” under Section 368(a) of the Code. | |
(i) Compensation. Except (i) as set forth in Section 6.1(c), (ii) as required by Applicable Laws or by the terms of any collective bargaining agreement or other agreement currently in effect between GBC or any Subsidiary of GBC and any executive officer or employee thereof, (iii) as contemplated by the Employee Matters Agreement or (iv) in the ordinary course of business, GBC shall not increase the amount of compensation or employee benefits of any director, officer or employee of GBC or any Subsidiary or business unit of GBC, pay any pension, retirement, savings or profit-sharing allowance or other employee benefit to any employee that is not required by any existing plan or agreement, enter into any Contract with any of its employees regarding his or her employment, compensation or benefits, increase or commit to increase any employee benefits, issue any additional GBC Stock Options, adopt, terminate or amend or make any commitment to adopt, terminate or amend any GBC Plan or make any contribution, other than regularly scheduled contributions, to any GBC Plan. GBC shall not accelerate the vesting of, or the lapsing of restrictions with respect to, any stock options or other stock-based compensation, except as required by Applicable Laws or in the ordinary course of business or in accordance with the existing terms of such awards or as provided in this Agreement, and any option, restricted stock unit or other equity or equity based award committed to be granted or granted after the date hereof shall not accelerate as a result of the approval or consummation of any transaction contemplated by this Agreement. | |
(j) Accounting Methods; Income Tax Elections. Except as disclosed in the GBC Filed SEC Reports or in the GBC 2004 Financial Statements, as required by a Governmental Entity or as required by changes in GAAP as concurred in by GBC’s independent public accountants, GBC shall not change its methods of accounting in effect at January 1, 2005. GBC shall not, and shall not permit any of its Subsidiaries to, (i) change its fiscal year or (ii) make any material Tax election or settle or compromise any material income Tax liability, other than in the ordinary course of business consistent with past practice. | |
(k) Certain Agreements and Arrangements. GBC shall not, and shall not permit any of its Subsidiaries to, enter into any Contracts that limit or otherwise restrict GBC or any of its Subsidiaries or any of their respective affiliates or any successor thereto, or that would, after the Effective Time, limit or restrict ACCO or any of its Subsidiaries or any of their respective affiliates or any successor thereto, from engaging or competing in any line of business in any geographic area, which agreements or arrangements, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on ACCO after giving effect to the Merger. |
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(a) Ordinary Course. |
(i) ACCO and its Subsidiaries shall carry on their respective businesses in the ordinary course, in substantially the same manner as heretofore conducted, and shall use all reasonable efforts to preserve intact their present business organizations, keep available the services of their current officers and other key employees and preserve their relationships with customers, suppliers and others having business dealings with them to the end that their ongoing businesses shall not be materially impaired at the Effective Time; provided, however, that no action by ACCO or its Subsidiaries with respect to matters specifically addressed by any other provision of this Section 6.2 shall be deemed a breach of this Section 6.2(a)(i) unless such action would constitute a breach of one or more of such other provisions. | |
(ii) Other than in connection with acquisitions permitted by Section 6.2(e) or investments permitted by Section 6.2(g), ACCO shall not, and shall not permit any of its Subsidiaries to, (A) enter into any new material line of business or (B) incur or commit to any capital expenditures or any obligations or liabilities in connection with any capital expenditures other than capital expenditures and obligations or liabilities in connection therewith incurred or committed to in the ordinary course of business consistent with past practice. |
(c) Issuance of Securities. Fortune and ACCO shall not, and ACCO shall not permit any of its Subsidiaries to, issue, deliver, sell, pledge or otherwise encumber, or authorize or propose the issuance, delivery, sale, pledge or encumbrance of, any shares of capital stock of ACCO or any of its Subsidiaries of any class, any ACCO Voting Debt or any securities convertible into or exercisable for, or any rights, warrants, calls or options to acquire, any such shares or ACCO Voting Debt, or enter into any commitment, arrangement, undertaking or agreement with respect to any of the foregoing, other than (i) the granting of options to purchase ACCO Common Stock upon conversion of Fortune Options and GBC Stock Options, (ii) issuances by a wholly-owned Subsidiary of ACCO of capital stock of such Subsidiary to such Subsidiary’s parent or another wholly-owned Subsidiary of ACCO, (iii) the granting by Fortune of options under the Fortune Stock Plans that would be Fortune Options immediately prior to the Time of Distribution and would be converted pursuant to Section 2.7 into Fortune Converted Options of or to acquire not more than 50,000 shares of ACCO Common Stock or (iv) as otherwise contemplated or permitted by the Transaction Agreements. Nothing in this Agreement or any other Transaction Agreement shall be deemed to restrict, prohibit or otherwise affect any issuance, delivery, sale, pledge or other encumbrance, or any authorization or proposal to issue, deliver, sell, pledge or encumber any shares of capital stock of Fortune or, subject to clause (iii) above, securities convertible into or exercisable for, or rights, warrants, calls or options to acquire, any such shares, or commitments, arrangements, undertakings or agreements with respect to the foregoing. | |
(d) Governing Documents. Except to the extent required to comply with its obligations hereunder or under the other Transaction Agreements or with Applicable Laws, ACCO shall not amend or propose to so amend its certificate of incorporation, by-laws or other governing documents. |
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(e) No Acquisitions. ACCO shall not, and shall not permit any of its Subsidiaries to, acquire or agree to acquire by merger or consolidation, or by purchasing a substantial equity interest in or a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, limited liability entity, joint venture, association or other business organization or division thereof or otherwise acquire or agree to acquire any material assets (excluding the acquisition of assets used in the operations of the business of ACCO and its Subsidiaries in the ordinary course consistent with past practice, which assets do not constitute a business unit, division or all or substantially all of the assets of the transferor); provided, however, that the foregoing shall not prohibit (x) internal reorganizations or consolidations only involving existing Subsidiaries of ACCO which remain Subsidiaries of ACCO (with respect to which Fortune and ACCO shall reasonably consult with GBC) or (y) the creation of new direct or indirect wholly-owned Subsidiaries of ACCO organized to conduct or continue activities otherwise permitted by this Agreement. | |
(f) No Dispositions. Other than (i) internal reorganizations or consolidations only involving existing Subsidiaries of ACCO which remain Subsidiaries of ACCO (with respect to which Fortune and ACCO shall reasonably consult with GBC) or (ii) as may be required by or in conformance with Applicable Laws in order to permit or facilitate the consummation of the transactions contemplated hereby or by the other Transaction Agreements, Fortune and ACCO shall not, and shall not permit any of their Subsidiaries to, sell, lease, license or otherwise encumber or subject to any Lien or otherwise dispose of, or agree to sell, lease, license or otherwise encumber or subject to any Lien or otherwise dispose of, any assets of ACCO or any of ACCO’s Subsidiaries (including capital stock of ACCO and its Subsidiaries, but excluding licenses of Intellectual Property and inventory and obsolete equipment, in each case, in the ordinary course of business consistent with past practice); provided that ACCO may fail to maintain applications or registrations for Intellectual Property in accordance with Section 6.2(m). | |
(g) Investments; Indebtedness. ACCO shall not, and shall not permit any of its Subsidiaries to, (i) make any loans, advances or capital contributions to, or investments in, any other Person, other than (A) cash advances to Fortune under the cash management facility between Fortune and ACCO, (B) loans or investments by ACCO or a Subsidiary of ACCO to or in ACCO or a Subsidiary of ACCO, (C) pursuant to any Contract or other legal obligation of ACCO or any of its Subsidiaries as in effect at the date of this Agreement (all of which Contracts or other legal obligations are set forth in Section 6.2(g) of the ACCO Disclosure Schedule), (D) employee loans or advances for travel, business, relocation or other reimbursable expenses made in the ordinary course of business or (E) loans, advances, capital contributions or investments in the ordinary course of business which are not, individually or in the aggregate, material to ACCO and its Subsidiaries taken as a whole or (ii) create, incur, assume or suffer to exist any indebtedness, issuances of debt securities, guarantees, loans or advances not in existence as of the date of this Agreement except in the ordinary course of business which are not, individually or in the aggregate, material to ACCO and its Subsidiaries taken as a whole. | |
(h) Tax-Free Qualification. Fortune shall use its reasonable best efforts not to, and shall use its reasonable best efforts not to permit any of its Subsidiaries to, take any action (including any action otherwise permitted by this Section 6.2) that would prevent or impede the Merger from qualifying as a “reorganization” under Section 368(a) of the Code. | |
(i) Compensation. Except (i) as set forth in Section 6.2(c), (ii) as required by Applicable Laws or by the terms of any collective bargaining agreement or other agreement currently in effect between ACCO or any Subsidiary of ACCO and any executive officer or employee thereof, (iii) as contemplated by the Employee Matters Agreement or (iv) in the ordinary course of business, ACCO shall not increase the amount of compensation or employee benefits of any director, officer or employee of ACCO or any Subsidiary or business unit of ACCO, pay any pension, retirement, savings or profit-sharing allowance or other employee benefit to any employee that is not required by any existing plan or agreement, enter into any Contract with any such employees regarding his or her employment, compensation or benefits, increase or commit to increase any employee benefits for any |
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such person, adopt, terminate or amend or make any commitment to adopt, terminate or amend any ACCO Plan or make any contribution, other than regularly scheduled contributions, to any ACCO Plan. Fortune shall not accelerate the vesting of, or the lapsing of restrictions with respect to, any stock options or other stock-based compensation held by employees of ACCO and its Subsidiaries, except as required by Applicable Laws or in the ordinary course of business or in accordance with the existing terms of such awards or as provided in this Agreement, and any option or other equity or equity based award committed to be granted or granted after the date hereof to employees of ACCO and its Subsidiaries shall not accelerate as a result of the approval or consummation of any transaction contemplated by this Agreement. | |
(j) Accounting Methods; Income Tax Elections. Except as disclosed in the Fortune SEC Reports filed and publicly available prior to the date hereof or the ACCO Financial Statements, as required by a Governmental Entity or as required by changes in GAAP as concurred in by ACCO’s independent public accountants, ACCO shall not change its methods of accounting in effect at January 1, 2005. ACCO shall not, and shall not permit any of its Subsidiaries to, (i) change its fiscal year or (ii) make any material Tax election or settle or compromise any material income Tax liability, other than in the ordinary course of business consistent with past practice. | |
(k) Certain Agreements and Arrangements. Except as contemplated by the Transaction Agreements, Fortune and ACCO shall not, and ACCO shall not permit any of its Subsidiaries to, enter into any Contracts that limit or otherwise restrict ACCO or any of its Subsidiaries or any of their respective affiliates or any successor thereto, or that would, after the Effective Time, limit or restrict ACCO or any of its Subsidiaries or any of their respective affiliates or any successor thereto, from engaging or competing in any line of business in any geographic area, which agreements or arrangements, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on ACCO after giving effect to the Merger. | |
(l) No Acquisition Sub Business Activities. Acquisition Sub will not conduct any activities other than in connection with the organization of Acquisition Sub, the negotiation and execution of this Agreement and the other Transaction Agreements and the consummation of the transactions contemplated hereby and thereby. | |
(m) Intellectual Property. ACCO and its Subsidiaries shall not do any act or omit to do any act whereby any material Intellectual Property that they own may lapse, become abandoned, dedicated to the public or otherwise become impaired or unenforceable unless they reasonably determine that such material Intellectual Property is not used or useful in its business and the cost of maintaining it is outweighed by its value, or if they are not legally permitted to maintain such registration or application. | |
(n) Related Party Agreements. Except for the Transaction Agreements and any Contracts contemplated thereby, Fortune and ACCO shall not, and Fortune and ACCO shall cause their respective Subsidiaries not to, enter into or amend in any material respect any Contract between ACCO and its Subsidiaries, on the one hand, and Fortune and its Subsidiaries (other than ACCO and its Subsidiaries), on the other hand. | |
(o) No Related Actions. Fortune (as to ACCO and its Subsidiaries) will not, and ACCO will not, and will not permit any of its Subsidiaries to, agree or commit to do any of the foregoing actions. |
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(i) (A) (x) either Fortune or GBC shall terminate this Agreement pursuant to Section 9.1(b) without the GBC Stockholder Meeting having occurred, (y) Fortune shall terminate this Agreement pursuant to Section 9.1(f) as a result of any intentional breach or failure to perform by GBC (unless covered by clause (ii) below) or (z) either Fortune or GBC shall terminate this Agreement pursuant to Section 9.1(d), and |
(B) (x) in the case of clause (i)(A)(x) or (i)(A)(y) above at any time after the date of this Agreement and before such termination or (y) in the case of clause (i)(A)(z) above at any time after the date of this Agreement and before the GBC Stockholders Meeting, a GBC Acquisition Proposal shall have been publicly announced, become publicly known or otherwise been communicated to the senior management, Board of Directors or stockholders of GBC (whether or not conditional and whether or not withdrawn), and | |
(C) within twelve months of such termination GBC or any of its Subsidiaries enters into a definitive agreement with respect to, or consummates, any GBC Acquisition Proposal (solely for purposes of this Section 9.2(b)(i)(C), the term “GBC Acquisition Proposal” shall have the meaning set forth in the definition of GBC Acquisition Proposal contained in Section 7.5(b) except that all references to 15% therein shall be deemed references to 33%); or |
(ii) Fortune shall terminate this Agreement pursuant to Section 9.1(e)(ii), 9.1(e)(iii) or 9.1(e)(iv); or | |
(iii) GBC shall terminate this Agreement pursuant to Section 9.1(h); |
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(a) if to Fortune, ACCO or Acquisition Sub to Fortune Brands, Inc. 300 Tower Parkway Lincolnshire, IL 60069 Fax: (847) 484-4490 Attention: Mark A. Roche, Esq. with a copy to Chadbourne & Parke LLP 30 Rockefeller Plaza New York, New York 10112 Fax: (212) 541-5369 Attention: Edward P. Smith, Esq. A. Robert Colby, Esq. (b) if to GBC to General Binding Corporation One GBC Plaza Northbrook, Illinois 60062 Fax: (847) 272-4763 Attention: Steven Rubin, Esq. |
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with a copy to | |
Skadden, Arps, Slate, Meagher & Flom LLP | |
333 West Wacker Drive | |
Chicago, Illinois 60606 | |
Fax: (312) 407-0411 | |
Attention: William R. Kunkel, Esq. | |
Susan S. Hassan, Esq. |
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FORTUNE BRANDS, INC. |
By: | /s/ Christopher J. Klein |
Name: Christopher J. Klein |
Title: | Senior Vice-President |
ACCO WORLD CORPORATION |
By: | /s/ Neal Fenwick |
Name: Neal Fenwick |
Title: | Executive Vice-President Finance and |
Administration | |
GEMINI ACQUISITION SUB, INC |
By: | /s/ Christopher J. Klein |
Name: Christopher J. Klein |
Title: | Vice-President |
GENERAL BINDING CORPORATION |
By: | /s/ Dennis J. Martin |
Name: Dennis J. Martin |
Title: | Chairman, President and Chief Executive |
Officer |
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ARTICLE IDefinitions | B-1 | |||||
SECTION 1.01 | GENERAL | B-1 | ||||
ARTICLE IIActions Prior to the Distribution | B-6 | |||||
SECTION 2.01 | ACCO RECAPITALIZATION | B-6 | ||||
SECTION 2.02 | SPECIAL DIVIDEND | B-7 | ||||
SECTION 2.03 | FINANCIAL INSTRUMENTS | B-7 | ||||
SECTION 2.04 | RELATED PARTY AGREEMENTS; INTERCOMPANY ACCOUNTS | B-7 | ||||
SECTION 2.05 | ACCO CERTIFICATE OF INCORPORATION AND BY-LAWS | B-8 | ||||
SECTION 2.06 | RESIGNATIONS; TRANSFER OF STOCK HELD AS NOMINEE | B-8 | ||||
SECTION 2.07 | THIRD PARTY INDEBTEDNESS | B-8 | ||||
ARTICLE IIIThe Distribution | B-9 | |||||
SECTION 3.01 | THE DISTRIBUTION | B-9 | ||||
SECTION 3.02 | COOPERATION PRIOR TO THE DISTRIBUTION | B-9 | ||||
SECTION 3.03 | CONDITIONS TO THE DISTRIBUTION | B-9 | ||||
SECTION 3.04 | WAIVER OF CONDITIONS | B-9 | ||||
SECTION 3.05 | DISCLOSURE | B-10 | ||||
ARTICLE IVMutual Release; Indemnification | B-10 | |||||
SECTION 4.01 | MUTUAL RELEASE | B-10 | ||||
SECTION 4.02 | INDEMNIFICATION BY FORTUNE | B-10 | ||||
SECTION 4.03 | INDEMNIFICATION BY ACCO | B-11 | ||||
SECTION 4.04 | LIMITATIONS ON INDEMNIFICATION OBLIGATIONS | B-11 | ||||
SECTION 4.05 | PROCEDURES RELATING TO INDEMNIFICATION | B-12 | ||||
SECTION 4.06 | REMEDIES CUMULATIVE | B-13 | ||||
SECTION 4.07 | SURVIVAL OF INDEMNITIES | B-13 | ||||
SECTION 4.08 | EXCLUSIVITY OF FORTUNE/ ACCO TAX ALLOCATION AGREEMENT | B-13 | ||||
ARTICLE VCertain Other Matters | B-13 | |||||
SECTION 5.01 | INSURANCE | B-13 | ||||
SECTION 5.02 | USE OF NAMES | B-15 | ||||
SECTION 5.03 | NON-SOLICITATION OF EMPLOYEES | B-15 | ||||
SECTION 5.04 | SUBSEQUENT TRANSFERS | B-15 | ||||
ARTICLE VIAccess to Information | B-16 | |||||
SECTION 6.01 | PROVISION OF CORPORATE RECORDS | B-16 | ||||
SECTION 6.02 | ACCESS TO INFORMATION | B-16 | ||||
SECTION 6.03 | PRODUCTION OF WITNESSES | B-17 | ||||
SECTION 6.04 | RETENTION OF RECORDS | B-17 | ||||
SECTION 6.05 | CONFIDENTIALITY | B-17 | ||||
ARTICLE VIIMiscellaneous | B-18 | |||||
SECTION 7.01 | ENTIRE AGREEMENT; CONSTRUCTION | B-18 | ||||
SECTION 7.02 | SURVIVAL OF AGREEMENTS | B-18 | ||||
SECTION 7.03 | GOVERNING LAW | B-18 |
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SECTION 7.04 | NOTICES | B-18 | ||||
SECTION 7.05 | EXPENSES | B-19 | ||||
SECTION 7.06 | CONSENT TO JURISDICTION | B-19 | ||||
SECTION 7.07 | AMENDMENTS | B-20 | ||||
SECTION 7.08 | ASSIGNMENT | B-20 | ||||
SECTION 7.09 | CAPTIONS; CURRENCY | B-20 | ||||
SECTION 7.10 | SEVERABILITY | B-20 | ||||
SECTION 7.11 | PARTIES IN INTEREST | B-20 | ||||
SECTION 7.12 | SCHEDULES | B-20 | ||||
SECTION 7.13 | WAIVERS; REMEDIES | B-20 | ||||
SECTION 7.14 | FURTHER ASSURANCES | B-21 | ||||
SECTION 7.15 | COUNTERPARTS | B-21 | ||||
SECTION 7.16 | PERFORMANCE | B-21 | ||||
SECTION 7.17 | INTERPRETATION | B-21 |
SCHEDULES | ||
Schedule 1.01(a) | ACCO Former Businesses | |
Schedule 1.01(b) | ACCO Financial Instruments | |
Schedule 1.01(c) | Amended By-Laws | |
Schedule 1.01(d) | Restated Certificate of Incorporation | |
Schedule 1.01(e) | Fortune Former Businesses | |
Schedule 1.01(f) | Fortune Financial Instruments | |
Schedule 1.01(g) | Related Party Agreements | |
Schedule 2.06(a) | Continuing Directors and Officers |
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(i) Fortune or a Fortune Subsidiary, as appropriate, will be responsible for the Claims Administration with respect to claims of Fortune and the Fortune Subsidiaries under Shared Policies; and | |
(ii) ACCO or a Subsidiary of ACCO, as appropriate, will be responsible for the Claims Administration with respect to claims of ACCO and the ACCO Subsidiaries under Shared Policies. |
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(i) Each party acknowledges that (A) each of Fortune and ACCO (and the members of the Fortune Group and the ACCO Group, respectively) has or may obtain Privileged Information; (B) there are or may be a number of Actions affecting one or more of the members of the Fortune Group and the ACCO Group; (C) the parties may have a common legal interest in Actions, in the Privileged Information, and in the preservation of the confidential status of the Privileged Information; and (D) each of Fortune and ACCO intends that the transactions contemplated by the Transaction Agreements and any transfer of Privileged Information in connection therewith shall not operate as a waiver of any potentially applicable privilege. | |
(ii) Each of Fortune and ACCO agrees, on behalf of itself and each member of the Group of which it is a member, not to disclose or otherwise waive any privilege attaching to any Privileged Information relating to the business of the other Group without providing prompt written notice to |
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and obtaining the prior written consent of the other, which consent will not be unreasonably withheld. In the event of a disagreement between any member of the Fortune Group and/or any member of the ACCO Group concerning the reasonableness of withholding such consent, no disclosure will be made prior to a final, nonappealable resolution of such disagreement by a court of competent jurisdiction. | |
(iii) Upon any member of the Fortune Group or any member of the ACCO Group receiving any subpoena or other compulsory disclosure notice from a court, other Governmental Entity or otherwise which requests disclosure of Privileged Information, in each case relating to the business of the other Group, the recipient of the notice will promptly provide to the other party (following the notice provisions set forth herein) a copy of such notice, the intended response, and all materials or information relating to the other Group that might be disclosed. In the event of a disagreement as to the intended response or disclosure, unless and until the disagreement is resolved as provided in Section 6.02(c)(ii), the parties will cooperate to assert all defenses to disclosure claimed by either Group, at the cost and expense of the Group claiming such defense to disclosure, and shall not disclose any disputed documents or information until all legal defenses and claims of privilege have been finally determined. |
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(a) | If to Fortune to Fortune Brands, Inc. 300 Tower Parkway Lincolnshire, Illinois 60069 Fax: (847) 484-4490 Attention: Mark A. Roche, Esq. with a copy to Chadbourne & Parke LLP 30 Rockefeller Plaza New York, New York 10112 Fax: (212) 541-5369 Attention: Edward P. Smith, Esq. A. Robert Colby, Esq. | |
(b) | If to ACCO to ACCO World Corporation 300 Tower Parkway Lincolnshire, Illinois 60069 Fax: (847) 484-4495 Attention: President with a copy (prior to the Time of Distribution, provided the Merger Agreement has not been terminated in accordance with its terms) to: GBC Corporation One GBC Plaza Northbrook, Illinois 60062 Fax: (847) 272-4763 Attention: Steven Rubin, Esq. |
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FORTUNE BRANDS, INC. |
By: | /s/ Christopher J. Klein |
Christopher J. Klein | |
Name: Christopher J. Klein |
Title: | Senior Vice-President |
ACCO WORLD CORPORATION |
By: | /s/ Neal Fenwick |
Neal Fenwick | |
Name: Neal Fenwick |
Title: | Executive Vice-President Finance and Administration |
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Very truly yours, | |
/s/ Goldman, Sachs & Co. | |
(GOLDMAN, SACHS & CO.) |
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(i) reviewed certain publicly available financial and other information concerning Acco and General Binding and certain internal analyses and financial and other information furnished to it by the Acco and General Binding, respectively; | |
(ii) reviewed certain financial forecasts prepared by management relating to Acco and General Binding, respectively; | |
(iii) reviewed certain financial forecasts and projections relating to the Merger, including information relating to the certain financial and operational benefits anticipated from the Merger, provided by the management of Acco (including the Potential Synergies, as defined below); | |
(iv) held discussions with members of the senior managements of Acco and General Binding regarding the businesses and prospects of their respective companies and the joint prospects of a combined Acco following the Merger, including the financial and operational benefits anticipated from the Merger (including the Potential Synergies, as defined below); |
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(v) compared the pro forma impact of the Merger on earnings per share, cash flow, consolidated capitalization and financial ratios to General Binding and General Binding Common Stock, as appropriate; | |
(vi) reviewed information relating to the relative contributions of Acco’s business and General Binding’s business to the combined company; | |
(vii) reviewed the reported prices and trading activity for General Binding Common Stock; | |
(viii) compared certain financial and stock market information for Acco and General Binding with similar information for certain other companies whose securities are publicly traded; | |
(ix) reviewed the terms of the Merger Agreement, the Distribution Agreement and certain related documents in each case as set forth in drafts dated as of March 8, 2005; and | |
(x) performed such other studies and analyses and considered such other factors as it deemed appropriate. |
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Very truly yours, | |
/s/ Deutsche Bank Securities Inc. | |
DEUTSCHE BANK SECURITIES INC. |
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1. Dividends. Whenever the full dividends upon any outstanding Preferred Stock for all past dividend periods shall have been paid and the full dividends thereon for the then current respective dividend periods shall have been paid, or declared and a sum sufficient for the respective payments thereof set apart, the holders of shares of the Common Stock shall be entitled to receive such dividends and distributions in equal amounts per share, payable in cash or otherwise, as may be declared thereon by the Board of Directors from time to time out of assets or funds of the Company legally available therefor. | |
2. Rights on Liquidation. In the event of any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, after the payment or setting apart for payment to the holders of any outstanding Preferred Stock of the full preferential amounts to which such holders are entitled as herein provided or referred to, all of the remaining assets of the Company shall belong to and be distributable in equal amounts per share to the holders of the Common Stock. For purposes of this paragraph 2, a consolidation or merger of the Company with any other corporation, or the sale, transfer or lease of all or substantially all its assets shall not constitute or be deemed a liquidation, dissolution or winding-up of the Company. |
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3. Voting. Except as otherwise provided by the laws of the State of Delaware or by this Article IV, each share of Common Stock shall entitle the holder thereof to one vote. |
(a) the designation of the series, which may be by distinguishing number, letter or title; | |
(b) the number of shares of the series, which number the Board of Directors may thereafter (except where otherwise provided in the Preferred Stock Designation) increase or decrease (but not below the number of shares thereof then outstanding); | |
(c) whether dividends, if any, shall be cumulative or noncumulative, and, if cumulative, the dates from which dividends on shares of such series shall be cumulative, and the dividend rate of the series; | |
(d) the dates at which dividends, if any, shall be payable; | |
(e) the redemption rights and price or prices, if any, for shares of the series; | |
(f) the terms and amount of any sinking fund provided for the purchase or redemption of shares of the series; | |
(g) the amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company; | |
(h) whether the shares of the series shall be convertible into shares of any other class or series, or any other security, of the Company or any other corporation, and, if so, the specification of such other class or series or such other security, the conversion price or prices or rate or rates, any adjustments thereof, the date or dates as of which such shares shall be convertible and all other terms and conditions upon which such conversion may be made; | |
(i) restrictions on the issuance of shares of the same series or of any other class or series; and | |
(j) the voting rights, if any, of the holders of shares of the series. |
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A. Approval by Continuing Directors. The Business Combination shall have been approved by at least two-thirds of the Continuing Directors (as hereinafter defined), whether such approval is made prior to or subsequent to the date on which the Interested Stockholder (as hereinafter defined) became an Interested Stockholder (the “Determination Date”). | |
B. Price and Procedure Requirements. Each of the seven conditions specified in the following subparagraphs (i) through (vii) shall have been met: |
(i) The aggregate amount of the cash and the Fair Market Value (as hereinafter defined) as of the date of the consummation of the Business Combination (the “Consummation Date”) of any consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be an amount at least equal to the higher amount determined under clauses (a) and (b) below (the requirements of this paragraph B(i) shall be applicable with respect to all shares of Common Stock outstanding, whether or not the Interested Stockholder has previously acquired any shares of the Common Stock): |
(a) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by or on behalf of the Interested Stockholder for any shares of Common Stock acquired beneficially by it (1) within the two-year period immediately prior to the first public announcement of the proposal of the Business Combination (the “Announcement Date”) or (2) in the transaction in which it became an Interested Stockholder, whichever is higher, plus interest compounded annually from the Determination Date through the Consummation Date at the prime rate of interest of Citibank N.A. (or of such other major bank headquartered in New York City selected by at least two-thirds of the Continuing Directors) from time to time in effect in New York City, less the aggregate amount of any cash dividends paid, and the Fair Market Value of any dividends paid in other than cash, per share of Common Stock from the Determination Date through the Consummation Date in an amount up to but not exceeding the amount of such interest payable per share of Common Stock; and | |
(b) the Fair Market Value per share of Common Stock on the Announcement Date or on the Determination Date, whichever is higher. |
(ii) The aggregate amount of the cash and the Fair Market Value as of the Consummation Date of any consideration other than cash to be received per share by holders of shares of any class or series of outstanding Capital Stock, other than the Common Stock, in such Business Combination shall be an amount at least equal to the highest amount determined under clauses (a), (b) and (c) below (the requirements of this paragraph B(ii) shall be applicable with respect to all shares of every class or series of outstanding Capital Stock, other than the Common Stock, whether or not the Interested Stockholder has previously acquired any shares of a particular class or series of Capital Stock): |
(a) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by or on behalf of the Interested Stockholder for any shares of such class or series of Capital Stock acquired beneficially by it (1) within the two-year period immediately prior to the Announcement Date or (2) in the transaction in which it became an Interested Stockholder, whichever is higher, plus interest compounded annually from the Determination Date through the Consummation Date at the prime rate of interest of Citibank N.A. (or of such other major bank headquartered in New York City selected by at least two-thirds of the Continuing Directors) from time to time in effect in New York City, less the aggregate amount of any cash dividends paid, and the Fair Market Value of any dividends paid in other than cash, per share of such class or series of Capital Stock from the Determination Date through the Consummation Date in an amount up to but not exceeding the amount of such interest payable per share of such class or series of Capital Stock; and |
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(b) the Fair Market Value per share of such class or series of Capital Stock on the Announcement Date or on the Determination Date, whichever is higher; and | |
(c) the highest preferential amount per share to which the holders of shares of such class or series of Capital Stock would be entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, regardless of whether the Business Combination to be consummated constitutes such an event. |
(iii) The consideration to be received by holders of a particular class or series of outstanding Capital Stock (including Common Stock) shall be in cash or in the same form as previously has been paid by or on behalf of the Interested Stockholder in its direct or indirect acquisition of beneficial ownership of shares of such class or series of Capital Stock. If the consideration so paid for shares of any class or series of Capital Stock varied as to form, the form of consideration for such class or series of Capital Stock shall be either cash or the form used to acquire beneficial ownership of the largest number of shares of such class or series of Capital Stock previously acquired by the Interested Stockholder. | |
(iv) After such Interested Stockholder has become an Interested Stockholder and prior to the consummation of such Business Combination, such Interested Stockholder shall not have become the beneficial owner of any additional shares of Capital Stock except as part of the transaction that results in such Interested Stockholder becoming an Interested Stockholder and except in a transaction that, after giving effect thereto, would not result in any increase in the Interested Stockholder’s percentage beneficial ownership of any class or series of Capital Stock; and, except as approved by at least two-thirds of the Continuing Directors: (a) there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) payable in accordance with the terms of any outstanding Capital Stock; (b) there shall have been no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any stock split, stock dividend or subdivision of the Common Stock); and (c) there shall have been an increase in the annual rate of dividends paid on the Common Stock as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of Common Stock. | |
(v) After such Interested Stockholder has become an Interested Stockholder, such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a stockholder of the Company), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Company, whether in anticipation of or in connection with such Business Combination or otherwise. | |
(vi) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to all stockholders of the Company at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). The proxy or information statement shall contain on the first page thereof, in a prominent place, any statement as to the advisability of the Business Combination that the Continuing Directors, or any of them, may choose to make and, if deemed advisable by at least two-thirds of the Continuing Directors, the opinion of an investment banking firm selected for and on behalf of the Company by at least two-thirds of the Continuing Directors as to the fairness of the terms of the Business Combination from a financial point of view to the holders of the outstanding shares of Capital Stock other than the Interested Stockholder and its Affiliates or Associates (as hereinafter defined). |
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(vii) Such Interested Stockholder shall not have made any material change in the Company’s business or equity capital structure without the approval of at least two-thirds of the Continuing Directors. |
A. A “Business Combination” shall mean: |
(i) any merger or consolidation of the Company or any Subsidiary (as hereinafter defined) with (i) any Interested Stockholder or (ii) any other corporation (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate or Associate of an Interested Stockholder; or | |
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder involving any assets or securities of the Company, any Subsidiary or any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder having an aggregate Fair Market Value of $[20,000,000] or more; or | |
(iii) the adoption of any plan or proposal for the liquidation or dissolution of the Company proposed by or on behalf of any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder; or | |
(iv) any reclassification of securities (including any reverse stock split), or recapitalization of the Company, or any merger or consolidation of the Company with any Subsidiary or any other transaction (whether or not with or into or otherwise involving an Interested Stockholder) that has the effect, directly or indirectly, of increasing the proportionate share of any class or series of Capital Stock, or any securities convertible into Capital Stock or into equity securities of any Subsidiary, that is beneficially owned by any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder; or | |
(v) any agreement, contract, arrangement or other understanding providing for any one or more of the actions specified in clauses (i) through (iv) above. |
B. A “person” shall mean any individual, firm, corporation or other entity and shall include any group composed of any person and any other person with whom such person or any Affiliate or Associate of such person has any agreement, arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of Capital Stock. | |
C. “Interested Stockholder” shall mean any person (other than the Company or any Subsidiary and other than any profit-sharing, employee stock ownership or other employee benefit plan of the Company, any Subsidiary, Fortune Brands, Inc., a Delaware corporation (“Fortune”), or any subsidiary of Fortune or any trustee of or fiduciary with respect to any such plan when acting in such capacity) who or which: |
(i) is the beneficial owner of Voting Stock having 10% or more of the votes entitled to be cast by the holders of all then outstanding shares of Voting Stock; or | |
(ii) is an Affiliate or Associate of the Company and at any time within the two-year period immediately prior to the date in question was the beneficial owner of Voting Stock having 10% or more of the votes entitled to be cast by the holders of all then outstanding shares of Voting Stock; or |
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(iii) is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Stockholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933; |
provided, however, that Fortune shall not be an Interested Stockholder as a result of its ownership of Capital Stock of the Company prior to the distribution of the shares of Capital Stock of the Company held by Fortune to the holders of capital stock of Fortune (the “Distribution”). |
D. A person shall be a “beneficial owner” of any Capital Stock: | |
(i) which such person or any Affiliate or Associate of such person beneficially owns, directly or indirectly; or | |
(ii) which such person or any Affiliate or Associate of such person has, directly or indirectly, (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding; or | |
(iii) which are beneficially owned, directly or indirectly, by any other person with which such person or any Affiliate or Associate of such person has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Capital Stock. | |
E. For the purposes of determining whether a person is an Interested Stockholder pursuant to paragraph C of this Section 3, the number of shares of Capital Stock deemed to be outstanding shall include shares deemed owned by the Interested Stockholder through application of paragraph D of this Section 3 but shall not include any other shares of Capital Stock that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. | |
F. “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, as in effect on [ • ], 2005 (the term “registrant” in such Rule 12b-2 meaning in this case the Company). | |
G. “Subsidiary” means any corporation of which a majority of any class of equity security is beneficially owned by the Company; provided, however, that for the purposes of the definition of Interested Stockholder set forth in paragraph C of this Section 3, the term “Subsidiary” shall mean only a corporation of which a majority of each class of equity security is beneficially owned by the Company. | |
H. “Continuing Director” means any member of the Board of Directors of the Company (the “Board”) who is not an Affiliate or Associate or representative of the Interested Stockholder and was a member of the Board prior to the time that the Interested Stockholder became an Interested Stockholder, and any successor of a Continuing Director who is not an Affiliate or Associate or representative of the Interested Stockholder and is recommended or elected to succeed a Continuing Director by at least two-thirds of the Continuing Directors then members of the Board. | |
I. “Fair Market Value” means: (i) in the case of cash, the amount of such cash; (ii) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the New York Stock Exchange Composite Transactions reporting system, or, if such stock is not quoted on such system, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934, as amended, on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period immediately preceding the date in question on the |
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National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined in good faith by at least two-thirds of the Continuing Directors; and (iii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined in good faith by at least two-thirds of the Continuing Directors. | |
J. In the event of any Business Combination in which the Company survives, the phrase “consideration other than cash to be received” as used in paragraphs B(i) and (ii) of Section 2 of this Article X shall include the shares of Common Stock and/or the shares of any other class or series of Capital Stock retained by the holders of such shares. |
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(1) “Change of Control” means any of the following occurring at any time after the distribution of the shares of capital stock of the Company held by Fortune Brands, Inc., a Delaware corporation (“Fortune”), to the holders of capital stock of Fortune (the “Distribution”) and the consummation of their merger pursuant to the Agreement and Plan of Merger dated as of March 15, 2005, by and among Fortune, the Company, Gemini Acquisition Sub, Inc. and General Binding Corporation (the “Merger”): | |
(a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Corporation Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Corporation Voting Securities”); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (w) any acquisition directly from the Company, (x) any acquisition by the Company, (y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or Fortune or any corporation controlled by the Company or Fortune or (z) any acquisition pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 9(1); or | |
(b) Individuals who, as of the date of the Distribution and Merger, constitute the Board of Directors (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to that date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors; Individuals who, as of the date of the Distribution and Merger, constitute the Board of Directors (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors; provided, |
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however, that any individual becoming a director subsequent to that date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors;or | |
(c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a “Corporate Transaction”), in each case, unless, following such Corporate Transaction, (i) disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a “Corporate Transaction”), in each case, unless, following such Corporate Transaction, (i)all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities, as the case may be, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company, of Fortune or of such corporation resulting from such Corporate Transaction) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Corporate Transaction and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Corporate Transaction; or | |
(d) Approval by the Company’s stockholders of a complete liquidation or dissolution of the Company. | |
(2) “Disinterested Director” means a director of the Company who is not and was not a party to an action, suit or proceeding in respect of which indemnification is sought by a director, officer, employee or agent. | |
(3) “Independent Counsel” means a law firm, or a member of a law firm, that (i) is experienced in matters of corporation law; (ii) neither presently is, nor in the past five years has been, retained to represent the Company, the director, officer, employee or agent claiming indemnification or any other party to the action, suit or proceeding giving rise to a claim for indemnification under this section, in any matter material to the Company, the claimant or any such other party; and (iii) would not, under applicable standards of professional conduct then prevailing, have a conflict of interest in representing either the Company or such director, officer, employee or agent in an action to determine the Company’s or such person’s rights under this section. |
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