Exhibit 2
Execution Copy
AGREEMENT AND PLAN OF MERGER
AMONG
THE INTERPUBLIC GROUP OF COMPANIES, INC.
VERITAS ACQUISITION CORP.
AND
TRUE NORTH COMMUNICATIONS INC.
Dated as of March 18, 2001
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
Section 1.1 The Merger......................................... 1
Section 1.2 Effective Time..................................... 2
Section 1.3 Effects of the Merger; Directors and Officers...... 2
Section 1.4 Charter and Bylaws; Directors and Officers......... 2
Section 1.5 Conversion of Securities........................... 2
Section 1.6 Parent to Make Certificates Available.............. 3
Section 1.7 Dividends; Transfer Taxes; Withholding............. 4
Section 1.8 No Fractional Securities........................... 5
Section 1.9 Return of Exchange Fund............................ 5
Section 1.10 Adjustment of Exchange Ratio....................... 5
Section 1.11 No Further Ownership Rights in Company Common Stock 5
Section 1.12 Closing of Company Transfer Books.................. 6
Section 1.13 Lost Certificates.................................. 6
Section 1.14 Further Assurances................................. 6
Section 1.15 Closing............................................ 6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Section 2.1 Organization, Standing and Power................... 7
Section 2.2 Capital Structure.................................. 7
Section 2.3 Authority.......................................... 8
Section 2.4 Consents and Approvals; No Violation............... 9
Section 2.5 SEC Documents and Other Reports.................... 10
Section 2.6 Registration Statement and Proxy Statement......... 10
Section 2.7 Absence of Certain Changes or Events............... 11
Section 2.8 Permits and Compliance............................. 11
Section 2.9 Actions and Proceedings............................ 12
Section 2.10 Opinion of Financial Advisor....................... 12
i
TABLE OF CONTENTS
(continued)
Page
Section 2.11 No Required Vote of Parent Stockholders............ 12
Section 2.12 Pooling of Interests; Reorganization............... 12
Section 2.13 Brokers............................................ 12
Section 2.14 Operations of Sub.................................. 13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization, Standing and Power................... 13
Section 3.2 Capital Structure.................................. 13
Section 3.3 Authority.......................................... 15
Section 3.4 Consents and Approvals; No Violation............... 15
Section 3.5 SEC Documents and Other Reports.................... 16
Section 3.6 Registration Statement and Proxy Statement......... 16
Section 3.7 Absence of Certain Changes or Events............... 17
Section 3.8 Permits and Compliance............................. 17
Section 3.9 Tax Matters........................................ 18
Section 3.10 Actions and Proceedings............................ 19
Section 3.11 Employee Benefits.................................. 19
Section 3.12 Labor Matters...................................... 21
Section 3.13 Opinion of Financial Advisor....................... 21
Section 3.14 Required Vote of Company Stockholders.............. 21
Section 3.15 Pooling of Interests; Reorganization............... 21
Section 3.16 Brokers............................................ 21
Section 3.17 Amendment to the Rights Agreement.................. 21
Section 3.18 Takeover Statutes.................................. 22
Section 3.19 Accuracy of Earn-Out Schedule...................... 22
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger.............. 22
Section 4.2 No Solicitation by the Company...................... 25
ii
TABLE OF CONTENTS
(continued)
Page
Section 4.3 Pooling of Interests; Reorganization................ 27
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Stockholder Meeting................................. 27
Section 5.2 Preparation of the Registration Statement
and the Proxy Statement............................ 28
Section 5.3 Access to Information............................... 29
Section 5.4 Compliance with the Securities Act.................. 29
Section 5.5 Current NYSE Listing................................ 30
Section 5.6 Fees and Expenses................................... 30
Section 5.7 Company Stock Plans................................. 31
Section 5.8 Reasonable Best Efforts; Pooling of Interests....... 32
Section 5.9 Public Announcements................................ 33
Section 5.10 Real Estate Transfer and Gains Tax.................. 33
Section 5.11 State Takeover Laws................................. 33
Section 5.12 Indemnification; Directors and Officers
Insurance.......................................... 34
Section 5.13 Notification of Certain Matters..................... 34
Section 5.14 Employee Benefit Plans and Agreements............... 35
Section 5.15 Section 16(b)....................................... 36
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation
to Effect the Merger............................... 36
Section 6.2 Conditions to Obligation of the Company
to Effect the Merger............................... 37
Section 6.3 Conditions to Obligations of Parent and Sub
to Effect the Merger............................... 38
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination......................................... 39
Section 7.2 Effect of Termination............................... 40
Section 7.3 Amendment........................................... 41
Section 7.4 Waiver.............................................. 41
iii
TABLE OF CONTENTS
(continued)
Page
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and Warranties...... 41
Section 8.2 Notices............................................. 41
Section 8.3 Interpretation...................................... 42
Section 8.4 Counterparts........................................ 42
Section 8.5 Entire Agreement; No Third-Party Beneficiaries...... 42
Section 8.6 Governing Law....................................... 43
Section 8.7 Assignment.......................................... 43
Section 8.8 Severability........................................ 43
iv
TABLE OF DEFINED TERMS
Defined Term Section
- ------------ -------
Agreement............................................................... Forepart
Blue Sky Laws........................................................... 2.4
Certificate of Merger................................................... 1.2
Certificates............................................................ 1.6(b)
Closing................................................................. 1.15
Code.................................................................... Recitals
Company................................................................. Forepart
Company Affiliate Letter................................................ 5.4(a)
Company Bylaws.......................................................... 1.4(a)
Company Charter......................................................... 1.4(a)
Company Common Stock.................................................... Recitals
Company Confidentiality Agreement....................................... 5.3(a)
Company Employees....................................................... 5.14(a)
Company Letter.......................................................... 3.2(a)
Company Multiemployer Plan.............................................. 3.11 (c)
Company Permits......................................................... 3.8(a)
Company Plan............................................................ 3.11(c)
Company Preferred Stock................................................. 3.2(a)
Company SEC Documents................................................... 3.5
Company Stock Option Plans.............................................. 3.2(a)
Company Stock Options................................................... 3.2(a)
Confidentiality Agreements.............................................. 5.3(b)
Constituent Corporations................................................ Forepart
D&O Insurance........................................................... 5.12(b)
DGCL.................................................................... 1.1
Effective Time.......................................................... 1.2
ERISA................................................................... 3.1(a)
ERISA Affiliates........................................................ 3.11(c)
Exchange Act............................................................ 2.4
Exchange Agent.......................................................... 1.6(a)
Exchange Fund........................................................... 1.6(a)
Exchange Ratio.......................................................... 1.5(c)
GAAP.................................................................... 6.3(d)
Gains Taxes............................................................. 5.10
Governmental Entity..................................................... 2.4
HSR Act................................................................. 2.4
Knowledge of Parent..................................................... 2.9
Knowledge of the Company................................................ 3.10
Liens................................................................... 2.2(b)
Material Adverse Effect................................................. 2.1
Merger.................................................................. Recitals
New Plans............................................................... 5.14(a)
v
NYSE.................................................................... 1.8
Old Plans............................................................... 5.14(a)
Parent.................................................................. Forepart
Parent Affiliate Letter................................................. 5.4(b)
Parent Annual Report.................................................... 2.2(b)
Parent Bylaws........................................................... 2.4
Parent Charter.......................................................... 2.4
Parent Common Stock..................................................... Recitals
Parent Letter........................................................... 2.4
Parent Permits.......................................................... 2.8(a)
Parent Preferred Stock.................................................. 2.2(a)
Parent SEC Documents.................................................... 2.5
Parent Stock Plans...................................................... 2.2(a)
Proxy Statement......................................................... 2.6
Rabbi Trust............................................................. 5.14(c)
Registration Statement.................................................. 2.3
Rights.................................................................. Recitals
Rights Agreement........................................................ Recitals
Rule 145 Affiliates..................................................... 5.4(a)
SEC..................................................................... 2.2(a)
Securities Act.......................................................... 2.3
Significant Subsidiary.................................................. 2.2(a)
State Takeover Approvals................................................ 2.4
State Takeover Statutes................................................. 3.18
Stockholder Meeting..................................................... 5.1
Sub..................................................................... Forepart
Subsidiary.............................................................. 2.1
Substitute Option....................................................... 5.7
Superior Proposal....................................................... 4.2(a)
Surviving Corporation................................................... 1.1
Takeover Proposal....................................................... 4.2(a)
Taxes................................................................... 3.9(a)
Tax Returns............................................................. 3.9(a)
Third Party............................................................. 5.6(d)
Third Party Acquisition Event........................................... 5.6(d)
vi
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 18, 2001 (this
"Agreement"), among The Interpublic Group of Companies, Inc., a Delaware
corporation ("Parent"), Veritas Acquisition Corp., a Delaware corporation and a
direct wholly owned subsidiary of Parent ("Sub"), and True North Communications
Inc., a Delaware corporation (the "Company") (Sub and the Company being
hereinafter collectively referred to as the "Constituent Corporations").
W I T N E S S E T H:
--------------------
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have each approved and declared advisable the merger of Sub with and
into the Company (the "Merger"), upon the terms and subject to the conditions
set forth herein, whereby each issued and outstanding share of common stock, par
value $.33 1/3 per share, of the Company ("Company Common Stock") together with
the associated right to purchase one two-thousandth of a share of Series B
Junior Participating Preferred Stock of the Company (the "Rights") under the
Rights Agreement dated November 4, 1998 , as amended, between the Company and
First Chicago Trust Company of New York, a division of Equiserve (the "Rights
Agreement"), not owned directly or indirectly by Parent or the Company will be
converted into shares of Common Stock, par value $.10 per share, of Parent
("Parent Common Stock");
WHEREAS, the respective Boards of Directors of Parent and the Company
have each determined that the Merger is in furtherance of and consistent with
their respective long-term business strategies and is in the best interest of
their respective stockholders;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, it is intended that the Merger shall be recorded for
accounting purposes as a pooling of interests.
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions hereof,
----------
and in accordance with the Delaware General Corporation Law (the "DGCL"), Sub
shall be merged with and into the Company at the Effective Time (as hereinafter
defined). Following the Merger, the separate corporate existence of Sub shall
cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Sub in accordance with the DGCL.
1
Section 1.2 Effective Time. The Merger shall become effective when a
--------------
Certificate of Merger (the "Certificate of Merger"), executed in accordance with
the relevant provisions of the DGCL, is filed with the Secretary of State of the
State of Delaware; provided, however, that, upon mutual consent of the
-------- -------
Constituent Corporations, the Certificate of Merger may provide for a later date
of effectiveness of the Merger not more than 30 days after the date the
Certificate of Merger is filed. When used in this Agreement, the term
"Effective Time" shall mean the date and time at which the Certificate of Merger
is accepted for recording or such later time established by the Certificate of
Merger. The filing of the Certificate of Merger shall be made on the date of
the Closing (as hereinafter defined).
Section 1.3 Effects of the Merger; Directors and Officers. The Merger shall
---------------------------------------------
have the effects set forth in this Agreement and in Section 259 of the DGCL.
Section 1.4 Charter and Bylaws; Directors and Officers.
------------------------------------------
(a) At the Effective Time, the Amended and Restated Certificate of
Incorporation, as amended, of the Company (the "Company Charter"), as in
effect immediately prior to the Effective Time, shall be amended so that
Article FOURTH of the Company Charter reads in its entirety as follows:
"The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 1,000 shares of Common Stock,
par value $.01 per share." As so amended, the Company Charter shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law. At the
Effective Time, the By-laws of the Company, as amended (the "Company
Bylaws"), as in effect immediately prior to the Effective Time shall be the
Bylaws of the Surviving Corporation until thereafter changed or amended as
provided therein or by the Company Charter and the DGCL.
(b) The directors of Sub at the Effective Time of the Merger shall be the
directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly
elected and qualified, as the case may be. The officers of the Company at
the Effective Time of the Merger shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or until
their respective successors are duly elected and qualified, as the case may
be.
(c) As of the Effective Time, Parent's board of directors shall elect David A.
Bell and J. Brendan Ryan as members of the board of directors of Parent, to
hold such office until the earlier of resignation or removal or until their
respective successors are duly elected and qualified.
(d) As of the Effective Time, Parent's board of directors shall elect David A.
Bell to become the Vice-Chairman of Parent, to hold such office until the
earlier of resignation or removal or until his successor is duly elected
and qualified.
Section 1.5 Conversion of Securities. As of the Effective Time, by virtue of
------------------------
the Merger and without any action on the part of Sub, the Company, Parent or the
holders of any securities of the Constituent Corporations:
2
(a) Each issued and outstanding share of common stock, par value $.01 per
share, of Sub shall be converted into one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) All shares of Company Common Stock, together with the associated Rights,
that are held in the treasury of the Company or by any wholly owned
Subsidiary of the Company and any shares of Company Common Stock, together
with the associated Rights, owned by Parent (other than shares, if any, in
trust accounts, managed accounts, custodial accounts and the like that are
beneficially owned by third parties) shall be canceled and no capital stock
of Parent or other consideration shall be delivered in exchange therefor.
(c) Subject to the provisions of Sections 1.8 and 1.10 hereof, each share of
Company Common Stock issued and outstanding immediately prior to the
Effective Time, together with the associated Rights, (other than shares to
be canceled in accordance with Section 1.5(b)) shall be converted into 1.14
(such number being the "Exchange Ratio") validly issued, fully paid and
nonassessable shares of Parent Common Stock. All such shares of Company
Common Stock and the associated Rights, when so converted, shall no longer
be outstanding and shall automatically be canceled and retired and each
holder of a certificate representing any such shares shall cease to have
any rights with respect thereto, except the right to receive any dividends
and other distributions in accordance with Section 1.7, certificates
representing the shares of Parent Common Stock into which such shares are
converted and any cash, without interest, in lieu of fractional shares to
be issued or paid in consideration therefor upon the surrender of such
certificate in accordance with Section 1.6.
Section 1.6 Parent to Make Certificates Available.
-------------------------------------
(a) Exchange of Certificates. Parent shall authorize Equiserve (or such other
------------------------
person or persons as shall be reasonably acceptable to Parent and the
Company) to act as Exchange Agent hereunder (the "Exchange Agent"). At or
prior to the Effective Time, Parent shall deposit with the Exchange Agent
certificates representing the shares of Parent Common Stock issuable
pursuant to Section 1.5(c) for exchange with outstanding shares of Company
Common Stock, together with the associated Rights, and cash, as required to
make payments in lieu of any fractional shares pursuant to Section 1.8
(such cash and shares of Parent Common Stock, together with any dividends
or distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund"). The Exchange Agent shall deliver the Parent Common Stock
contemplated to be issued pursuant to Section 1.5(c) out of the Exchange
Fund. The Exchange Agent shall invest any cash included in the Exchange
Fund as directed by Parent on a daily basis and promptly pay to Parent or
its designee any interest or other income resulting therefrom. Parent
shall bear the risk of any investment losses arising from such investment.
(b) Exchange Procedures. Parent shall instruct the Exchange Agent, as soon as
-------------------
practicable after the Effective Time, to mail to each record holder of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock, together with the
associated Rights, converted in the Merger (the "Certificates") a letter of
transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon actual delivery
of the Certificates to the Exchange Agent, and shall contain instructions
for use in effecting the surrender of the
3
Certificates in exchange for certificates representing shares of Parent
Common Stock and cash in lieu of fractional shares). Upon surrender for
cancellation to the Exchange Agent of one or more Certificates held by any
record holder of a Certificate, together with such letter of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive
in exchange therefor (after taking into account all shares of Company
Common Stock then held and surrendered by such holder) a certificate
representing that number of whole shares of Parent Common Stock into which
the shares represented by the surrendered Certificate shall have been
converted at the Effective Time pursuant to this Article I, cash in lieu of
any fractional share in accordance with Section 1.8 and certain dividends
and other distributions in accordance with Section 1.7, and any Certificate
so surrendered shall forthwith be canceled.
Section 1.7 Dividends; Transfer Taxes; Withholding. No dividends or other
--------------------------------------
distributions that are declared on or after the Effective Time on Parent Common
Stock, or are payable to the holders of record thereof on or after the Effective
Time, will be paid to any person entitled by reason of the Merger to receive a
certificate representing Parent Common Stock until such person surrenders the
related Certificate or Certificates, as provided in Section 1.6, and no cash
payment in lieu of fractional shares will be paid to any such person pursuant to
Section 1.8 until such person shall so surrender the related Certificate or
Certificates. Subject to the effect of applicable law, there shall be paid to
each record holder of a new certificate representing such Parent Common Stock:
(i) at the time of such surrender or as promptly as practicable thereafter, the
amount of any dividends or other distributions theretofore paid with respect to
the shares of Parent Common Stock represented by such new certificate and having
a record date on or after the Effective Time and a payment date prior to such
surrender; (ii) at the appropriate payment date or as promptly as practicable
thereafter, the amount of any dividends or other distributions payable with
respect to such shares of Parent Common Stock and having a record date on or
after the Effective Time but prior to such surrender and a payment date on or
subsequent to such surrender; and (iii) at the time of such surrender or as
promptly as practicable thereafter, the amount of any cash payable with respect
to a fractional share of Parent Common Stock to which such holder is entitled
pursuant to Section 1.8. In no event shall the person entitled to receive such
dividends or other distributions or cash in lieu of fractional shares be
entitled to receive interest on such dividends or other distributions or cash in
lieu of fractional shares. If any cash or certificate representing shares of
Parent Common Stock is to be paid to or issued in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it shall
be a condition of such exchange that the Certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange shall pay to the Exchange Agent any transfer or other
taxes required by reason of the issuance of certificates for such shares of
Parent Common Stock in a name other than that of the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable. Parent or the Exchange
Agent shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock such amounts as Parent or the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the Code or under any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by Parent or the Exchange Agent, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of Company Common Stock in respect of which such deduction and
withholding was made by Parent or the Exchange Agent.
4
Section 1.8 No Fractional Securities. No certificates or scrip representing
------------------------
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates pursuant to this Article I, and no Parent dividend or
other distribution or stock split shall relate to any fractional share, and no
fractional share shall entitle the owner thereof to vote or to any other rights
of a security holder of Parent. In lieu of any such fractional share, each
holder of Company Common Stock who would otherwise have been entitled to a
fraction of a share of Parent Common Stock upon surrender of Certificates for
exchange pursuant to this Article I will be paid an amount in cash (without
interest), rounded to the nearest cent, determined by multiplying (i) the last
reported sale price per share of Parent Common Stock on The New York Stock
Exchange (the "NYSE") on the date of the Effective Time (or, if the shares of
Parent Common Stock do not trade on the NYSE on such date, the first date of
trading of shares of Parent Common Stock on the NYSE after the Effective Time)
by (ii) the fractional interest to which such holder would otherwise be
entitled. As promptly as practicable after the determination of the amount of
cash, if any, to be paid to holders of fractional share interests, the Exchange
Agent shall so notify Parent, and Parent shall deposit such amount with the
Exchange Agent and shall cause the Exchange Agent to forward payments to such
holders of fractional share interests subject to and in accordance with the
terms of Section 1.7 and this Section 1.8.
Section 1.9 Return of Exchange Fund. Any portion of the Exchange Fund
-----------------------
(including any income or proceeds thereon or any investments thereof) which
remains undistributed to the former stockholders of the Company for twelve
months after the Effective Time shall be delivered to Parent or its designee,
upon demand of Parent, and any such former stockholders who have not theretofore
complied with this Article I shall thereafter look only to Parent (subject to
abandoned property, escheat and similar laws) for payment of their claim for
Parent Common Stock, any cash in lieu of fractional shares of Parent Common
Stock and any dividends or distributions with respect to Parent Common Stock.
Any such portion of the Exchange Fund remaining unclaimed by holders of shares
of Company Common Stock who are entitled thereto pursuant to Sections 1.7 and
1.8 on the third anniversary of the date of the Effective Time (or such earlier
date as shall be immediately before such date upon which such securities or
amounts would otherwise escheat to or become property of any public official or
Governmental Entity (as hereinafter defined)) shall, to the extent permitted by
law, become the property of Parent, free and clear of claims or interests of any
person previously entitled thereto. Neither Parent nor the Surviving
Corporation shall be liable to any former holder of Company Common Stock for any
such shares of Parent Common Stock, cash, dividends and distributions which are
delivered to a public official or Governmental Entity pursuant to any applicable
abandoned property, escheat or similar law.
Section 1.10 Adjustment of Exchange Ratio. In the event of any
----------------------------
reclassification, stock split or stock dividend with respect to Parent Common
Stock or any change or conversion of Parent Common Stock into other securities
(or if a record date with respect to any of the foregoing should occur) prior to
the Effective Time, appropriate and proportionate adjustments, if any, shall be
made to the Exchange Ratio, and all references to the Exchange Ratio in this
Agreement shall be deemed to be to the Exchange Ratio as so adjusted.
Section 1.11 No Further Ownership Rights in Company Common Stock. All shares
---------------------------------------------------
of Parent Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms hereof (including any cash paid pursuant to Section
1.8) shall be
5
deemed to have been issued in full satisfaction of all rights pertaining to the
shares of Company Common Stock, together with the associated Rights, represented
by such Certificates.
Section 1.12 Closing of Company Transfer Books. At the Effective Time, the
---------------------------------
stock transfer books of the Company shall be closed and no transfer of shares of
Company Common Stock shall thereafter be made on the records of the Company.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation, the Exchange Agent or the Parent, such Certificates shall be
canceled and exchanged as provided in this Article I.
Section 1.13 Lost Certificates. If any Certificate shall have been lost,
-----------------
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Parent or the Exchange Agent, the posting by such person of a bond, in such
reasonable amount as Parent or the Exchange Agent may direct as indemnity
against any claim that may be made against them with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the shares of Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock to which the holders thereof are
entitled pursuant to Section 1.8 and any dividends or other distributions to
which the holders thereof are entitled pursuant to Section 1.7.
Section 1.14 Further Assurances. If at any time after the Effective Time the
------------------
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the Constituent Corporations, or (b) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either of the Constituent Corporations, all such deeds, bills of sale,
assignments and assurances and to do, in the name and on behalf of either
Constituent Corporation, all such other acts and things as may be necessary,
desirable or proper to vest, perfect or confirm the Surviving Corporation's
right, title or interest in, to or under any of the rights, privileges, powers,
franchises, properties or assets of such Constituent Corporation and otherwise
to carry out the purposes of this Agreement.
Section 1.15 Closing. The closing of the transactions contemplated by this
-------
Agreement (the "Closing") and all actions specified in this Agreement to occur
at the Closing shall take place at the offices of Cleary, Gottlieb, Steen &
Hamilton, One Liberty Plaza, New York, New York 10006, at 10:00 a.m. local time
no later than the sixth business day following the day on which the last of the
conditions set forth in Article VI shall have been fulfilled or waived (if
permissible) (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the fulfillment or waiver (if
permissible) of such conditions) or at such other time and place as Parent and
the Company shall agree.
6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
Section 2.1 Organization, Standing and Power. Each of Parent and Sub is a
--------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is organized and has the requisite corporate
power and authority to carry on its business as now being conducted. Each
Subsidiary (as hereinafter defined) of Parent is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized and has the requisite corporate power to carry on its business as now
being conducted, except where the failure to be so organized, existing or in
good standing or to have such power or authority would not, individually or in
the aggregate, have a Material Adverse Effect (as hereinafter defined) on
Parent. Parent and each of its Subsidiaries are duly qualified to do business,
and are in good standing, in each jurisdiction where the character of their
properties owned or held under lease or the nature of their activities makes
such qualification necessary, except where the failure to be so qualified would
not, individually or in the aggregate, have a Material Adverse Effect on Parent.
For purposes of this Agreement (a) "Material Adverse Effect" means, when used
with respect to Parent or the Company, as the case may be, any event, change or
effect that individually or when taken together with all other such events,
changes or effects is, or would be, materially adverse to the business,
financial condition or results of operations of Parent and its subsidiaries,
taken as a whole, or the Company and its subsidiaries, taken as a whole, as the
case may be, except to the extent resulting from or relating to (i) any changes
or events affecting the economy of any country or the advertising industry
generally (other than to the extent such changes or events adversely affect
Parent or the Company, as the case may be, in a materially disproportionate
manner in relation to the industry generally) or (ii) the loss of those clients
that have been previously discussed by the parties; and (b) "Subsidiary" means
any corporation, partnership, limited liability company, joint venture or other
legal entity of which Parent or the Company, as the case may be (either alone or
through or together with any other Subsidiary), (i) owns, directly or
indirectly, 50% or more of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation, partnership, limited liability
company, joint venture or other legal entity or otherwise (through contract or
other means) holds or controls 50% or more of the ordinary voting power in
respect of the election or appointment of the board of directors or other
governing body or (ii) of which such party or any of its Subsidiaries is a
general or managing partner.
Section 2.2 Capital Structure.
-----------------
(a) As of the date hereof, the authorized capital stock of Parent consists of
550 million shares of Parent Common Stock and 20 million shares of
preferred stock, no par value ("Parent Preferred Stock"). At the close of
business on February 28, 2001, (i) 315,527,074 shares of Parent Common
Stock were issued and outstanding, all of which were validly issued, fully
paid and nonassessable and free of preemptive rights and (ii) 5,461,525
shares of Parent Common Stock were held in treasury of Parent or by
Subsidiaries of Parent. As of December 31, 2000, approximately 27,516,000
shares of Parent Common Stock were reserved for issuance
7
pursuant to outstanding options to purchase shares of Parent Common Stock
under Parent's 1986, 1988, 1996 and 1997 Stock Option Plans (collectively,
the "Parent Stock Plans"). As of the date hereof, the Parent Stock Plans
are the only benefit plans of Parent or its Subsidiaries under which any
securities of Parent are issuable. As of the date of this Agreement, except
as set forth above and except for the issuance of shares of Parent Common
Stock upon exercise of options issued pursuant to the Parent Stock Plans,
no shares of capital stock or other voting securities of Parent were
issued, reserved for issuance or outstanding. All of the shares of Parent
Common Stock issuable in exchange for Company Common Stock at the Effective
Time in accordance with this Agreement will be, when so issued, duly
authorized, validly issued, fully paid and nonassessable and free of
preemptive rights. As of the date of this Agreement, except for (i) this
Agreement and (ii) as set forth above, and except as disclosed in the
Parent SEC Documents (as hereinafter defined), there are no options,
warrants, calls, rights, puts or agreements to which Parent or any of its
Significant Subsidiaries (as hereinafter defined) is a party or by which
any of them is bound obligating Parent or any of its Significant
Subsidiaries to issue, deliver, sell or redeem, or cause to be issued,
delivered, sold or redeemed, any additional shares of capital stock (or
other voting securities or equity equivalents) or convertible or
exchangeable securities of Parent or any of its Significant Subsidiaries or
obligating Parent or any of its Significant Subsidiaries to grant, extend
or enter into any such option, warrant, call, right, put or agreement.
True, complete and correct copies of the Certificate of Incorporation and
Bylaws of each of Parent and Sub have been delivered to the Company. For
purposes of this Agreement, "Significant Subsidiary" means any Subsidiary
that constitutes a significant subsidiary within the meaning of Rule 1-02
of Regulation S-X of the Securities and Exchange Commission (the "SEC").
(b) Each outstanding share of capital stock (or other voting security or equity
equivalent) of each Significant Subsidiary of Parent is duly authorized,
validly issued, fully paid and nonassessable and each such share (or other
voting security or equity equivalent) is owned by Parent or another
Subsidiary of Parent, free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations
on voting rights, charges and other encumbrances of any nature whatsoever
(collectively, "Liens") other than such Liens which (individually or in the
aggregate) would not have a Material Adverse Effect on Parent. Except as
disclosed in the Parent SEC Documents, Parent does not have any outstanding
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or convertible into or exercisable for securities having the
right to vote) with the stockholders of Parent on any matter. Exhibit 21
to Parent's Annual Report on Form 10-K for the year ended December 31,
1999, as filed with the SEC (the "Parent Annual Report"), was, at the time
so filed, a true, accurate and correct statement in all material respects
of all of the information required to be set forth therein by the
regulations of the SEC.
Section 2.3 Authority. On or prior to the date of this Agreement, the Boards
---------
of Directors of Parent and Sub have unanimously (i) declared the agreement of
merger (within the meaning of Section 251 of the DGCL) contained in this
Agreement advisable and fair to and in the best interest of Parent and Sub,
respectively, and their respective stockholders, and (ii) approved and adopted
this Agreement in accordance with the DGCL. Each of Parent and Sub has all
requisite corporate power to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and Sub and the consummation by Parent and Sub of the transactions
contemplated hereby have been
8
duly authorized by all necessary corporate action on the part of Parent and Sub,
subject to the filing of appropriate Merger documents as required by the DGCL.
This Agreement and the consummation of the transactions contemplated hereby have
been approved by Parent as the sole stockholder of Sub. This Agreement has been
duly executed and delivered by Parent and Sub and (assuming the valid
authorization, execution and delivery of this Agreement by the Company and the
validity and binding effect hereof on the Company) this Agreement constitutes
the valid and binding obligation of Parent and Sub enforceable against each of
them in accordance with its terms. The issuance of Parent Common Stock in
connection with the Merger and the filing of a registration statement on Form S-
4 with the SEC by Parent under the Securities Act of 1933, as amended (together
with the rules and regulations promulgated thereunder, the "Securities Act"),
for the purpose of registering the shares of Parent Common Stock to be issued in
the Merger (together with any amendments or supplements thereto, whether prior
to or after the effective date thereof, the "Registration Statement") have been
duly authorized by Parent's Board of Directors.
Section 2.4 Consents and Approvals; No Violation. Assuming that all consents,
------------------------------------
approvals, authorizations and other actions described in this Section 2.4 and in
Section 5.7 have been obtained and all filings and obligations described in this
Section 2.4 have been made, and except as set forth in Section 2.4 of the letter
dated the date hereof and delivered on the date hereof by Parent to the Company,
which letter relates to this Agreement and is designated the Parent Letter (the
"Parent Letter"), the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give to others a right of
termination, cancellation or acceleration of any obligation or the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of Parent
or any of its Subsidiaries under, any provision of (i) the Restated Certificate
of Incorporation of Parent (the "Parent Charter") or the By-laws of Parent (the
"Parent Bylaws") or the Certificate of Incorporation or By-laws of Sub, (ii) any
provision of the comparable charter or organization documents of any of Parent's
Subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to Parent or any of its Subsidiaries or any of their
respective properties or assets or (iv) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Parent or any of its
Subsidiaries or any of their respective properties or assets, other than, in the
case of clauses (ii), (iii) or (iv), any such violations, defaults, rights,
liens, security interests, charges or encumbrances that, individually or in the
aggregate, would not have a Material Adverse Effect on Parent, materially impair
the ability of Parent or Sub to perform their respective obligations hereunder
or prevent the consummation of any of the transactions contemplated hereby. No
filing or registration with, or authorization, consent or approval of, any
domestic (federal and state), foreign or supranational court, commission,
governmental body, regulatory agency, authority or tribunal or stock exchange (a
"Governmental Entity") is required by or with respect to Parent or any of its
Subsidiaries in connection with the execution and delivery of this Agreement by
Parent or Sub or is necessary for the consummation of the Merger and the other
transactions contemplated by this Agreement, except for (i) in connection, or in
compliance, with the provisions of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), the Securities Act and the Securities
Exchange Act of 1934, as amended, (together with the rules and regulations
promulgated thereunder, the "Exchange Act"),
9
(ii) the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware and appropriate documents with the relevant authorities of
other states in which the Company or any of its Subsidiaries is qualified to do
business, (iii) such filings, authorizations, orders and approvals as may be
required by state takeover laws (the "State Takeover Approvals"), (iv) such
filings as may be required in connection with the taxes described in Section
5.10, (v) applicable requirements, if any, of state securities or "blue sky"
laws ("Blue Sky Laws") and the NYSE, (vi) as may be required under applicable
non-U.S. laws of general applicability and (vii) such other consents, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made would not, individually or in the aggregate, have a Material
Adverse Effect on Parent, materially impair the ability of Parent or Sub to
perform its obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby.
Section 2.5 SEC Documents and Other Reports. Parent has timely filed all
-------------------------------
required documents with the SEC since December 31, 1999 (including, without
limitation, financial statements, exhibits and schedules included or
incorporated by reference therein and all other documents incorporated by
reference therein, the "Parent SEC Documents"). As of their respective dates,
the Parent SEC Documents complied in all material respects with the requirements
of the Securities Act or the Exchange Act, as the case may be, and, at the
respective times they were filed, none of the Parent SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The consolidated
financial statements (including, in each case, any notes thereto) of Parent
included in the Parent SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
generally accepted accounting principles (except, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated therein or in the notes
thereto) and fairly presented in all material respects the consolidated
financial position of Parent and its consolidated Subsidiaries as at the
respective dates thereof and the consolidated results of their operations and
their consolidated cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein that, in either case, have not been and will not
be material in amount). Except as disclosed in the Parent SEC Documents or as
required by generally accepted accounting principles, Parent has not, between
December 31, 1999 and the date hereof, made any material change in the
accounting practices or policies applied in the preparation of any of such
financial statements.
Section 2.6 Registration Statement and Proxy Statement. None of the
------------------------------------------
information to be supplied in writing by Parent or Sub for inclusion or
incorporation by reference in the Registration Statement or the proxy
statement/prospectus included therein relating to the Stockholder Meeting (as
defined in Section 5.1) (together with any amendments or supplements thereto,
the "Proxy Statement") will (i) in the case of the Registration Statement, at
the time it becomes effective, 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 not misleading or (ii) in the case of the
Proxy Statement, at the time of the mailing of the Proxy Statement and at the
time of the Stockholder 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
10
the statements therein, in light of the circumstances under which they are made,
not misleading. The Registration Statement will comply (with respect to Parent)
as to form in all material respects with the provisions of the Securities Act,
and the Proxy Statement will comply (with respect to Parent) as to form in all
material respects with the provisions of the Exchange Act.
Section 2.7 Absence of Certain Changes or Events. Except as disclosed in
------------------------------------
Parent SEC Documents filed with the SEC prior to the date of this Agreement or
as disclosed in Section 2.7 of the Parent Letter, since December 31, 1999 (A)
Parent and its Subsidiaries have not incurred any liability or obligation
(indirect, direct or contingent) that would result in a Material Adverse Effect
on Parent, (B) Parent and its Subsidiaries have not sustained any loss or
interference with their business or properties from fire, flood, windstorm,
accident or other calamity (whether or not covered by insurance) that has had a
Material Adverse Effect on Parent, (C) there has been no dividend or
distribution of any kind declared, paid or made by Parent on any class of its
stock, except for regular quarterly cash dividends to shareholders of Parent
consistent with past practice and (D) there has been no Material Adverse Effect
with respect to Parent.
Section 2.8 Permits and Compliance.
----------------------
(a) Except as disclosed in the Parent SEC Documents filed before the date
hereof, each of Parent and its Subsidiaries is in possession of all
franchises, grants, authorizations, licenses, permits, charters, easements,
variances, exceptions, consents, certificates, approvals and orders of any
Governmental Entity necessary for Parent or any of its Subsidiaries to own,
lease and operate its properties or to carry on its business as it is now
being conducted (the "Parent Permits"), except where the failure to have
any of the Parent Permits would not, individually or in the aggregate, have
a Material Adverse Effect on Parent. Except as disclosed in the Parent SEC
Documents filed before the date hereof, neither Parent nor any of its
Subsidiaries is in violation of (A) its charter, by-laws or other
organizational documents, (B) any applicable law, ordinance, administrative
or governmental rule or regulation or (C) any order, decree or judgment of
any Governmental Entity having jurisdiction over Parent or any of its
Subsidiaries, except, in the case of clauses (B) and (C), for any
violations that, individually or in the aggregate, would not have a
Material Adverse Effect on Parent.
(b) Except as disclosed in the Parent SEC Documents filed prior to the date of
this Agreement or as disclosed in Section 2.8 of the Parent Letter, as of
the date hereof there is no contract or agreement that is or was required
to be filed by Parent as a material contract pursuant to Item 601 of
Regulation S-K under the Securities Act. Except as set forth in the Parent
SEC Documents filed prior to the date of this Agreement or Section 2.8 of
the Parent Letter, no event of default or event that, but for the giving of
notice or the lapse of time or both, would constitute an event of default
exists or, upon the consummation by Parent or Sub of the transactions
contemplated by this Agreement, will exist under any indenture, mortgage,
loan agreement, note or other agreement or instrument for borrowed money,
any guarantee of any agreement or instrument for borrowed money or any
lease, contractual license or other agreement or instrument to which Parent
or any of its Subsidiaries is a party or by which Parent or any such
Subsidiary is bound or to which any of the properties, assets or operations
of Parent or any such Subsidiary is subject, other than any defaults that,
individually or in the aggregate, would not have a Material Adverse Effect
on Parent.
11
Section 2.9 Actions and Proceedings. Except as set forth in the Parent SEC
-----------------------
Documents filed prior to the date of this Agreement and except as set forth in
Section 2.9 of the Parent Letter, there are no outstanding orders, judgments,
injunctions, awards or decrees of any Governmental Entity against or involving
Parent or any of its Subsidiaries, or against or involving any of the present or
former directors, officers, employees of Parent or any of its Subsidiaries, as
such, or any of its or their properties, assets or business that, individually
or in the aggregate, would have a Material Adverse Effect on Parent or, as of
the date hereof, materially impair the ability of Parent to perform its
obligations hereunder. Except as set forth in Section 2.9 of the Parent Letter
or in the Parent SEC Documents filed prior to the date hereof, there are no
actions, suits or claims or legal, administrative or arbitration proceedings or
investigations pending or, to the Knowledge of Parent (as hereinafter defined),
threatened against or involving Parent or any of its Subsidiaries or any of its
or their present or former directors, officers, employees as such, or any of its
or their properties, assets or business that, individually or in the aggregate,
would have a Material Adverse Effect on Parent or, as of the date hereof,
materially impair the ability of Parent to perform its obligations hereunder.
As of the date hereof, there are no actions, suits, or other litigation, legal
or administrative proceedings or governmental investigations pending or, to the
Knowledge of Parent, threatened against Parent or any of its Subsidiaries or any
of its or their present or former officers, directors, employees, as such, or
any of its or their properties, assets or business, in each case relating to the
transactions contemplated by this Agreement. For purposes of this Agreement,
"Knowledge of Parent" means the actual knowledge of the Chief Executive Officer,
Chief Financial Officer or General Counsel of Parent.
Section 2.10 Opinion of Financial Advisor. Parent has received the opinion of
----------------------------
Goldman, Sachs & Co. to the effect that, as of the date thereof, the Exchange
Ratio is fair to Parent from a financial point of view.
Section 2.11 No Required Vote of Parent Stockholders. No vote of the
---------------------------------------
securityholders of Parent is required by law, the Parent Charter or the Parent
Bylaws or otherwise in order for Parent to consummate the Merger and the
transactions contemplated hereby.
Section 2.12 Pooling of Interests; Reorganization. To the Knowledge of Parent
------------------------------------
after due inquiry and consultation with PriceWaterhouseCoopers, its independent
auditors, neither Parent nor any of its Subsidiaries has (i) taken any action or
failed to take any action which action or failure (or has become aware of any
fact or circumstance that) would, or would be reasonably expected to, jeopardize
the treatment of the Merger as a pooling of interests for accounting purposes
under applicable accounting rules and the applicable rules and regulations of
the SEC or (ii) taken any action or failed to take any action which action or
failure (or has become aware of any fact or circumstance that) would, or would
be reasonably expected to, jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 368 of the Code.
Section 2.13 Brokers. No broker, investment banker or other person, other than
-------
Goldman, Sachs & Co., the fees and expenses of which will be paid by Parent (as
reflected in the agreement between Goldman, Sachs & Co. and Parent), is entitled
to any broker's, finder's or
12
other similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of Parent.
Section 2.14 Operations of Sub. Sub is a direct, wholly owned subsidiary of
-----------------
Parent, was formed solely for the purpose of engaging in the transactions
contemplated hereby, has engaged in no other business activities and has
conducted its operations only as contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 3.1 Organization, Standing and Power. The Company is a corporation
--------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to carry
on its business as now being conducted. Each Subsidiary of the Company is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate power and
authority to carry on its business as now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power
or authority would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. The Company and each of its Subsidiaries are
duly qualified to do business, and are in good standing, in each jurisdiction
where the character of their properties owned or held under lease or the nature
of their activities makes such qualification necessary, except where the failure
to be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
Section 3.2 Capital Structure.
-----------------
(a) As of the date hereof, the authorized capital stock of the Company consists
of 90,100,000 shares of capital stock of which 90,000,000 are shares of
Company Common Stock, and 100,000 are shares of preferred stock, par value
$1 per share, of the Company ("Company Preferred Stock"). At the close of
business on March 15, 2001, (i) 50,413,400 shares of Company Common Stock
(including associated Rights) were issued and outstanding, all of which
were validly issued, fully paid and nonassessable and free of preemptive
rights, (ii) 1,092 shares of Company Common Stock were held in the treasury
or by Subsidiaries of the Company; (iii) 8,013,681 shares of Company Common
Stock were reserved for issuance pursuant to options to purchase shares of
Company Common Stock ("Company Stock Options") issued and outstanding
pursuant to (A) the Company's Stock Option Plan, (B) the Company's Outside
Director Stock Option Plan and (C) the Bozell, Jacobs, Kenyon & Eckhardt,
Inc. Stock Option Plan (collectively, the "Company Stock Option Plans")
(with a weighted average exercise price between $28 and $29); (iv) an
additional 868,912 shares of Company Common Stock were authorized
(excluding shares subject to stockholder approval) for awards, but not yet
issued; and (v) no shares of Company Preferred Stock were issued or
outstanding. Set forth in Section 3.2 of the letter dated the date hereof
and delivered on the date hereof by the Company to Parent, which letter
relates to this Agreement and is designated the Company Letter (the
"Company Letter"), is a list of each benefit plan of the Company or its
Subsidiaries under which any securities of the
13
Company are issuable or reserved for issuance. All the outstanding shares
of Company Common Stock are duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights. As of the date of this
Agreement, except for shares reserved or issuable in connection with the
Rights Agreement, except as set forth above, except for the issuance of
shares of Company Common Stock upon the exercise of Company Stock Options
and except as set forth in Section 3.2 of the Company Letter, no shares of
capital stock or other voting securities of the Company were issued,
reserved for issuance or outstanding. As of the date hereof, except (i) as
set forth above, (ii) for options, warrants, calls, rights, puts and
agreements that relate to securities of Subsidiaries other than Significant
Subsidiaries with exercise or purchase prices that, in the aggregate, do
not exceed $25 million and that are not referenced in Section 3.2 of the
Company Letter and (iii) as set forth in Section 3.2 of the Company Letter,
there are no options, warrants, calls, rights, puts or agreements to which
the Company or any of its Subsidiaries is a party or by which any of them
is bound obligating the Company or any of its Subsidiaries to issue,
deliver, sell or redeem, or cause to be issued, delivered, sold or
redeemed, any additional shares of capital stock (or other voting
securities or equity equivalents) or convertible or exchangeable securities
of the Company or any of its Subsidiaries or obligating the Company or any
of its Subsidiaries to grant, extend or enter into any such option,
warrant, call, right, put or agreement. True, complete and correct copies
of the Company Charter and Company Bylaws have been delivered to Parent.
(b) Each outstanding share of capital stock (or other voting security or equity
equivalent) of each Significant Subsidiary of the Company is duly
authorized, validly issued, fully paid and nonassessable, and each such
share (or other voting security or equity equivalent) is owned by the
Company or another Subsidiary of the Company, free and clear of all Liens
other than such Liens which (individually or in the aggregate) are not
material. The Company does not have any outstanding bonds, debentures,
notes or other obligations the holders of which have the right to vote (or
convertible into or exercisable for securities having the right to vote)
with the stockholders of the Company on any matter. Section 3.2(b) of the
Company Letter contains a true, accurate and correct statement in all
material respects of Exhibit 21 if it were dated as of March 15, 2001.
(c) The Company and its Subsidiaries have no mandatory obligations, contingent
or otherwise, to provide financing to or make any investment in (in the
form of a mandatory loan, capital contribution or similar payment) any
person or entity (other than wholly-owned subsidiaries) except (i) in the
case of such persons and entities other than Modem Media, Inc. for
obligations (A) involving no more than $15 million in the aggregate or (B)
as disclosed in the Company SEC Documents (as hereinafter defined) or in
Section 3.2(c) of the Company Letter and (ii) in the case of Modem Media,
Inc., the guarantees referenced in Section 3.2(d) of the Company Letter.
(d) Section 3.2(d) of the Company Letter discloses all the agreements that the
Company has with Modem Media, Inc. and all guarantees, indemnities and
other forms of credit support that the Company and its Subsidiaries have
undertaken in respect of liabilities and obligations incurred by Modem
Media, Inc.
(e) Except as set forth in Section 3.2(e) of the Company Letter, neither the
Company nor any of its Subsidiaries is a party to any agreement with Modem
Media, Inc. that
14
restricts the acquisition or disposition of shares of Modem Media, Inc.
other than agreements with regard to restrictions relating to compliance
with applicable securities laws.
Section 3.3 Authority. On or prior to the date of this Agreement, the Board of
---------
Directors of the Company has by unanimous vote of those present (i) declared the
agreement of merger (within the meaning of Section 251 of the DGCL) contained in
this Agreement advisable and fair to and in the best interest of the Company and
its stockholders, (ii) approved and adopted this Agreement in accordance with
the DGCL, (iii) resolved to recommend the approval and adoption of the agreement
of merger (within the meaning of Section 251 of the DGCL) contained in this
Agreement by the Company's stockholders and (iv) directed that the agreement of
merger (within the meaning of Section 251 of the DGCL) contained in this
Agreement be submitted to the Company's stockholders for approval and adoption.
The Company has all requisite corporate power to enter into this Agreement and,
subject to approval by the stockholders of the Company of this Agreement, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject to (x) approval of this
Agreement by the stockholders of the Company and (y) the filing of appropriate
Merger documents as required by the DGCL. This Agreement has been duly executed
and delivered by the Company and (assuming the valid authorization, execution
and delivery of this Agreement by Parent and Sub and the validity and binding
effect of the Agreement on Parent and Sub) constitutes the valid and binding
obligations of the Company enforceable against the Company in accordance with
its terms. The filing of the Proxy Statement with the SEC has been duly
authorized by the Company's Board of Directors.
Section 3.4 Consents and Approvals; No Violation. Assuming that all consents,
------------------------------------
approvals, authorizations and other actions described in this Section 3.4 and in
Section 5.7 have been obtained and all filings and obligations described in
this Section 3.4 have been made, except as set forth in Section 3.4 of the
Company Letter, the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give to others a right of
termination, cancellation or acceleration of any obligation or the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company or any of its Subsidiaries under, any provision of (i) the Company
Charter or the Company Bylaws, (ii) any provision of the comparable charter or
organization documents of any of the Company's Subsidiaries, (iii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to the Company
or any of its Subsidiaries or any of their respective properties or assets or
(iv) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries or any of their respective
properties or assets, other than, in the case of clauses (ii), (iii) or (iv),
any such violations, defaults, rights, liens, security interests, charges or
encumbrances that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company, materially impair the ability of the Company to
perform its obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby. No filing or registration with, or
authorization, consent or approval of, any Governmental Entity is required by or
with respect to the Company or any of its Subsidiaries in
15
connection with the execution and delivery of this Agreement by the Company or
is necessary for the consummation of the Merger and the other transactions
contemplated by this Agreement except for (i) in connection, or in compliance,
with the provisions of the HSR Act and the Securities Act and the Exchange Act,
(ii) the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware and appropriate documents with the relevant authorities of
other states in which the Company or any of its Subsidiaries is qualified to do
business, (iii) such filings, authorizations, orders and approvals as may be
required to obtain the State Takeover Approvals, (iv) such filings as may be
required in connection with the taxes described in Section 5.10, (v) applicable
requirements, if any, of Blue Sky Laws and the NYSE, (vi) as may be required
under non-U.S. laws of general applicability and (vii) such other consents,
orders, authorizations, registrations, declarations and filings the failure of
which to be obtained or made would not, individually or in the aggregate, have a
Material Adverse Effect on the Company, materially impair the ability of the
Company to perform its obligations hereunder or prevent the consummation of any
of the transactions contemplated hereby.
Section 3.5 SEC Documents and Other Reports. The Company has timely filed all
-------------------------------
required documents with the SEC since December 31, 1999 (including, without
limitation, financial statements, exhibits and schedules included or
incorporated by reference therein and all other documents incorporated by
reference therein, the "Company SEC Documents"). Except as set forth in Section
3.5 of the Company Letter, as of their respective dates, the Company SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and, at the respective
times they were filed, none of the Company SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except as set forth in
Section 3.5 of the Company Letter, the consolidated financial statements
(including, in each case, any notes thereto) of the Company included in the
Company SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with generally
accepted accounting principles (except, in the case of the unaudited statements,
as permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly presented in all material respects the consolidated financial
position of the Company and its consolidated Subsidiaries as at the respective
dates thereof and the consolidated results of their operations and their
consolidated cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein that, in either case, have not been and will not
be material in amount). Except as disclosed in the Company SEC Documents or as
required by generally accepted accounting principles or as set forth in Section
3.5 of the Company Letter, the Company has not, between December 31, 1999 and
the date hereof, made any material change, in the accounting practices or
policies applied in the preparation of any of such financial statements.
Section 3.6 Registration Statement and Proxy Statement. None of the
------------------------------------------
information to be supplied in writing by the Company for inclusion or
incorporation by reference in the Registration Statement or the Proxy Statement
will (i) in the case of the Registration Statement, at the time it becomes
effective, 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
16
statements therein not misleading or (ii) in the case of the Proxy Statement, at
the time of the mailing of the Proxy Statement and at the time of the
Stockholder 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 are
made, not misleading. The Registration Statement will comply (with respect to
the Company) as to form in all material respects with the provisions of the
Securities Act, and the Proxy Statement will comply (with respect to the
Company) as to form in all material respects with the provisions of the Exchange
Act.
Section 3.7 Absence of Certain Changes or Events. Except as disclosed in the
------------------------------------
Company SEC Documents filed with the SEC prior to the date of this Agreement or
as disclosed in Section 3.7 of the Company Letter, since December 31, 1999 (A)
the Company and its Subsidiaries have not incurred any material liability or
obligation (indirect, direct or contingent) that would result in a Material
Adverse Effect on the Company, (B) the Company and its Subsidiaries have not
sustained any loss or interference with their business or properties from fire,
flood, windstorm, accident or other calamity (whether or not covered by
insurance) that has had a Material Adverse Effect on the Company, (C) there has
been no dividend or distribution of any kind declared, paid or made by the
Company on any class of its stock except for regular quarterly cash dividends to
shareholders of the Company consistent with past practice, (D) there has been no
Material Adverse Effect with respect to the Company and (E) since September 30,
2000 through the date hereof, the Company has conducted its business in the
ordinary course in all material respects.
Section 3.8 Permits and Compliance.
----------------------
(a) Except as disclosed in the Company SEC Documents filed before the date
hereof, each of the Company and its Subsidiaries is in possession of all
franchises, grants, authorizations, licenses, permits, easements,
variances, exceptions, consents, certificates, approvals and orders of any
Governmental Entity necessary for the Company or any of its Subsidiaries to
own, lease and operate its properties or to carry on its business as it is
now being conducted (the "Company Permits"), except where the failure to
have any of the Company Permits would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. Except as
disclosed in the Company SEC Documents filed before the date hereof,
neither the Company nor any of its Subsidiaries is in violation of (A) the
charter, by-laws or other organizational documents of the Company or any of
its Significant Subsidiaries, (B) the charter, by-laws or other
organizational documents of any Subsidiary that is not a Significant
Subsidiary, (C) any applicable law, ordinance, administrative or
governmental rule or regulation or (D) any order, decree or judgment of any
Governmental Entity having jurisdiction over the Company or any of its
Subsidiaries, except, in the case of clauses (B), (C) or (D), for any
violations that, individually or in the aggregate, would not have a
Material Adverse Effect on the Company.
(b) Section 3.8 of the Company Letter contains, as of the date hereof, each
contract or agreement that would be required to be filed by the Company as
a material contract pursuant to Item 601(b)(10) of Regulation S-K under the
Securities Act if the Company were filing an annual report on 10-K. The
material contracts disclosed in Section 3.8 of the Company Letter are in
full force and effect, as of the date hereof, except as otherwise expressly
stated in
17
the Company SEC Documents or Section 3.8 of the Company Letter. Except as
set forth in Section 3.8 of the Company Letter, neither the Company nor any
of its Subsidiaries is a party to or bound by any agreement evidencing, or
guarantee relating to, indebtedness for borrowed money to the extent the
aggregate principal amount outstanding thereunder exceeds $10,000,000. To
the knowledge of the Company, Section 3.8 of the Company Letter also sets
forth all agreements and contracts of the Company or any of its
Subsidiaries (i) that both (A) are not client contracts and (B) purport to
limit, curtail or restrict the ability of the Company or any of its
Subsidiaries or affiliates to compete in any geographic area or line of
business or (ii) that both (A) are client contracts and (B) from and after
the Closing would, by their own terms, purport to restrict, in any material
respect, the continuation of the current conduct of the businesses of
Parent and its Subsidiaries, as described in the Parent SEC Documents filed
before the date hereof. Except as set forth in the Company SEC Documents
filed prior to the date of this Agreement or as disclosed in Section 3.8 of
the Company Letter, no event of default or event that, but for the giving
of notice or the lapse of time or both, would constitute an event of
default exists or, upon the consummation by the Company of the transactions
contemplated by this Agreement will exist under any indenture, mortgage,
loan agreement, note or other agreement or instrument for borrowed money,
any guarantee of any agreement or instrument for borrowed money or any
lease, contractual license or other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or
any such Subsidiary is bound or to which any of the properties, assets or
operations of the Company or any such Subsidiary is subject, other than any
defaults that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company.
Section 3.9 Tax Matters. (a) Except as otherwise set forth in Section 3.9 of
-----------
the Company Letter, (i) the Company and each of its Subsidiaries have timely
filed all Tax Returns (as hereinafter defined) required to have been filed with
a national taxing authority, and all material Tax Returns required to have been
filed with other taxing authorities, or appropriate extensions therefor have
been properly obtained, and such Tax Returns are correct and complete, except to
the extent that any failure to so file or any failure to be correct and complete
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company; (ii) all Taxes (as hereinafter defined) shown to be due on such Tax
Returns have been timely paid or extensions for payment have been properly
obtained, except to the extent that any failure to so pay or so obtain such an
extension would not, individually or in the aggregate, have a Material Adverse
Effect on the Company; (iii) the Company and each of its Subsidiaries have
complied in all material respects with all rules and regulations relating to the
withholding of Taxes except to the extent that any failure to comply with such
rules and regulations would not, individually or in the aggregate, have a
Material Adverse Effect on the Company; (iv) no material items that have been
contested in writing by the relevant taxing authority in connection with any
examination of the Tax Returns referred to in clause (i) are pending on the date
hereof; and (v) all material deficiencies asserted or assessments made as a
result of any examination of such Tax Returns by any taxing authority have been
paid in full or are being timely and properly contested. For purposes of this
Agreement: (i) "Taxes" means any federal, state, local, foreign or provincial
income, gross receipts, property, sales, use, license, excise, franchise,
employment, payroll, withholding, alternative or added minimum, ad valorem,
value added, transfer or excise tax, or other tax, custom, duty, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or penalty imposed by any Governmental Entity, and (ii) "Tax Return"
means any return, report or similar statement (including the attached schedules)
18
required to be filed with respect to any Tax, including, without limitation, any
information return, claim for refund, amended return or declaration of estimated
Tax.
(b) The Company has not constituted either a "distributing corporation" or a
"controlled corporation" (within the meaning of Section 355(a)(1)(A) of the
Code) in a distribution of stock qualifying for tax-free treatment under
Section 355 of the Code since the effective date of Section 355(e) of the
Code, and no Subsidiary has constituted such a "distributing corporation"
or "controlled corporation" unless any Subsidiary constituting such a
"distributing corporation" or "controlled corporation" would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company.
Section 3.10 Actions and Proceedings. Except as set forth in the Company SEC
-----------------------
Documents filed prior to the date of this Agreement and except as set forth in
Section 3.10 of the Company Letter, there are no outstanding orders, judgments,
injunctions, awards or decrees of any Governmental Entity against or involving
the Company or any of its Subsidiaries, or against or involving any of the
present or former directors, officers, employees of the Company or any of its
Subsidiaries, as such, or any of its or their properties, assets, or business or
any Company Plan (as hereinafter defined) that, individually or in the
aggregate, would have a Material Adverse Effect on the Company or, as of the
date hereof, materially impair the ability of the Company to perform its
obligations hereunder. Except as set forth in the Company SEC Documents filed
prior to the date of this Agreement or in Section 3.10 of the Company Letter,
there are no actions, suits or claims or legal, administrative or arbitration
proceedings or investigations pending or, to the Knowledge of the Company,
threatened against or involving the Company or any of its Subsidiaries or any of
its or their present or former directors, officers, employees, as such, or any
of its or their properties, assets or business that, individually or in the
aggregate, would have a Material Adverse Effect on the Company or, as of the
date hereof, materially impair the ability of the Company to perform its
obligations hereunder. As of the date hereof, there are no actions, suits, or
other litigation, legal or administrative proceedings or governmental
investigations pending or, to the Knowledge of the Company, threatened against
the Company or any of its Subsidiaries or any of its or their present or former
officers, directors, employees or any of its or their properties, assets or
business, in each case relating to the transactions contemplated by this
Agreement. For purposes of this Agreement, "Knowledge of the Company" means the
actual knowledge of the individuals identified on Section 3.10 of the Company
Letter.
Section 3.11 Employee Benefits.
-----------------
(a) Except as would not have a Material Adverse Effect on the Company, (i) each
Company Plan has been administered and is in compliance in all material
respects with the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), the Code, the terms of such plan and all other
applicable statutes and governmental rules and regulations, (ii) with
respect to each Company Plan, no governmental audits, actions, suits or
claims (other than routine claims for benefits in the ordinary course) are
pending or, to the Knowledge of the Company, threatened, and (iii) no
"reportable event" (within the meaning of Section 4043 of ERISA) has
occurred with respect to any Company Plan for which the 30-day notice
requirement has not been waived. Neither the Company nor any of its ERISA
Affiliates (as hereinafter defined) has withdrawn from any Company Plan or
Company Multiemployer Plan (as hereinafter
19
defined) or instituted, or is currently considering taking, any action to
do so. No Company Plan, nor any trust created thereunder, has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived. The Company has provided or made available to Parent
true and complete copies of each material Company Plan other than (i) any
such material Company Plan maintained outside of the United States
primarily for the benefit of employees working outside of the United States
and (ii) any such material Company Plan which is an employment contract,
and, with respect to any such material Company Plan which is not in written
form, a summary of the material terms of such Company Plan. With respect to
each Company Plan that is an employment contract which provides for annual
base salary in excess of $350,000, to the specific Knowledge of the Company
as of the date hereof, the Company has provided a true and complete copy
thereof to Parent. The Company will use its reasonable best efforts to
provide to Parent, between the date hereof and the Effective Time, a copy
of each Company Plan that is an employment contract which provides for
annual base salary in excess of $350,000.
(b) No event has occurred and there exists no condition or set of circumstances
in connection with which the Company or any ERISA Affiliate or Company Plan
fiduciary could be subject to any liability under the terms of such Company
Plans, ERISA, the Code or any other applicable law, other than liabilities
for benefits payable in the normal course, which would have a Material
Adverse Effect on the Company.
(c) As used herein, (i) "Company Plan" means a "pension plan" (as defined in
Section 3(2) of ERISA (other than a Company Multiemployer Plan)), a
"welfare plan" (as defined in Section 3(1) of ERISA), or any bonus, profit
sharing, deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, holiday pay, vacation,
severance, death benefit, sick leave, fringe benefit, insurance, each
employment contract (which, to the Knowledge of the Company, is in effect
and provides for annual base salary in excess of $350,000) or other plan,
arrangement or understanding, in each case established or maintained by the
Company or any of its ERISA Affiliates or as to which the Company or any of
its ERISA Affiliates has contributed or otherwise may have any liability,
(ii) "Company Multiemployer Plan" means a "multiemployer plan" (as defined
in Section 4001(a)(3) of ERISA) to which the Company or any of its ERISA
Affiliates is or has been obligated to contribute or otherwise may have any
liability and (iii) with respect to any person, "ERISA Affiliate" means any
trade or business (whether or not incorporated) which is under common
control or would be considered a single employer with such person pursuant
to Section 414(b), (c), (m) or (o) of the Code and the regulations
promulgated under those sections or pursuant to Section 4001(b) of ERISA
and the regulations promulgated thereunder.
(d) Neither the Company nor any of its Subsidiaries has disseminated in writing
or otherwise broadly or generally notified employees of any intent or
commitment (whether or not legally binding) to create any additional
Company Plan or to amend, modify or terminate any existing Company Plan
which would be reasonably expected to result in material liabilities to the
Company and its Subsidiaries.
(e) The aggregate amount required to be contributed to the Company Executive
Benefit Trust as a result of the consummation of the transactions
contemplated by this Agreement, either alone or in connection with any
other event, shall not exceed $55,000,000.
20
Section 3.12 Labor Matters. As of the date hereof, neither the Company nor any
-------------
of its Subsidiaries is a party to any collective bargaining agreement. Except
as would not have a Material Adverse Effect on the Company, (i) there is no
material labor strike, dispute, slowdown or stoppage pending or, to the
Knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries, and (ii) to the Knowledge of the Company, no efforts or
attempts to unionize or enter into a collective bargaining agreement are ongoing
or threatened. Except as would not, individually or in the aggregate, have a
Material Adverse Effect on the Company, (i) neither the Company nor any of its
Subsidiaries, nor their respective businesses has committed any unfair labor
practices or violated any applicable employment laws in connection with the
operation of the respective businesses, and (ii) there is no pending or, to the
Knowledge of the Company, threatened charge or complaint against the Company or
any of its Subsidiaries by the National Labor Relations Board or any comparable
state agency, or by any employee or class of employees or governmental agency
relating to a purported violation of any applicable employment laws.
Section 3.13 Opinion of Financial Advisor. The Company has received the
----------------------------
opinion of Morgan Stanley & Co. Incorporated to the effect that, as of the date
thereof, the Exchange Ratio is fair to the Company's stockholders from a
financial point of view.
Section 3.14 Required Vote of Company Stockholders. The affirmative vote of
-------------------------------------
the holders of a majority of the outstanding shares of Company Common Stock is
required to approve and adopt the agreement of merger (within the meaning of
Section 251 of the DGCL) contained in this Agreement. No other vote of the
securityholders of the Company is required by law, the Company Charter or the
Company Bylaws or otherwise in order for the Company to consummate the Merger
and the transactions contemplated hereby.
Section 3.15 Pooling of Interests; Reorganization. To the Knowledge of the
------------------------------------
Company after due inquiry and consultation with Arthur Andersen, its independent
auditors, neither the Company nor any of its Subsidiaries has (i) taken any
action or failed to take any action which action or failure (or has become aware
of any fact or circumstance that) would, or would be reasonably expected to,
jeopardize the treatment of the Merger as a pooling of interests for accounting
purposes under applicable accounting rules and the applicable rules and
regulations of the SEC or (ii) taken any action or failed to take any action
which action or failure (or has become aware of any fact or circumstance that)
would, or would be reasonably expected to, jeopardize the qualification of the
Merger as a reorganization within the meaning of Section 368 of the Code.
Section 3.16 Brokers. No broker, investment banker or other person, other than
-------
Morgan Stanley & Co. Incorporated, the fees and expenses of which will be paid
by the Company (as reflected in an agreement between Morgan Stanley & Co.
Incorporated and the Company dated February 29, 2000, a copy of which has been
furnished to Parent), is entitled to any broker's, finder's or other similar fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
Section 3.17 Amendment to the Rights Agreement. The Board of Directors of the
---------------------------------
Company has taken all necessary action under the Rights Agreement (including any
21
amendment thereof) so that (a) none of the execution or delivery of this
Agreement, the exchange of the shares of Parent Common Stock for the shares of
Company Common Stock in accordance with Article I or any other transaction
contemplated hereby will cause (i) the rights issued pursuant to the Rights
Agreement to become exercisable under the Rights Agreement, (ii) a Stock
Acquisition Date (as defined in the Rights Agreement) to occur, (iii) Parent or
the Sub to be deemed an Acquiring Person (as defined in the Rights Agreement) or
(iv) a Triggering Event (as defined in the Rights Agreement) to occur upon any
such event; and (b) the execution and delivery of this Agreement and the other
transactions contemplated hereby will be exempt from the Rights Agreement. The
Company has furnished Parent with a true and correct copy of the executed
amendment to the Rights Agreement that has the effects specified in the
preceding sentence.
Section 3.18 Takeover Statutes. The Company's Board has approved, for purposes
-----------------
of Section 203 of the DGCL, the Merger. The Board of Directors of the Company
has adopted an omnibus resolution providing that this Agreement and the
transactions contemplated hereby are exempt from the requirements of any
applicable "moratorium", "control share", "fair price", "affiliate transaction",
"business combination" or other antitakeover laws or regulations of any state
("State Takeover Statutes").
Section 3.19 Accuracy of Earn-Out Schedule. Section 3.19 of the Company Letter
-----------------------------
lists, as of March 8, 2001, the Company's good faith estimate of the material
payment obligations (whether contingent or otherwise) of the Company and its
Subsidiaries in respect of earn-outs, deferred purchase price arrangements or
similar arrangements that have arisen in connection with investments in or
acquisitions of companies, businesses or business lines, based on the most
recently available data after due inquiry.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger.
--------------------------------------
(a) Except as expressly permitted by clauses (i) through (xvii) of this Section
4.1(a), during the period from the date of this Agreement through the
Effective Time, the Company shall (and shall cause its Significant
Subsidiaries to and shall use reasonable best efforts to cause its other
Subsidiaries to) in all material respects carry on its business in the
ordinary course of its business as currently conducted and, to the extent
consistent therewith, use reasonable best efforts to preserve intact its
current business organizations, keep available the services of its current
officers and employees and preserve its relationships with customers,
suppliers and others having business dealings with it. Without limiting
the generality of the foregoing, and except as otherwise contemplated by
this Agreement or as set forth in Section 4.1 of the Company Letter, the
Company shall not (and (1) in the case of clauses (iii), (iv), (v), (vi),
(viii), (ix) and (xvi), shall cause its Subsidiaries not to and (2) in the
case of clauses (i), (ii), (vii), (x)-(xv) and (xvii), shall cause its
Significant Subsidiaries not to and shall use reasonable best efforts to
cause its other Subsidiaries not to) without the prior written consent of
Parent, which consent shall not be unreasonably withheld or delayed:
22
(i) (A) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, or otherwise make
any payments to its stockholders in their capacity as such other than
dividends and distributions by any Subsidiary to its parent and regular
quarterly cash dividends to shareholders of the Company consistent with
past practice, (B) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, or (C)
purchase, redeem or otherwise acquire any shares of capital stock of the
Company or any Subsidiary or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge, dispose of or otherwise encumber any shares
of its capital stock, any other voting securities or equity equivalent or
any securities convertible into, or any rights, warrants or options to
acquire any such shares, voting securities, equity equivalent or
convertible securities, other than (A) the issuance or delivery of shares
of Company Common Stock including the associated Rights upon the exercise
of existing Company Stock Options in accordance with their terms as
currently in effect, (B) the issuance or delivery of options exercisable
for Company Common Stock under Company Stock Option Plans in the ordinary
course of business consistent with past practice and in an amount not to
exceed options to purchase 180,000 shares of Company Common Stock in the
aggregate (whether or not subject to subsequent approval of Parent's
stockholders); provided that no grants may be made to any officers,
directors or key employees whose annual base salary exceeds $350,000; (C)
the issuance or delivery of restricted stock in the ordinary course of
business consistent with past practice and in an amount not to exceed
15,500 shares, in the aggregate; (D) the issuance or delivery of shares of
Company Common Stock (including the associated Rights) pursuant to the
Company's Nonemployee Directors Deferred Stock Compensation Program or
401(k) retirement program, in each case in the ordinary course, and in
amounts not to exceed 20,000 shares and 160,000 shares, respectively, in
the aggregate, provided, that, at the request of Parent and subject to the
agreement of the Company and further subject to the requirements of
applicable law or existing contractual restrictions, in lieu of the
delivery of shares pursuant to either such plan, cash shall be delivered
and may be used to purchase such shares in the market; and (E) subject to
Section 3.17 which shall remain accurate, issuances pursuant to the Rights
Agreement;
(iii) amend its charter or by-laws or other comparable charter or organizational
documents;
(iv) acquire or agree to acquire (except for any acquisition or series of
related acquisitions that does not involve more than $3 million in the
aggregate and that, when aggregated with all other acquisitions by the
Company and its Subsidiaries between the date hereof and the Effective
Time, does not involve in excess of $15 million) (A) by merging or
consolidating with, or by purchasing a substantial portion of the assets of
or equity in, or by any other manner, any business or any corporation,
limited liability company, partnership, association or other business
organization or division thereof or (B) any assets that are material,
individually or in the aggregate, to the Company and its Subsidiaries taken
as a whole;
23
(v) sell, lease (as lessor), license, mortgage, encumber or otherwise
dispose of material properties or assets, other than in connection with
sales of inventory in the ordinary course of business;
(vi) incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions to, or
other investments in, any other person, other than (A) indebtedness or
guarantees in the ordinary course of business, (B) loans, advances,
capital contributions and other investments between the Company and any
Subsidiary or between Subsidiaries and (C)immaterial advances to
employees in the ordinary course of business;
(vii) enter into, adopt or amend in any material respect any pension,
retirement, stock option, stock purchase, savings, profit sharing,
deferred compensation, bonus, group insurance or other employee benefit,
incentive, welfare or severance plan, agreement or arrangement, Company
Plan or employment or consulting agreement, except as required by
applicable law and except in the ordinary course of business;
(viii) increase the compensation payable or to become payable to employees
other than in the ordinary course of business consistent with past
practice and other than as described in Section 4.1 of the Company
Letter;
(ix) enter into any material contract (as used in item 601(b)(10) of
Regulation S-K) or amend in any material respect any material contract
(as used in item 601(b)(10) of Regulation S-K;
(x) make capital expenditures in excess of $25 million, in the aggregate;
(xi) change, in any material respect, any accounting practices or
methodologies or revalue, in any material respect, any of its assets
other than in the ordinary course consistent with past practices or as
required by generally accepted accounting principles;
(xii) make or revoke any material Tax election or settle or compromise any
material Tax liability or change (or make a request to any Taxing
authority to change) any material aspect of its method of accounting for
Tax purposes;
(xiii) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business consistent with past practice of liabilities
reflected or reserved against in the Company's consolidated balance
sheet as of September 30, 2000 (or the notes thereto) as included in the
Company SEC Documents (or off-balance sheet liabilities incurred as of
such date in the ordinary course of business consistent with past
practice), or incurred subsequent to such date in the ordinary course of
business consistent with past practice;
(xiv) refrain from enforcing any confidentiality, standstill or similar
agreement, in each case relating to any Takeover Proposal to which the
Company is a party;
24
(xv) settle or compromise any pending or threatened suit, action or claim
relating to the transactions contemplated hereby;
(xvi) enter into any agreement that purports to limit or otherwise restricts
(by its own terms) in any material respect, after the Effective Time,
Parent or any of its Subsidiaries (other than the Company and its
Subsidiaries) from engaging or competing in any line of business or in
any geographic area; or
(xvii) authorize, take, or agree to take, any of the actions described in
clauses (i) through (xvi) above or any action which would be reasonably
likely to result in any of the conditions to the Merger set forth in
Article VI hereof not being satisfied;
provided that, to the extent any action is specifically permitted under this
Section 4.1(a), nothing set forth in clauses (i) through (xvii) above shall be
construed to limit any such action.
(b) Except as otherwise contemplated by this Agreement or as set forth in
Section 4.1 of the Parent Letter, Parent shall not, and shall not permit
any of its Significant Subsidiaries to, without the prior written consent
of the Company, which consent shall not be unreasonably withheld or
delayed:
(i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, or otherwise make
any payments to its stockholders in their capacity as such, other than
dividends and distributions by any Subsidiary to its parent and regular
quarterly cash dividends to shareholders of Parent consistent with past
practice;
(ii) liquidate or dissolve Parent;
(iii) amend the charter or by-laws of Parent in any manner that would be
adverse to holders of Parent Common Stock or the holders of Company
Common Stock; or
(iv) take, propose to take, or agree in writing or otherwise to take, any of
the actions described in clauses (i) through (iii) above or any action
which would be reasonably likely to result in any of the conditions to
the Merger set forth in Article VI hereof not being satisfied.
Section 4.2 No Solicitation by the Company.
------------------------------
(a) From the date hereof until the earlier of the Effective Time or the date on
which this Agreement is terminated in accordance with the terms hereof, the
Company shall not, nor shall it authorize or knowingly allow any of its
Subsidiaries to, nor shall it authorize or knowingly allow any officer,
director or employee of or any financial advisor, attorney or other advisor
or representative of, the Company or any of its Subsidiaries to, (i)
solicit, initiate or purposefully encourage the submission of, any Takeover
Proposal (as hereafter defined), (ii) enter into any binding or non-binding
agreement with respect to any Takeover Proposal (other than a
confidentiality agreement to the extent information is permitted to be
furnished to any person pursuant to this Section 4.2(a)), (iii) participate
in any discussions or negotiations
25
regarding, or furnish to any person any information with respect to or in
connection with, or take any other action to facilitate knowingly any
inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Takeover Proposal; (iv) amend or grant any
waiver or release under any confidentiality, standstill or similar
agreement, in each case relating to a Takeover Proposal or (v) except as
expressly contemplated by this Agreement with respect to the Merger, amend
or grant any waiver or release or approve any transaction or redeem any
rights under the Rights Agreement; provided, however, that, nothing
-------- -------
contained in this Agreement shall prevent the Company or its Board of
Directors from (i) complying with Rules 14d-9 and 14e-2 under the Exchange
Act or publicly disclosing the existence of a Takeover Proposal involving
the Company to the extent required by applicable law or (ii) furnishing
non-public information to, or entering into discussions or negotiations
with, any person or entity in connection with an unsolicited bona fide
written Takeover Proposal by such person or entity, if (x) the failure to
take such action would, in the good faith judgment of the Board of
Directors of the Company, taking into consideration the advice of
independent legal counsel of the Company, violate the fiduciary duties of
the Board of Directors of the Company to the Company's stockholders under
applicable law, (y) (1) such Takeover Proposal is not subject to any
financing contingencies or complete copies of executed, bona fide customary
commitments from reputable financial institutions for all necessary
financing shall have been furnished to the Company and (2) the Board of
Directors of the Company has determined in good faith that (A) such
Takeover Proposal, if accepted, would be reasonably likely to be
consummated taking into account all legal, financial, regulatory and other
aspects of the proposal and the person making the proposal, and (B) after
consultation with and considering the advice of independent financial
advisors of national standing and after taking into account the strategic
benefits to be derived from the Merger and the long term prospects of
Parent and its Subsidiaries and after consideration of other matters it
deems relevant, would, if consummated, result in a transaction more
favorable to the Company's stockholders from a financial point of view than
the Merger (a Takeover Proposal satisfying such criteria being a "Superior
Proposal"), and (z) prior to furnishing such non-public information to, or
entering into discussions or negotiations with, such person or entity, such
Board of Directors receives from such person or entity an executed
confidentiality agreement with provisions not less favorable to the Company
than those contained in the Confidentiality Agreements (as defined below)
and provides at least two full business days' advance notice to Parent to
the effect that it is proposing to take such action, together with the
information required to be provided pursuant to Section 4.2(b). For
purposes of this Agreement, "Takeover Proposal" means any offer or proposal
by any third party (or binding or non-binding agreement by any third party
with the Company with respect to, or any public announcement or SEC filing
by any third party that indicates an intention to make, such an offer or
proposal) (a) for a merger, consolidation, share exchange, recapitalization
or other business combination involving the Company or any of its
Significant Subsidiaries or (b) to acquire in any manner (including by
disposition or transfer), directly or indirectly, a 15% or greater equity
interest in, 15% or more of the voting securities or capital stock of, or
15% or more of the assets of, the Company or any of its Significant
Subsidiaries, other than the transactions contemplated by this Agreement.
(b) With respect to any Takeover Proposal as to which the Company proposes to
take any action permitted by clause (ii) of the proviso in Section 4.2(a)
above, the Company shall notify Parent of such Takeover Proposal as
promptly as practicable (but in no case later than 48 hours) after the
Company's decision to take such action, and shall provide Parent with
26
the material terms of such Takeover Proposal and the identity of the person
making it and all information provided by the Company to such person in
accordance with Section 4.2(a) to the extent not previously delivered to
Parent, and shall thereafter convey to Parent, as promptly as practicable
(but in no case later than 48 hours) after the Company becomes aware
thereof, all material changes to such terms and all additional information
provided by the Company to such person to the extent not previously
delivered to Parent. Subject to Section 4.2(a), immediately after the
execution and delivery of this Agreement, the Company will, and will direct
its Subsidiaries to, and will direct its and their respective officers,
directors, employees, financial advisors, attorneys, other advisors and
representatives to, cease and terminate all existing activities,
discussions and negotiations with any parties conducted heretofore with
respect to any possible Takeover Proposal.
Section 4.3 Pooling of Interests; Reorganization. During the period from the
------------------------------------
date of this Agreement through the Effective Time, unless the other party shall
otherwise agree in writing, none of Parent, the Company or any of their
respective Subsidiaries shall (a) knowingly take or fail to take any action
which action or failure would jeopardize the treatment of the Merger as a
pooling of interests for accounting purposes under accounting rules and the
applicable SEC rules and regulations or (b) knowingly take or fail to take any
action which action or failure would jeopardize the qualification of the Merger
as a reorganization within the meaning of Section 368 of the Code. Between the
date of this Agreement and the Effective Time, Parent and the Company each shall
take, or cause to be taken, all actions reasonably necessary in order for the
Merger to be treated as a pooling of interests for accounting purposes.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Stockholder Meeting. The Company will, as soon as practicable
-------------------
following the date of this Agreement, duly call, give notice of, convene and
hold a meeting of stockholders (the "Stockholder Meeting") for the purpose of
considering the approval and adoption of the agreement of merger (within the
meaning of Section 251 of the DGCL) contained in this Agreement. The Company
will, through its Board of Directors, recommend to its stockholders approval and
adoption of this Agreement, shall use all reasonable efforts to solicit such
approval by its stockholders and shall not withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Parent such recommendation (or
announce publicly its intention to do so), except if the Company has complied
with Section 4.2, an unsolicited bona fide written Superior Proposal is then-
outstanding, the Company provides at least two full business days' advance
notice to Parent to the effect that it is proposing to take such action,
together with the information required to be provided pursuant to Section
4.2(b), if applicable, and in the good faith judgment of the Company's Board of
Directors, taking into consideration the advice of independent legal counsel of
the Company, the making of, or the failure to withdraw or modify, such
recommendation would violate the fiduciary duties of such Board of Directors to
the Company's stockholders under applicable law. The Company agrees to submit
this Agreement to its stockholders for approval and adoption whether or not the
Board of Directors of the Company determines at any time subsequent to the date
hereof that this
27
Agreement is no longer advisable and recommends that the stockholders of the
Company reject it and notwithstanding any Takeover Proposal.
Section 5.2 Preparation of the Registration Statement and the Proxy Statement.
-----------------------------------------------------------------
(a) The Company and Parent shall promptly prepare, and the Company shall file
with the SEC, the Proxy Statement and Parent shall prepare and file with
the SEC the Registration Statement, in which the Proxy Statement will be
included as a prospectus. Each of Parent and the Company shall use its
reasonable best efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after such
filing. As promptly as practicable after the Registration Statement shall
have become effective, the Company shall mail the Proxy Statement to its
stockholders. Parent shall also take any action reasonably required to be
taken under any applicable state securities laws in connection with the
issuance of Parent Common Stock in the Merger (other than qualifying to do
business in any jurisdiction where it is not now so qualified or to file a
general consent to service of process in any jurisdiction), and the Company
shall furnish all information concerning the Company and the holders of
Company Common Stock as may be reasonably requested in connection with any
such action. The Company and Parent shall use reasonable best efforts to
cause their accountants and counsel to deliver necessary or required
instruments in connection with the Registration Statement and the Proxy
Statement, including opinions, consents and certificates. If, at any time
prior to the Effective Time, the Company or Parent shall become aware of
any event that is required to be described in an amendment or supplement to
the Registration Statement or the Proxy Statement, then such party shall
promptly so advise the other. Each of the Company and Parent shall give the
other reasonable opportunity to review and comment on any filing (including
amendments and supplements) in connection with the Registration Statement
or the Proxy Statement before so filed and will provide the other with a
copy of each such filing. In addition, each will advise the other of any
comments (oral or written) received from the staff of the SEC in connection
with the Registration Statement or the Proxy Statement.
(b) The Company shall use all reasonable best efforts to cause to be delivered
to Parent a letter of Arthur Andersen LLP, the Company's independent
auditors, dated a date within two business days before the date on which
the Registration Statement shall become effective (and before the date on
which each posteffective amendment to the Registration Statement shall
become effective) and addressed to Parent, in form and substance reasonably
satisfactory to Parent and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statement.
(c) Parent shall use all reasonable best efforts to cause to be delivered to
the Company a letter of PriceWaterhouseCoopers, Parent's independent
auditors, dated a date within two business days before the date on which
the Registration Statement shall become effective (and before the date on
which each posteffective amendment to the Registration Statement shall
become effective) and addressed to the Company, in form and substance
reasonably satisfactory to the Company and customary in scope and substance
for letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
28
Section 5.3 Access to Information. (a) Subject to currently existing
---------------------
contractual and legal restrictions applicable to the Company or any of its
Subsidiaries, including those in the Confidentiality Agreement, dated December
15, 2000, between Parent and the Company, relating to information provided by
the Company, as amended or supplemented (the "Company Confidentiality
Agreement"), the Company shall, and shall cause each of its Subsidiaries to,
afford to the accountants, counsel, financial advisors and other representatives
of Parent reasonable access to, and permit them to make such inspections as they
may reasonably require of, during normal business hours during the period from
the date of this Agreement through the Effective Time, all of its properties,
books, contracts, commitments and records (including, without limitation, the
work papers of independent accountants, if available and subject to the consent
of such independent accountants).
(b) Subject to currently existing contractual and legal restrictions applicable
to Parent and any of its Subsidiaries or the Company and any of its
Subsidiaries, as the case may be, including those in the Company
Confidentiality Agreement and the Confidentiality Agreement, dated March
2001, between the Company and Parent relating to information provided by
Parent, as amended or supplemented (together with the Company
Confidentiality Agreement, the "Confidentiality Agreements"), each of
Parent and the Company shall, and shall cause each of its Significant
Subsidiaries to, furnish promptly to the other (A) a copy of each report,
schedule, registration statement and other document filed by it during such
period pursuant to the requirements of federal or state securities laws and
(B) all other information concerning its business, properties and personnel
as the other may reasonably request.
(c) In addition the Company shall provide Parent, as soon as reasonably
practicable following the delivery to management, such monthly financial
statements and data as are regularly prepared for distribution to Company
management, all of which shall be kept confidential pursuant to the
supplement dated March 9, 2001 to the Company Confidentiality Agreement.
(d) No investigations pursuant to this Section 5.3 shall affect or be deemed to
modify any representations or warranties hereunder. All information
obtained pursuant to this Section 5.3 shall be kept confidential in
accordance with the Confidentiality Agreements.
Section 5.4 Compliance with the Securities Act.
----------------------------------
(a) Section 5.4(a) of the Company Letter contains a list identifying all
persons who, at the time of the Stockholder Meeting, may be deemed to be
"affiliates" of the Company as that term is used in paragraphs (c) and (d)
of Rule 145 under the Securities Act and under applicable SEC accounting
releases with respect to pooling of interests accounting treatment (the
"Rule 145 Affiliates"). The Company shall use its reasonable best efforts
to cause each person who is identified as a Rule 145 Affiliate in such list
to execute and deliver to Parent within 30 days of the date hereof a
written agreement in substantially the form of Exhibit 5.4(a) hereto (the
--------------
"Company Affiliate Letter"). Prior to the Effective Time, the Company
shall amend and supplement Section 5.4(a) of the Company Letter and use its
reasonable best efforts to cause each additional person who is identified
as a Rule 145 Affiliate of the Company to execute the Company Affiliate
Letter.
29
(b) Section 5.4(b) of the Parent Letter contains a list identifying those
persons who may be affiliates of Parent under applicable SEC accounting
releases with respect to pooling of interests accounting treatment. Parent
shall use its reasonable best efforts to enter into a written agreement in
substantially the form of Exhibit 5.4(b) hereto (the "Parent Affiliate
--------------
Letter") within 30 days of the date hereof with each of such persons
identified in the foregoing list. Prior to the Effective Time, Parent
shall amend and supplement Section 5.4(b) of the Parent Letter and use its
reasonable best efforts to cause each additional person who is identified
as an affiliate of Parent to execute the Parent Affiliate Letter.
Section 5.5 Current NYSE Listing. Each of Parent and the Company shall use its
--------------------
reasonable best efforts to continue the listing of the Parent Common Stock and
the Company Common Stock on the NYSE during the term of this Agreement to the
extent necessary so that appraisal rights will not be available to stockholders
of the Company under Section 262 of the DGCL.
Section 5.6 Fees and Expenses.
-----------------
(a) Except as provided in this Section 5.6 and Section 5.10, whether or not the
Merger is consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby including, without
limitation, the fees and disbursements of counsel, financial advisors and
accountants, shall be paid by the party incurring such costs and expenses,
provided that all printing expenses and all filing fees payable to
Governmental Entities (including, without limitation, filing fees under the
Securities Act, the Exchange Act and the HSR Act) shall be shared equally
by Parent and the Company.
(b) Notwithstanding any provision in this Agreement to the contrary, if (i)(A)
this Agreement is terminated by the Company or Parent pursuant to Section
7.1.(d)(i) or 7.1(e) or by Parent pursuant to Section 7.1(b), (B) a
Takeover Proposal (or the intent to make a Takeover Proposal), whether or
not conditional, was publicly announced or made to the Company or its Board
either publicly or privately or to its stockholders generally by a person
or entity that, together with its affiliates and controlling persons or
entities, has assets of not less than $100 million at any time from and
after the date hereof and on or before the date of the event that gave rise
to such termination and (C) at any time on or before the first anniversary
of any such termination a Third Party Acquisition Event (as defined below)
occurs or the Company shall enter into any letter of intent, agreement in
principle, definitive acquisition agreement or other similar agreement with
respect to a Third Party Acquisition Event or (ii) this Agreement is
terminated by Parent pursuant to Section 7.1(f), then, in each case, the
Company shall (without prejudice to any other rights that Parent may have
against the Company for a breach of this Agreement) pay to Parent a fee of
$80 million in cash, such payment to be made promptly, but in no event
later than, in the case of clause (i), the closing of such Third Party
Acquisition Event or the signing of such agreement, as the case may be, or,
in the case of clause (ii), the first day following such termination.
(c) All payments under this Section 5.6 shall be made by wire transfer of
immediately available U.S. dollar funds to an account designated by Parent.
30
(d) The Company acknowledges that the agreements contained in Section 5.6(b)
and (c) are an integral part of the transactions contemplated by this
Agreement and that, without these agreements, Parent would not have entered
into this Agreement; accordingly, if the Company fails to pay any amount
when, due pursuant to Sections 5.6(b) and (c) and, in order to obtain such
payment, Parent brings a suit or action which results in a judgment against
the Company, then the Company shall pay to Parent its costs and expenses
(including attorneys' fees) in connection with such suit or action.
As used in this Agreement, a "Third Party Acquisition Event" means (i)
a transaction or series of transactions pursuant to which any person or group
(as such term is defined under the Exchange Act), other than Parent or Sub, or
any affiliate thereof ("Third Party"), acquires more than 25% of the equity
securities or voting power of the Company or any of its Significant
Subsidiaries, pursuant to a tender offer or exchange offer or otherwise, (ii) a
merger, consolidation, share exchange or other business combination involving
the Company or any of its Significant Subsidiaries pursuant to which any Third
Party acquires ownership of more than 25% of the outstanding equity securities
or voting power of the Company or any of its Significant Subsidiaries or of the
entity surviving such merger or business combination or resulting from such
consolidation, (iii) any other transaction or series of transactions pursuant to
which any Third Party acquires control of assets of the Company or any of its
Significant Subsidiaries (including, for this purpose, outstanding equity
securities of Significant Subsidiaries of such party) having a fair market value
equal to more than 25% of the fair market value of all the consolidated assets
of the Company and its Subsidiaries, taken as a whole, immediately prior to such
transaction or series of transactions, or (iv) any transaction or series of
transactions pursuant to which any Third Party acquires control of the Board of
Directors of the Company or by which nominees of any Third Party are elected or
appointed to a majority of the seats on the Board of Directors of the Company.
Section 5.7 Company Stock Plans. (a) Not later than the Effective Time, each
-------------------
Company Stock Option which is outstanding immediately prior to the Effective
Time pursuant to a Company Stock Option Plan shall become and represent an
option to purchase the number of shares of Parent Common Stock (a "Substitute
Option") (decreased to the nearest full share) determined by multiplying (i) the
number of shares of Company Common Stock subject to such Company Stock Option
immediately prior to the Effective Time by (ii) the Exchange Ratio, at an
exercise price per share of Parent Common Stock (rounded up to the nearest cent)
equal to the exercise price per share of Company Common Stock immediately prior
to the Effective Time divided by the Exchange Ratio. After the Effective Time,
except as provided above in this Section 5.7, each Substitute Option shall be
exercisable upon the same terms and conditions as were applicable under the
related Company Stock Option immediately prior to or at the Effective Time. The
Company shall, if so requested by Parent, use reasonable best efforts to obtain
any consents that may be required in connection with implementing the provisions
of this Section 5.7 (it being understood that, in connection with any such
consents that may be so required, the Company will have satisfied its obligation
under this Agreement relating thereto if it has used reasonable best efforts to
obtain such consents, whether or not successful) or provide any notice or take
any other similar action reasonably requested in connection therewith. As soon
as reasonably practicable, and in no event later than ten days after the
Effective Time, Parent shall file a registration statement on Form S-8 (or any
successor or other appropriate form) with respect to Parent Common Stock subject
to such Substitute Options, or shall cause such
31
Substitute Options to be deemed to be issued pursuant to a Parent Stock Plan for
which shares of Parent Common Stock have been previously registered pursuant to
an appropriate registration form.
(b) As of the Effective Time, the right of each nonemployee director of the
Company who has elected to receive shares of Company Common Stock pursuant
to the deferred stock compensation program maintained by the Company shall
become and represent a right to receive the number of shares of Parent
Common Stock (decreased to the nearest whole share) determined by
multiplying (i) the number of shares of Company Common Stock which would be
issuable to such nonemployee director if he or she ceased serving as a
director immediately prior to the Effective Time by (ii) the Exchange
Ratio. Such shares of Parent Common Stock shall be issued to such
nonemployee director as soon as practicable after the Effective Time.
Section 5.8 Reasonable Best Efforts; Pooling of Interests.
---------------------------------------------
(a) Upon the terms and subject to the conditions set forth in this Agreement,
each of the parties agrees to use reasonable best efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including, but not limited to: (i) obtaining all necessary
actions or non-actions, waivers, consents and approvals from all
Governmental Entities and the making of all necessary registrations and
filings (including filings with Governmental Entities) and taking all
reasonable steps (subject to clause (c) below, including, in the case of
Parent, divesting or holding separate any assets or agreeing to any
governmental conditions), as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by, any Governmental
Entity (including those in connection with the HSR Act), (ii) obtaining all
necessary consents, approvals or waivers from third parties, (iii)
defending any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental
Entity vacated or reversed, (iv) each of Parent and the Company agreeing to
take, together with their respective accountants, all actions reasonably
necessary in order to obtain a favorable determination (if required) from
the SEC that the Merger may be accounted for as a pooling of interests in
accordance with generally accepted accounting principles and (v) the
execution and delivery of any additional instruments reasonably necessary
to consummate the transactions contemplated by this Agreement. No party to
this Agreement shall consent to any voluntary delay of the consummation of
the Merger at the behest of any Governmental Entity without the consent of
the other parties to this Agreement, which consent shall not be
unreasonably withheld.
(b) Each party shall use all reasonable best efforts to not take any action, or
enter into any transaction, which would cause any of its representations or
warranties contained in this Agreement to be untrue in any material respect
or result in a material breach of any covenant made by it in this Agreement
or which could reasonably be expected to impede, interfere with or prevent
in any material respect the Merger.
32
(c) Notwithstanding anything herein to the contrary, Parent shall not be
obligated (i) to enter into any "hold-separate" agreement or other
agreement with respect to the disposition of any assets or businesses of
the Parent or any of its Subsidiaries or the Company or any of its
Subsidiaries (if such agreements would, individually or in the aggregate,
have a material and adverse impact on the business of Parent or the Company
or on the benefits that would have otherwise been derived by Parent from
the Merger or if such agreement would impose or give rise to any of the
conditions of the type described in clause (ii) below with the impact
described in clause (ii) below) in order to obtain clearance from the
Federal Trade Commission or the Antitrust Division of the Department of
Justice or any other antitrust or competition authorities to proceed with
the consummation of the transactions contemplated hereby or (ii) to
consummate the transactions contemplated hereby in the event that both (A)
any consent, approval or authorization of any Governmental Entity obtained
or sought to be obtained in connection with this Agreement is conditioned
upon the imposition of any restrictions upon (or the making of any
accommodation (financial or otherwise) in respect of the transactions
contemplated hereby or) the conduct of the business of the Surviving
Corporation or of Parent or its Subsidiaries (including any agreement not
to compete in any geographic area or line of business) or results, or would
result in, the abrogation or diminishment of any authority or license
granted by any Governmental Entity and (B) such restrictions,
accommodations and abrogations would, individually or in the aggregate,
have a material and adverse impact on the business of Parent or the Company
or on the benefits that would otherwise have been derived by Parent from
the Merger. Parent's exercise of its rights under this paragraph (c) shall
not in any way prejudice the rights of Parent under this Agreement in
respect of Closing conditions and termination rights.
Section 5.9 Public Announcements. Parent and the Company will not issue any
--------------------
press release with respect to the transactions contemplated by this Agreement or
otherwise issue any written public statements with respect to such transactions
without prior consultation with the other party, except as may be required by
applicable law or by obligations pursuant to any listing agreement with any
national securities exchange or the rules of the NYSE.
Section 5.10 Real Estate Transfer and Gains Tax. Parent and the Company agree
----------------------------------
that either the Company or the Surviving Corporation will pay any state or local
tax which is attributable to the transfer of the beneficial ownership of the
Company's or its Subsidiaries' real property, if any (collectively, the "Gains
Taxes"), and any penalties or interest with respect to the Gains Taxes, payable
in connection with the consummation of the Merger. The Company and Parent agree
to cooperate with the other in the filing of any returns with respect to the
Gains Taxes, including supplying in a timely manner a complete list of all real
property interests held by the Company and its Subsidiaries and any information
with respect to such property that is reasonably necessary to complete such
returns. The portion of the consideration allocable to the real property of the
Company and its Subsidiaries shall be determined by Parent in its reasonable
discretion.
Section 5.11 State Takeover Laws. If any "fair price," "business combination"
-------------------
or "control share acquisition" statute or other similar statute or regulation
shall become applicable to the transactions contemplated hereby, Parent and the
Company and their respective Boards of Directors shall use their reasonable best
efforts to grant such approvals and take such actions as are necessary so that
the transactions contemplated hereby and thereby may be
33
consummated as promptly as practicable on the terms contemplated hereby and
thereby and otherwise act to minimize the effects of any such statute or
regulation on the transactions contemplated hereby.
Section 5.12 Indemnification; Directors and Officers Insurance.
-------------------------------------------------
(a) From and after the Effective Time, Parent shall, and shall cause the
Surviving Corporation to, indemnify and hold harmless all past and present
officers, directors, employees and agents of the Company and of its
Subsidiaries to the full extent such persons are currently indemnified by
the Company for acts or omissions occurring at or prior to the Effective
Time pursuant to the Company Charter, the Company Bylaws and any existing
agreements. Without limiting the generality of the foregoing, in the event
any person entitled to indemnification under this Section 5.12(a) becomes
involved in any claim, action, proceeding or investigation after the
Effective Time, Parent shall, or shall cause the Surviving Corporation to,
periodically advance to such person his or her reasonable legal and other
reasonably incurred expenses (including the cost of any investigation and
preparation incurred in connection therewith), subject to such person
providing an undertaking to reimburse all amounts so advanced in the event
of a final nonappealable determination by a court of competent jurisdiction
that such person is not entitled thereto.
(b) Parent shall provide, or shall cause the Surviving Corporation to provide,
for an aggregate period of not less than six (6) years from the Effective
Time, the Company's current directors and officers an insurance and
indemnification policy that provides coverage for events occurring on or
prior to the Effective Time (the "D&O Insurance") that is substantially
similar (with respect to limits and deductibles and scope) to the Company's
existing policy or, if substantially equivalent insurance coverage is
unavailable, the best available coverage; provided, however, that the
-------- -------
Parent and the Surviving Corporation shall not be required to pay an annual
premium for the D&O Insurance in excess of 150% of the last annual premium
paid prior to the date of this Agreement.
(c) The provisions of this Section 5.12 are intended for the benefit of, and
shall be enforceable by, each person entitled to indemnification under this
Section 5.12, his or her heirs and his or her personal representatives.
Section 5.13 Notification of Certain Matters. Parent shall use its reasonable
-------------------------------
best efforts to give prompt notice to the Company, and the Company shall use its
reasonable best efforts to give prompt notice to Parent, of: (i) the
occurrence, or non-occurrence, of any event of which it is aware and which would
be reasonably likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect, or (ii) any
failure of Parent or the Company, as the case may be, to comply in a timely
manner with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that the delivery of any notice
-------- -------
pursuant to this Section 5.13 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
34
Section 5.14 Employee Benefit Plans and Agreements.
-------------------------------------
(a) From the Effective Time through December 31, 2001, Parent shall cause the
Company and its Subsidiaries to continue to maintain the material benefit
plans and programs provided to employees of the Company and its
Subsidiaries immediately prior to the Effective Time (excluding any such
plans (or any portion of any such plan) providing for equity-related
benefits) and subject to the requirements of applicable law; provided,
however, that the performance criteria under any such plan or program that
provides for performance-based incentive compensation shall be modified or
adjusted appropriately to reflect the transactions contemplated by this
Agreement and prevent a change in the incentive compensation opportunities
thereunder. For a period of not less than six months following December
31, 2001, Parent shall cause to be provided, to employees of the Company or
its Subsidiaries as of the Effective Time (including each such person who
is on vacation, temporary layoff, approved leave of absence, sick leave or
short or long-term disability) (collectively the "Company Employees"),
employee benefits (excluding for this purpose equity-related benefits) that
are, in the aggregate, at least as favorable as those benefits provided to
such Company Employees immediately prior to the Effective Time and such
Company Employees shall be eligible to participate in equity plans of
Parent on a substantially equivalent basis as similarly situated employees
of Parent and its affiliates. Nothing herein shall require the Company or
its Subsidiaries to make matching or profit-sharing contributions in
Company Common Stock under the Company Retirement Plan. For purposes of
vesting, eligibility to participate and benefit accrual (other than accrual
under a defined benefit pension plan) under the employee benefit plans of
Parent and its Subsidiaries providing benefits to any Company Employees
after the Effective Time (collectively the "New Plans"), each Company
Employee shall be credited with his or her years of service with the
Company and its Subsidiaries before the Effective Time, to the same extent
as such Company Employee was entitled, before the Effective Time, to credit
for such service under any similar Company benefit plan in which such
Company Employee participated or was eligible to participate immediately
prior to the Effective Time; provided that the foregoing shall not apply to
the extent that its application would result in a duplication of benefits
or for newly established plans and programs in which employees of Parent
and its Subsidiaries participate and for which prior service of employees
of Parent and its Subsidiaries is not taken into account. In addition,
without limiting the generality of the foregoing: (i) each Company
Employee shall be immediately eligible to participate, without any waiting
time, in any and all New Plans to the extent coverage under such New Plans
replaces coverage under a comparable Company employee benefit plan or
compensation arrangement or agreements in which such Company Employee
participated immediately before the Effective Time (collectively the "Old
Plans") and (ii) for purposes of each New Plan providing medical, dental,
pharmaceutical and/or vision benefits to any Company Employee, Parent shall
cause all pre-existing condition exclusions of such New Plans to be waived
for such employee and his or her dependents, unless such conditions would
not have been waived under the comparable plans of the Company and its
Subsidiaries in which such employee participated or in which such employee
would have been eligible to participate immediately prior to the Effective
Time and Parent shall cause any eligible expenses incurred by such employee
and his or her covered dependents during the portion of the plan year of
the Old Plan ending on the date of such employee's participation in the
corresponding New Plans to be taken into account under such New Plan for
purposes of satisfying all deductible, coinsurance and maximum out-of-
pocket
35
requirements applicable to such employee and his or her covered dependents
for the applicable plan year as if such amounts had been paid in accordance
with such New Plan.
(b) Except as otherwise provided by this Section, nothing in this Agreement
shall be interpreted as limiting the power of the Surviving Corporation to
amend or terminate any particular Company Plan or any other particular
employee benefit plan, program, agreement or policy or as requiring the
Surviving Corporation to offer to continue the employment of any employee
(other than as required by the terms of any written employment contract or
benefit plan).
(c) Parent shall take all reasonable steps to ensure that (i) the obligations
of the Company or the Surviving Corporation to fund the Company's Executive
Benefit Trust (the "Rabbi Trust") within seven days after the approval of
the Merger by the stockholders of the Company shall be honored, provided
that if the Effective Time does not occur within this seven-day period, the
Company shall be entitled to fund such obligations, and that (ii) the
obligations of the Company or the Surviving Corporation under the Rabbi
Trust shall be honored following the Effective Time.
(d) From the Closing, Parent shall cause to be honored by the Company, the
Surviving Corporation and their Subsidiaries all employment agreements,
bonus agreements, severance agreements and any other similar agreements
with the persons who are directors, officers and employees of the Company
and its Subsidiaries.
Section 5.15 Section 16(b). The Parent shall use reasonable best efforts to
-------------
cause, before the Effective Time, any acquisitions of equity securities of
Parent (including derivative securities) contemplated by this Agreement by each
individual who becomes a director or officer of Parent to be exempt under Rule
16b-3 promulgated under the Exchange Act.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger. The
----------------------------------------------------------
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement shall have been duly approved by the
--------------------
requisite vote of stockholders of the Company in accordance with applicable
law and the Company Charter and the Company Bylaws.
(b) Quotation of Stock. The Parent Common Stock issuable in the Merger shall
------------------
have been authorized for quotation on the NYSE, subject to official notice
of issuance.
(c) HSR. The waiting period (and any extension thereof) applicable to the
---
consummation of the Merger under the HSR Act shall have expired or been
terminated.
36
(d) Authorizations and Consents. All authorizations, consents, orders,
---------------------------
declarations or approvals of, or filings with, or terminations or
expirations of waiting periods imposed by, any Governmental Entity, which
the failure to obtain, make or occur would have the effect of making the
Merger or any of the transactions contemplated hereby illegal or would
have, individually or in the aggregate, a Material Adverse Effect on Parent
(assuming the Merger had taken place) or on the Company, shall have been
obtained, shall have been made or shall have occurred.
(e) Registration Statement. The Registration Statement shall have become
----------------------
effective in accordance with the provisions of the Securities Act. No stop
order suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceedings for that purpose shall have been
initiated or, to the Knowledge of Parent or the Company, threatened by the
SEC. All necessary state securities or Blue Sky authorizations (including
State Takeover Approvals) shall have been received.
(f) No Order. No court or other Governmental Entity having jurisdiction over
--------
the Company or Parent, or any of their respective Subsidiaries, shall have
enacted, issued, promulgated, enforced or entered any law, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is then in effect and has the
effect of making the Merger or any of the transactions contemplated hereby
illegal.
Section 6.2 Conditions to Obligation of the Company to Effect the Merger. The
------------------------------------------------------------
obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties. Each of Parent
----------------------------------------------------------
and Sub shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed on or prior
to the Effective Time, each of the representations and warranties of Parent
and Sub contained in this Agreement that is qualified by materiality shall
be true and correct on and as of the Effective Time as if made on and as of
such date (other than representations and warranties which address matters
only as of a certain date which shall be true and correct as of such
certain date) and each of the representations and warranties that is not so
qualified shall be true and correct in all material respects on and as of
the Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as of a certain
date which shall be true and correct in all material respects as of such
certain date), in each case except as contemplated or permitted by this
Agreement, and the Company shall have received a certificate signed on
behalf of Parent by its Chief Executive Officer and its Chief Financial
Officer to such effect.
(b) Tax Opinion. The Company shall have received an opinion of its counsel,
-----------
Sidley & Austin, in form and substance reasonably satisfactory to the
Company, dated the Effective Time, substantially to the effect that, on the
basis of facts, representations and assumptions set forth in such opinion,
(i) the Merger will constitute a tax-free reorganization within the meaning
of Section 368 of the Code and (ii) for U.S. federal income tax purposes,
the shareholders of the Company will recognize no gain or loss upon the
conversion of their shares of Company Common Stock into shares of Parent
Common Stock pursuant to the Merger, except with respect to cash, if any,
received in lieu of fractional shares of Parent Common Stock.
37
In rendering such opinion, Sidley & Austin may rely upon representations
contained herein and may receive and rely upon representations from Parent, the
Company, and others, including representations from Parent substantially similar
to the representations in the Parent Tax Certificate attached to the Parent
Letter and representations from the Company substantially similar to the
representations in the Company Tax Certificate attached to the Company Letter.
(c) Consents. Parent shall have obtained the consent or approval of each
--------
person that is not a Governmental Entity whose consent or approval shall be
required in connection with the transactions contemplated hereby under any
loan or credit agreement, note, mortgage, indenture, lease or other
agreement by which Parent or any of its Subsidiaries is bound, except as to
which the failure to obtain such consents and approvals would not,
individually or in the aggregate, have a Material Adverse Effect on Parent
(assuming the Merger has taken place).
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the Merger.
----------------------------------------------------------------
The obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment at or Prior to the Effective Time of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties. The Company
----------------------------------------------------------
shall have performed in all material respects each of its agreements
contained in this Agreement required to be performed on or prior to the
Effective Time, each of the representations and warranties of the Company
contained in this Agreement that is qualified by materiality shall be true
and correct on and as of the Effective Time as if made on and as of such
date (other than representations and warranties which address matters only
as of a certain date which shall be true and correct as of such certain
date) and each of the representations and warranties that is not so
qualified shall be true and correct in all material respects on and as of
the Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as of a certain
date which shall be true and correct in all material respects as of such
certain date), in each case except as contemplated or permitted by this
Agreement, and Parent shall have received a certificate signed on behalf of
the Company by its Chief Executive Officer and its Chief Financial Officer
to such effect.
(b) Tax Opinion. Parent shall have received an opinion of its counsel, Cleary,
-----------
Gottlieb, Steen & Hamilton, in form and substance reasonably satisfactory
to Parent, dated the Effective Time, substantially to the effect that, on
the basis of facts, representations and assumptions set forth in such
opinion, (i) the Merger will constitute a tax-free reorganization within
the meaning of Section 368 of the Code and (ii) for U.S. federal income tax
purposes, the shareholders of the Company will recognize no gain or loss
upon the conversion of their shares of Company Common Stock into shares of
Parent Common Stock pursuant to the Merger, except with respect to cash, if
any, received in lieu of fractional shares of Parent Common Stock.
In rendering such opinion, Cleary, Gottlieb, Steen & Hamilton may rely upon
representations contained herein and may receive and rely upon representations
from Parent, the Company, and others, including representations from Parent
substantially similar to the representations in the Parent Tax Certificate
attached to the Parent Letter and representations from the Company substantially
similar to the representations in the Company Tax Certificate attached to the
Company Letter.
38
(c) Consents. The Company shall have obtained the consent or approval of each
--------
person that is not a Governmental Entity whose consent or approval shall be
required in connection with the transactions contemplated hereby under any
loan or credit agreement, note, mortgage, indenture, lease or other
agreement or instrument by which the Company or any of its Subsidiaries is
bound, except as to which the failure to obtain such consents and approvals
would not, individually or in the aggregate, have a Material Adverse Effect
on the Company.
(d) Accounting. The Company shall have received the written opinion, dated as
----------
of the Effective Time, of Arthur Andersen that the Company is eligible to
be a party to a business combination accounted for as a pooling of
interests in accordance with U.S. generally accepted accounting principles
("GAAP") and applicable published rules and regulations of the SEC. Parent
shall have received the written opinion, dated as of the Effective Time, of
PriceWaterhouseCoopers that Parent is eligible to be a party to a business
combination accounted for as a pooling of interests in accordance with GAAP
and applicable published rules and regulations of the SEC, and that the
Merger will qualify for pooling of interests accounting. Each of such
written opinions will be in form and substance reasonably satisfactory to
the Parent.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Effective Time, whether before or after any approval of the matters
presented in connection with the Merger by the stockholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the other party shall have failed to
comply in any material respect with any of its covenants or agreements
contained in this Agreement required to be complied with prior to the date
of such termination, which failure to comply has not been cured within
thirty business days following receipt by such other party of written
notice from the non-breaching party of such failure to comply (it being
understood (i) that any breach of Section 4.2 or 5.1 shall be considered
material for purposes of this Section 7.1(b) and (ii) that a breach of
Section 4.2 or the penultimate sentence of Section 5.1 is not capable of
cure and therefore the 30-day cure period shall not apply in the case of
any such breach);
(c) by either Parent or the Company if there has been (i) a breach by the other
party (in the case of Parent, including any breach by Sub) of any
representation or warranty that is not qualified as to materiality which
has the effect of making such representation or warranty not true and
correct in all material respects or (ii) a breach by the other party (in
the case of Parent, including any breach by Sub) of any representation or
warranty that is qualified as to materiality, in each case which breach has
not been cured within thirty business days following receipt by the
breaching party from the non-breaching party of written notice of the
breach;
(d) by Parent or the Company if: (i) the Merger has not been effected on or
prior to the close of business on the 180th day after the date hereof
(provided that if either Parent
39
or the Company determines that additional time is necessary in connection
with obtaining any consent, registration, approval, permit or authorization
required to be obtained from any Governmental Entity, such date may be
extended by Parent or the Company from time to time by written notice to
the other party to a date not beyond the 270th day after the date hereof if
the extending party in good faith believes that such consent, registration,
approval, permit or authorization can be obtained by such date); provided,
--------
however, that the right to terminate this Agreement pursuant to this
-------
Section 7.1(d)(i) shall not be available to any party whose failure to
fulfill any of its obligations contained in this Agreement has been the
cause of, or resulted in, the failure of the Merger to have occurred on or
prior to the aforesaid date; or (ii) any court or other Governmental Entity
having jurisdiction over a party hereto shall have issued an order, decree
or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the consummation of the Merger and such order,
decree, ruling or other action shall have become final and nonappealable;
(e) by Parent or the Company if the stockholders of the Company do not approve
and adopt the agreement of merger (within the meaning of Section 251 of the
DGCL) contained in this Agreement at the Stockholder Meeting or at any
adjournment or postponement thereof; provided, however, that the Company
-------- -------
may not terminate this Agreement pursuant to this Section 7.1(e) if the
Company has not complied with its obligations under Sections 4.2, 5.1 and
5.2 or has otherwise breached in any material respect its obligations under
this Agreement in any manner that could reasonably have caused the failure
of the stockholder approval to be obtained at the Stockholder Meeting; or
(f) by Parent if (without regard to whether or not a breach of this Agreement
has occurred) (i) the Board of Directors of the Company shall not have
recommended, or shall have resolved not to recommend, or shall have
adversely qualified, adversely modified or withdrawn its recommendation of
the Merger or declaration that the Merger is advisable and fair to and in
the best interest of the Company and its stockholders, or shall have
resolved to do so (even if permitted by Section 5.1), (ii) any person
(other than Parent or its affiliates) acquires or becomes the beneficial
owner of 15% or more of the outstanding shares of Company Common Stock,
(iii) the Board of Directors of the Company shall have recommended to the
stockholders of the Company any Takeover Proposal involving the Company or
shall have resolved to do so or (iv) a tender offer or exchange offer for
15% or more of the outstanding shares of capital stock of the Company is
commenced, and the Board of Directors of the Company fails, within 10
business days of such commencement, to recommend against acceptance of such
tender offer or exchange offer by its stockholders (including by taking no
position with respect to the acceptance of such tender offer or exchange
offer by its stockholders).
The right of any party hereto to terminate this Agreement pursuant to
this Section 7.1 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
Section 7.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by either Parent or the Company, as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of the Company, Parent, Sub or their respective officers or
directors (except for the Confidentiality Agreements
40
and the entirety of Section 5.6, which shall survive the termination); provided,
--------
however, that nothing contained in this Section 7.2 shall relieve any party
- -------
hereto from any liability for any willful breach of a representation or warranty
contained in this Agreement or the breach of any covenant contained in this
Agreement.
Section 7.3 Amendment. This Agreement may be amended by the parties hereto, by
---------
or pursuant to action taken by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
at the Stockholder Meeting, but, after any such approval, no amendment shall be
made which by law requires further approval by such stockholders without such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
Section 7.4 Waiver. At any time prior to the Effective Time, the parties
------
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein which may legally be waived. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and Warranties. The
----------------------------------------------
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall terminate at the Effective Time.
Section 8.2 Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed given when delivered personally, one day after
being delivered to an overnight courier or when telecopied (with a confirmatory
copy sent by overnight courier) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
The Interpublic Group of Companies, Inc.
1271 Avenue of the Americas
New York, New York 10020
Attention: General Counsel
Facsimile No.: (212) 399-8119
41
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, NY 10024
Attention: Barry M. Fox, William A. Groll and
Ethan A. Klingsberg
Facsimile No.: (212) 225-3999
(b) if to the Company, to
True North Communications Inc.
101 East Erie Street
Chicago, Illinois 60611
Attention: General Counsel
Facsimile No.(312) 425-6589
with a copy to:
Sidley & Austin
Bank One Plaza
10 S. Dearborn Street
Chicago, Illinois 60603
Attention: Thomas A. Cole and
Imad I. Qasim
Facsimile No.: (312) 853-7036
Section 8.3 Interpretation. When a reference is made in this Agreement to a
--------------
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents, list of defined terms and headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."
Section 8.4 Counterparts. This Agreement may be executed in counterparts, all
------------
of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
Section 8.5 Entire Agreement; No Third-Party Beneficiaries. This Agreement and
----------------------------------------------
the Confidentiality Agreements constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof. This Agreement, except as provided
in the next sentence, is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder. The parties hereto expressly
intended the provisions of Section 5.12 to confer a benefit upon and be
enforceable by, as third party beneficiaries of this Agreement, the third
persons referred to in, or intended to be benefited by such provision.
42
Section 8.6 Governing Law. This Agreement shall be governed by, and construed
-------------
in accordance with, the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
Section 8.7 Assignment. Neither this Agreement nor any of the rights,
----------
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Any transfer in violation of Section 8.7 shall be
null and void.
Section 8.8 Severability. If any term or other provision of this Agreement is
------------
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
* * * *
43
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
THE INTERPUBLIC GROUP OF COMPANIES, INC.
By:/s/ Nicholas J. Camera
----------------------
Name: Nicholas J. Camera
Its: Senior Vice President, Secretary
and General Counsel
VERITAS ACQUISITION CORP.
By:/s/ Nicholas J. Camera
----------------------
Name: Nicholas J. Camera
Its: Senior Vice President, Secretary
and General Counsel
TRUE NORTH COMMUNICATIONS INC.
By:/s/ David A. Bell
-----------------
Name: David A. Bell
Its: Chairman and Chief Executive
Officer
44
Exhibit 5.4(a)
[FORM OF COMPANY AFFILIATE LETTER TO PARENT]
[Date]
[Parent Address]
Dear Sir or Madam:
Reference is made to the provisions of the Agreement and Plan of
Merger, dated as of [ ], 2001 (together with any amendments thereto, the
"Merger Agreement"), among [________________________], a Delaware corporation
("Parent"), [_____], a Delaware corporation and a direct wholly owned subsidiary
of Parent ("Sub") and [________________________], a Delaware corporation (the
"Company"), pursuant to which Sub will be merged with and into the Company, with
the Company continuing as the surviving corporation (the "Merger"). This letter
constitutes the undertakings of the undersigned contemplated by the Merger
Agreement, as is being furnished pursuant to Section 5.4(a) thereto.
I understand that I may be deemed to be an "affiliate" of the Company,
as such term is defined for purposes of paragraphs (c) and (d) of Rule 145
("Rule 145") promulgated under the Securities Act of 1933, as amended (the
"Securities Act"). Execution of this letter shall not be construed as an
admission of "affiliate" status nor as a waiver of any rights that I may have to
object to any claim that I am an "affiliate" on or after the date of this
letter.
If in fact I were to be deemed an "affiliate" of the Company under
paragraphs (c) and (d) of Rule 145, my ability to sell, transfer or otherwise
dispose of any shares of the common stock, par value $0.10 per share, of Parent
(the "Parent Shares") received by me in exchange for any shares of common stock,
par value $.33 1/3 per share, of the Company (the "Company Shares") pursuant to
the Merger may be restricted.
I hereby represent, warrant and covenant to Parent that:
I will not sell, pledge, transfer or otherwise dispose of any of the
Parent Shares except (i) pursuant to an effective registration statement under
the Securities Act, or (ii) as permitted by, and in accordance with, Rule 145 or
another applicable exemption under the Securities Act and the rules and
regulations promulgated thereunder;
Except as permitted by Staff Accounting Bulletin No. 76 issued by the
Securities and Exchange Commission, I will not (i) sell, pledge, transfer or
dispose of, or otherwise reduce my risk relative to, any Company Shares during
the 30-day period prior to the Effective Time (as defined in the Merger
Agreement) or (ii) sell, pledge, transfer or dispose of, or otherwise reduce my
risk (within the meaning of the Securities and Exchange Commission's Financial
Reporting Release No. 1, "Codification of Financial Reporting Policies", Section
201.01 47 F.R. 21028 (April 15, 1982)) relative to, any Parent Shares until
after such time as consolidated financial results (including combined sales and
net income) covering at least 30 days of post-merger combined operations of
Parent and the Company have been published by Parent in the form of a
1
quarterly earnings report, an effective registration statement filed with the
Commission, a report to the Commission on Form 10-K, 10-Q, or 8-K, or any other
public filing or announcement which includes the combined results of operations.
Parent shall notify the "affiliates" of the publication of such results.
I understand that during the period described in the paragraph
immediately above, subject to providing written notice to Parent and the other
restrictions set forth above, and to the extent permitted under the "pooling of
interest" accounting rules and applicable securities laws, I will be permitted
to sell up to 10% of the Parent Shares (the "10% Shares") received by me or the
Company Shares owned by me or to make charitable contributions or bona fide
gifts of the Parent Shares received by me or the Company Shares owned by me,
subject to the same restrictions. I agree that I will give Parent not less than
five (5) business days notice prior to making any sales, charitable
contributions or gifts as contemplated under this paragraph, that I will provide
any information reasonably requested by Parent or Parent's accounting firm
regarding any such sale, charitable contribution or gift, and that I will
refrain from making such sales, charitable contributions or gifts if Parent
determines, after consultation with its accounting firm, that such transaction
could preclude the Merger from being accounted for as a "pooling of interest."
The 10% Shares shall be calculated in accordance with SEC Accounting Series
Release No. 135 as amended by Staff Accounting Bulletin No. 76.
I hereby acknowledge that Parent is under no obligation to register
the sale, transfer, pledge or other disposition of the Parent Shares or to take
any other action necessary for the purpose of making an exemption from
registration available.
I understand that Parent will issue stop transfer instructions to its
transfer agents with respect to the Parent Shares and that a restrictive legend
will be placed on certificates delivered to me evidencing the Parent Shares in
substantially the following form:
"This certificate and the shares represented hereby have been issued
pursuant to a transaction governed by Rule 145 ("Rule 145") promulgated
under the Securities Act of 1933, as amended (the "Securities Act"), and
may not be sold or otherwise disposed of unless registered under the
Securities Act pursuant to a Registration Statement in effect at the time
or unless the proposed sale or disposition can be made in compliance with
Rule 145 or without registration in reliance on another exemption
therefrom."
The term Parent Shares as used in this letter shall mean and include
not only the common stock of Parent as presently constituted, but also any other
stock which may be issued in exchange for, in lieu of, or in addition to, all or
any part of such Parent Shares.
I hereby acknowledge that Parent and its independent public
accountants will be relying upon this letter in connection with the
determination that the Merger will qualify and be accounted for as a "pooling of
interests", and that I understand the requirements of this letter and the
limitations imposed upon the transfer, sale or other disposition of the Company
Shares and the Parent Shares.
2
By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
It is understood and agreed that certificates with the legend set
forth above will be substituted by delivery of certificates without such legend
if (i) one year shall have elapsed from the date the undersigned acquired the
Parent Shares received in the Merger and the provisions of Rule 145(d)(2) are
then available to the undersigned, (ii) two years shall have elapsed from the
date the undersigned acquired the Parent Shares received in the Merger and the
provisions of Rule 145(d)(3) are then applicable to the undersigned, or (iii)
the Parent has received either a written opinion of counsel, which opinion and
counsel shall be reasonably satisfactory to Parent, or a "no action" letter
obtained by the undersigned from the staff of the Commission, to the effect that
the restrictions imposed by Rule 145 under the Act no longer apply to the
undersigned.
Very truly yours,
[Name]
Accepted and Agreed:
THE INTERPUBLIC GROUP OF COMPANIES, INC.
By:
--------------------------------
Name:
Title:
3
Exhibit 5.4(a)
[FORM OF PARENT AFFILIATE LETTER TO PARENT]
[Date]
[Parent]
Dear Sir/Madam:
Reference is made to the provisions of the Agreement and Plan of
Merger, dated as of [ ], 2001 (together with any amendments thereto, the
"Merger Agreement"), among [_____________________], a Delaware corporation
("Parent"), [_____], a Delaware corporation and a direct wholly owned subsidiary
of Parent ("Sub") and [Company], a Delaware corporation (the "Company"),
pursuant to which Sub will be merged with and into the Company, with the Company
continuing as the surviving corporation (the "Merger"). This letter constitutes
the undertakings of the undersigned contemplated by the Merger Agreement, as is
being furnished pursuant to Section 5.4(b) thereto.
I hereby represent, warrant and covenant to the Company that:
Except as permitted by Staff Accounting Bulletin No. 76 issued by the
Securities and Exchange Commission, I will not (i) sell, pledge, transfer or
dispose of, or otherwise reduce my risk relative to any shares of common stock,
par value $.10 per share, of the Parent ("Parent Shares") during the 30-day
period prior to the Effective Time (as defined in the Merger Agreement) or (ii)
sell, pledge, transfer or dispose of, or otherwise reduce my risk (within the
meaning of the Securities and Exchange Commission's Financial Reporting Release
No. 1., "Codification of Financial Reporting Policies", Section 201.01 47 F.R.
21028 (April 15, 1982)) relative to, any Parent Shares until after such time as
consolidated financial results (including combined sales and net income)
covering at least 30 days of post-merger combined operations of Parent and the
Company have been published by Parent in the form of a quarterly earnings
report, an effective registration statement filed with the Commission, a report
to the Commission on Form 10-K, 10-Q, or 8-K, or any other public filing or
announcement which includes the combined results of operations. Parent shall
notify the "affiliates" of the publication of such results.
The term Parent Shares as used in this letter shall mean and include
not only the common stock of Parent as presently constituted, but also any other
stock which may be issued in exchange for, in lieu of, or in addition to, all or
any part of such Parent Shares.
I hereby acknowledge that the Parent and its independent public
accountants will be relying upon this letter in connection with the
determination that the Merger will qualify and be accounted for as a "pooling of
interests", and that I understand the requirements of this letter and the
limitations imposed upon the transfer, sale or other disposition of Parent
Shares.
4
Very truly yours,
[Name]
Accepted and Agreed:
THE INTERPUBLIC GROUP OF COMPANIES, INC.
By:
--------------------------------
Name:
Title:
5