Exhibit 99.(a)(1)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Together with the Associated Preferred Stock Purchase Rights)
of
Sodexho Marriott Services, Inc.
at
$32.00 Net Per Share
by
SMS Acquisition Corp.
a wholly-owned subsidiary of
Sodexho Alliance, S.A.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON THURSDAY, JUNE 14, 2001, UNLESS THE OFFER IS EXTENDED.
This Offer is being made pursuant to an Agreement and Plan of Merger (the
"Merger Agreement") dated as of May 1, 2001 among Sodexho Marriott Services,
Inc. ("SMS"), Sodexho Alliance, S.A. ("Sodexho") and SMS Acquisition Corp. The
Offer is conditioned upon, among other things, there being validly tendered
and not withdrawn prior to the expiration of the offer a number of shares of
common stock of SMS, $1.00 par value per share (the "Shares"), which, when
taken together with Shares then owned by Sodexho or any of its subsidiaries,
represents at least a majority of the Shares outstanding on a fully-diluted
basis.
The board of directors of SMS, by unanimous decision of those directors
participating and based on the recommendation of a Special Committee of
independent directors of SMS: (1) has determined that the Merger Agreement and
the transactions contemplated thereby are fair to and in the best interests of
SMS and its stockholders (other than Sodexho), (2) has approved and declared
advisable the Merger Agreement and (3) has resolved to recommend that SMS's
stockholders accept the Offer and approve the Merger Agreement if submitted
for their approval.
UBS Warburg LLC, the financial advisor to the Special Committee, has
delivered to the Special Committee its written opinion that as of the date of
the opinion the consideration to be received by the holders of Shares (other
than Sodexho and its affiliates) in the Offer and the Merger is fair from a
financial point of view to such holders. See "Special Factors--Opinion of
Financial Advisor."
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A summary of the principal terms of the Offer appears on pages 1-4 of this
Offer to Purchase.
If you have questions about the Offer, you can call MacKenzie Partners,
Inc., the Information Agent for the Offer, or Goldman, Sachs & Co., the Dealer
Manager for the Offer, at their respective addresses and telephone numbers set
forth on the back cover of this Offer to Purchase. You can also obtain
additional copies of this Offer to Purchase, the related Letter of Transmittal
and the Notice of Guaranteed Delivery from the Information Agent or your
broker, dealer, commercial bank, trust company or other nominee.
This transaction has not been approved or disapproved by the Securities and
Exchange Commission nor has the Commission passed upon the fairness or merits
of such transaction or upon the accuracy or adequacy of the information
contained in this document. Any representation to the contrary is unlawful.
----------------
The Dealer Manager for the Offer is:
Goldman, Sachs & Co.
May 17, 2001
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TABLE OF CONTENTS
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Page
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SUMMARY TERM SHEET............................................................. 1
INTRODUCTION................................................................... 5
SPECIAL FACTORS................................................................ 7
Background of the Offer...................................................... 7
Recommendation of the Special Committee and the SMS Board; Fairness of
the Offer and the Merger.................................................... 12
Opinion of Financial Advisor................................................. 15
Position of Sodexho and the Purchaser Regarding Fairness of the Offer
and the Merger.............................................................. 19
Purpose and Structure of the Offer and the Merger; Reasons of Sodexho
for the Offer and the Merger................................................ 20
Plans for SMS after the Offer and the Merger; Certain Effects of the
Offer....................................................................... 20
The Merger Agreement......................................................... 21
Appraisal Rights............................................................. 28
Transactions and Arrangements Concerning the Shares.......................... 30
Related Party Transactions................................................... 31
Interests of Certain Persons in the Offer and the Merger..................... 32
Goldman Sachs Reports........................................................ 32
THE OFFER...................................................................... 38
1. Terms of the Offer; Expiration Date...................................... 38
2. Extension of Tender Period; Termination; Amendment; Subsequent
Offering Period............................................................. 38
3. Acceptance for Payment and Payment....................................... 40
4. Procedure for Tendering Shares........................................... 40
5. Withdrawal Rights........................................................ 43
6. Certain United States Federal Income Tax Consequences.................... 43
7. Price Range of Shares; Dividends......................................... 44
8. Certain Information Concerning SMS....................................... 45
9. Certain Information Concerning the Purchaser, Sodexho and Bellon S.A. ... 49
10. Source and Amount of Funds............................................... 49
11. Effect of the Offer on the Market for the Shares; Stock Exchange
Listing(s); Registration under the Exchange Act......................... 50
12. Dividends and Distributions.............................................. 51
13. Conditions of the Offer.................................................. 52
14. Certain Legal Matters; Regulatory Approvals.............................. 53
15. Fees and Expenses........................................................ 55
16. Miscellaneous............................................................ 56
Schedule I Directors and Executive Officers of Sodexho, the Purchaser and Bellon S.A.
ANNEX A Agreement and Plan of Merger
ANNEX B Opinion of UBS Warburg LLC
ANNEX C General Corporation Law of Delaware Section 262
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SUMMARY TERM SHEET
SMS Acquisition Corp., a wholly-owned subsidiary of Sodexho Alliance, S.A.,
is offering to purchase all of the outstanding shares of Common Stock, par
value $1.00 per share, of Sodexho Marriott Services, Inc. ("SMS"), together
with the associated preferred stock purchase rights (collectively, the
"Shares"), other than Shares already owned by Sodexho Alliance, S.A. and its
subsidiaries, for $32.00 per Share net to the seller in cash pursuant to the
Merger Agreement. The following are some of the questions you, as a stockholder
of SMS, may have and answers to those questions. You should carefully read this
Offer to Purchase and the accompanying Letter of Transmittal in their entirety
because the information in this summary term sheet is not complete and
additional important information is contained in the remainder of this Offer to
Purchase and the Letter of Transmittal.
Who is offering to buy my securities?
Our name is SMS Acquisition Corp. We are a Delaware corporation and a
wholly-owned subsidiary of Sodexho Alliance, S.A., a French corporation
("Sodexho"). Sodexho was founded in 1966 by its current Chairman, Pierre
Bellon. It is today the world leader in food and management services. With
286,000 employees and operations in 70 countries at 22,000 sites, Sodexho
generated Euro 10.5 billion in sales in its fiscal year ended August 31, 2000.
Sodexho has held 29,949,925 Shares since SMS's formation in 1998, which
currently represents about 47.1 percent of SMS.
What are the classes and amounts of securities sought in the Offer?
We are seeking to purchase all of the outstanding Shares that Sodexho does
not already own. The Offer is conditioned upon the tender of a number of Shares
that, together with the Shares then owned by Sodexho or any of its
subsidiaries, represents at least a majority of the Shares outstanding on a
fully-diluted basis.
How much are you offering to pay for my securities and what is the form of
payment? Will I have to pay any fees or commissions?
We are offering to pay $32.00 per Share, net to you, in cash. If you tender
your Shares to us in the Offer, you will not have to pay brokerage fees,
commissions or similar expenses. If you own your Shares through a broker or
other nominee, and your broker tenders your Shares on your behalf, your broker
or nominee may charge you a fee for doing so. You should consult your broker or
nominee to determine whether any charges will apply.
Do you have the financial resources to make payment?
We will need approximately $1.15 billion to purchase all Shares that Sodexho
does not already own pursuant to the Offer, to cash out certain employee stock
options in the Merger and to pay related fees and expenses. We intend to fund
this amount through borrowings under a credit agreement with a group of
lenders. See "The Offer--Source and Amount of Funds" for a description of the
credit agreement. The Offer is not subject to any financing condition.
What does SMS's Board of Directors think of the Offer?
The Board of Directors of SMS (the "SMS Board"), by unanimous decision of
those directors participating and based upon the recommendation of a Special
Committee of independent directors of the SMS Board (the "Special Committee"):
(1) has determined that the Merger Agreement and the transactions
contemplated thereby are fair to and in the best interests of SMS and its
stockholders (other than Sodexho);
(2) has approved and declared advisable the Merger Agreement; and
1
(3) has resolved to recommend that SMS's stockholders accept the Offer
and approve the Merger Agreement if submitted for their approval. See
"Special Factors--Recommendation of the Special Committee and the SMS
Board; Fairness of the Offer and the Merger--Recommendation of the Special
Committee and the SMS Board."
Is your financial condition relevant to my decision to tender in the Offer?
Because the form of payment consists solely of cash and the Offer is not
conditioned on our ability to obtain financing, we do not think our financial
condition is relevant to your decision whether to tender in the Offer. We have
arranged for the financing of this transaction under a credit agreement with a
group of lenders. See "The Offer--Source and Amount of Funds."
How long do I have to decide whether to tender in the Offer?
You have until at least 12:00 Midnight, New York City time, on Thursday,
June 14, 2001, to tender your Shares in the Offer. Further, if you cannot
deliver everything required to make a valid tender to EquiServe Trust Company,
N.A. ("EquiServe" or the "Depositary"), the depositary for the Offer, prior to
such time, you may be able to use a guaranteed delivery procedure, which is
described in "The Offer--Procedure for Tendering Shares." In addition, if we
decide to include a subsequent offering period in the Offer as described under
"The Offer--Extension of Tender Period; Termination; Amendment; Subsequent
Offering Period", you will have an additional opportunity to tender your
Shares. We have not at this time made a final decision to include or not to
include a subsequent offering period.
Can the Offer be extended and under what circumstances?
Subject to the terms of the Merger Agreement, we can extend the Offer. We
might extend, for instance, if any conditions to the Offer have not been
satisfied or waived prior to the expiration of the Offer or, for a period of up
to ten business days, if all of the conditions to the Offer are satisfied or
waived, but the number of Shares validly tendered and not withdrawn is
insufficient to result in Sodexho and its subsidiaries owning at least 90% of
the then outstanding number of Shares on a fully-diluted basis. We may
establish a subsequent offering period of up to 20 business days under certain
circumstances. See "The Offer--Extension of Tender Period; Termination;
Amendment; Subsequent Offering Period." If you do not tender your Shares during
the initial offering period or the subsequent offering period (if any), you
will have to wait until after the Merger is completed to receive cash
consideration for your Shares.
How will I be notified if the Offer is extended?
If we decide to extend the Offer, we will inform EquiServe, the depositary
for the Offer, of that fact and will make a public announcement of the
extension, not later than 9:00 a.m., New York City time, on the business day
after the day on which the Offer was scheduled to expire.
What are the most significant conditions to the Offer?
We are not obligated to purchase any Shares unless the number of Shares
validly tendered and not withdrawn, together with the Shares then owned by
Sodexho or any of its subsidiaries, represents at least a majority of the
Shares outstanding on a fully-diluted basis. For other conditions to the Offer,
see "The Offer--Conditions of the Offer."
How do I tender my Shares?
To tender Shares, you must deliver the certificates representing your
Shares, together with a completed Letter of Transmittal, to EquiServe, the
depositary for the Offer, not later than the time the Offer expires. If
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your Shares are held in street name by your broker, dealer, bank, trust company
or other nominee, such nominee can tender your shares through The Depository
Trust Company. If you cannot deliver everything required to make a valid tender
to the Depositary prior to the expiration of the Offer, you may have a limited
amount of additional time by having a broker, a bank or other fiduciary which
is a member of the Securities Transfer Agents Medallion Program or other
eligible institution guarantee that the missing items will be received by the
Depositary within three New York Stock Exchange trading days. However, the
Depositary must receive the missing items within that three trading day period.
Until what time can I withdraw tendered Shares?
You can withdraw tendered Shares at any time until the Offer has expired
and, if we have not by July 15, 2001, agreed to accept your Shares for payment,
you can withdraw them at any time until we accept Shares for payment. You may
not, however, withdraw Shares tendered during a subsequent offering period, if
one is included. See "The Offer--Withdrawal Rights."
How do I withdraw tendered Shares?
To withdraw Shares, you must deliver a written notice of withdrawal, or a
facsimile of one, with the required information to EquiServe while you have the
right to withdraw the Shares. See "The Offer--Withdrawal Rights."
When and how will I be paid for my tendered Shares?
Subject to the terms and conditions of the Offer, we will pay for all Shares
validly tendered and not withdrawn promptly after the Expiration Date.
We will pay for your validly tendered and not withdrawn Shares by depositing
the purchase price with EquiServe, which will act as your agent for the purpose
of receiving payments from us and transmitting such payments to you. In all
cases, payment for tendered Shares will be made only after timely receipt by
EquiServe of certificates for such Shares (or of a confirmation of a book-entry
transfer of such shares as described in "The Offer--Procedure for Tendering
Shares"), a properly completed and duly executed Letter of Transmittal and any
other required documents for such Shares.
Will the Offer be followed by a merger?
If we purchase Shares in the Offer and the other conditions to the Merger
are satisfied or waived (where permissible), the Purchaser will be merged with
and into SMS. If we purchase Shares in the Offer, we will have sufficient
voting power to approve the Merger without the affirmative vote of any other
stockholder of SMS. Furthermore, if as a result of our purchases in the Offer
we own in excess of 90% of the outstanding Shares, we may effect the Merger
without any further action by the stockholders of SMS. If the Merger takes
place, SMS will become a wholly-owned subsidiary of Sodexho, and all remaining
stockholders (other than Sodexho and its subsidiaries and any SMS stockholders
who properly exercise their appraisal rights under Delaware law) will receive
$32.00 net per Share in cash (or any higher price per Share which is paid in
the Offer).
Following the Offer, will SMS continue as a public company?
If and when the Merger takes place, SMS will no longer be publicly owned.
Even if the Merger does not take place, there may be so few remaining
stockholders and publicly held Shares that the Shares will no longer be
eligible to be traded on the New York Stock Exchange (the "NYSE") or any other
securities exchange and there may not be an active public trading market (or,
possibly, any public trading market) for the Shares. As a result of the Merger,
the registration of the Shares under the Securities Exchange Act of 1934, as
amended (the
3
"Exchange Act"), will be terminated. Consequently, following the Merger, SMS
will be relieved of the duty to file annual and other periodic reports and
proxy and information statements under the Exchange Act, and its officers,
directors and more than 10% stockholders will be relieved of the reporting
requirements under, and the "short swing" profit liability provisions of,
Section 16 of the Exchange Act. SMS will no longer be a public company and its
common stock will no longer be traded on the NYSE.
If I decide not to tender, how will the Offer affect my Shares?
If the Merger takes place, stockholders not tendering in the Offer (other
than Sodexho and its subsidiaries) will receive the same amount of cash per
Share which they would have received had they tendered their Shares in the
Offer. Therefore, if the Merger takes place (and you do not exercise your
appraisal rights under Delaware law), the only difference to you between
tendering your Shares pursuant to the Offer and not tendering your Shares is
that you will be paid earlier if you tender your Shares in the Offer.
Stockholders who hold Shares at the time of the Merger will also be entitled to
appraisal rights under Delaware law. See "Special Factors--Appraisal Rights."
If for some reason the Merger does not take place and the Offer is consummated,
the number of stockholders and Shares that are still in the hands of the public
may be so small that there will no longer be an active public trading market
(or, possibly, any public trading market) for the Shares, which may affect
prices at which Shares trade. Also, as described above, SMS may cease making
certain filings with the SEC or otherwise cease to be required to comply with
the SEC rules relating to publicly held companies.
What is the market value of my Shares as of a recent date?
On January 24, 2001, the last full trading day before public announcement of
Sodexho's initial proposal to acquire all Shares it did not already own, the
closing price per Share on the NYSE was $24.875. On May 1, 2001, the last full
trading day before public announcement of the Merger Agreement, the closing
price per Share on the NYSE was $29.50. On May 15, 2001, a recent trading day
before the date of this Offer to Purchase, the closing price per Share on the
NYSE was $31.75. We advise you to obtain a recent quotation for Shares before
deciding whether to tender your Shares.
Who can I talk to if I have questions about the Offer?
You can call MacKenzie Partners, Inc., the Information Agent for the Offer,
at (800) 322-2885 (toll free) or (212) 929-5500 (call collect) or Goldman,
Sachs & Co., the Dealer Manager for the Offer, at (800) 323-5678 (toll free) or
(212) 902-1000 (call collect).
Are there transactions between Sodexho and SMS?
Yes. When Sodexho acquired Shares of SMS in 1998, the companies entered into
a number of agreements to govern the ongoing relationship between the parties.
These agreements include a Stockholder Agreement, a Tax Sharing Agreement, a
Royalty Agreement, an Assistance Agreement and a Guaranty Agreement. See
"Special Factors--Related Party Transactions."
What are the tax consequences to me of the transaction?
If your Shares are accepted for payment pursuant to the Offer, you will
generally recognize gain or loss measured by the difference between the cash
you receive and your tax basis in the Shares tendered. See "The Offer--Certain
United States Federal Income Tax Consequences."
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To the Holders of Common Stock of Sodexho Marriott Services, Inc.:
INTRODUCTION
SMS Acquisition Corp. (the "Purchaser"), a Delaware corporation and a
wholly-owned subsidiary of Sodexho Alliance, S.A., a French corporation
("Sodexho"), hereby offers to purchase all of the outstanding shares of Common
Stock, par value $1.00 per share, of Sodexho Marriott Services, Inc., a
Delaware corporation ("SMS"), together with the associated preferred stock
purchase rights issued pursuant to the Rights Agreement dated as of October 8,
1993, as amended, between SMS and The Bank of New York, as Rights Agent
(collectively the "Shares"), other than Shares already owned by Sodexho and its
subsidiaries, for $32.00 per Share, net to the seller in cash (the "Offer
Price"), upon the terms and subject to the conditions set forth in this Offer
to Purchase and in the related Letter of Transmittal (which together constitute
the "Offer"). You will not be obligated to pay brokerage fees, commissions or,
except as set forth in Instruction 6 of the Letter of Transmittal, transfer
taxes on the sale of Shares pursuant to the Offer. We will pay all charges and
expenses of Goldman, Sachs & Co. (the "Dealer Manager"), EquiServe Trust
Company, N.A. ("EquiServe" or the "Depositary") and MacKenzie Partners, Inc.
(the "Information Agent") incurred in connection with the Offer. See "The
Offer--Fees and Expenses."
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of May 1, 2001 (the "Merger Agreement") among SMS, Sodexho and the Purchaser.
The Merger Agreement provides that following completion of the Offer and the
satisfaction or waiver of certain conditions in the Merger Agreement, the
Purchaser will be merged into SMS (the "Merger"), with SMS continuing as the
surviving corporation (the "Surviving Corporation"), which will be wholly-owned
by Sodexho. At the effective time of the Merger (the "Effective Time"), (1)
each Share issued and outstanding immediately prior to the Effective Time
(other than Shares of holders exercising appraisal rights, as described below
in "Special Factors--Appraisal Rights," and Shares to be cancelled as provided
in (2) below) will be converted into the right to receive the Offer Price in
cash (the "Merger Consideration"); and (2) each Share held in the treasury of
SMS or owned by Sodexho or any of its subsidiaries immediately prior to the
Effective Time will be cancelled, and no payment or distribution will be made
with respect to such Shares; see "Special Factors--The Merger Agreement" for a
description of the Merger and the Merger Agreement.
The Board of Directors of SMS ("SMS Board"), by unanimous decision of those
directors participating and based upon the recommendation of a special
committee of independent directors of the SMS Board (the "Special Committee"):
(1) has determined that the Merger Agreement and the transactions
contemplated thereby are fair to and in the best interests of SMS and its
stockholders (other than Sodexho);
(2) has approved and declared advisable the Merger Agreement; and
(3) has resolved to recommend that SMS's stockholders accept the Offer
and approve the Merger Agreement if submitted for their approval. See
"Special Factors--Recommendation of the Special Committee and the SMS
Board; Fairness of the Offer and the Merger--Recommendation of the Special
Committee and the SMS Board."
Messrs. Pierre Bellon, Bernard Carton and Edouard de Royere, each a director
on the SMS Board, did not participate in this meeting (or any other SMS Board
meeting in which the acquisition proposal was discussed) in light of their
positions as Sodexho's designees on the SMS Board. See "Special Factors--
Recommendation of the Special Committee to the SMS Board; Fairness of the Offer
and the Merger."
UBS Warburg LLC ("UBS Warburg"), the financial advisor to the Special
Committee, has delivered to the Special Committee its written opinion that as
of the date of the opinion the consideration to be received by the holders of
Shares (other than Sodexho and its affiliates) in the Offer and the Merger is
fair from a financial point of view to such holders. See "Special Factors--
Opinion of Financial Advisor."
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This Offer is conditioned upon the tender of a number of Shares that,
together with the Shares then owned by Sodexho or any of its subsidiaries,
represents at least a majority of the Shares outstanding on a fully-diluted
basis. The Offer is also subject to certain other conditions. See "The Offer--
Conditions of the Offer."
SMS has advised Sodexho that to the best of its knowledge each of its
executive officers and directors, other than those individuals, if any, for
whom the tender of Shares could cause them liability under the provisions of
Section 16(b) of the Exchange Act or to the extent their Shares are restricted
shares, intends to tender all of his or her Shares pursuant to the Offer.
If, as a result of the purchase of Shares pursuant to the Offer, Sodexho and
the Purchaser own in the aggregate at least 90% of the outstanding Shares, then
Sodexho will contribute any of its Shares to the Purchaser and the Purchaser
will effect the Merger as a short-form merger under the Delaware General
Corporation Law (the "DGCL"), without a vote of the stockholders of SMS. If,
following the purchase of Shares pursuant to the Offer, Sodexho and the
Purchaser own in the aggregate less than 90% of the outstanding Shares, SMS,
Sodexho, and the Purchaser have agreed to take certain actions necessary to
seek stockholder approval and effect a long-form merger pursuant to the DGCL.
See "Special Factors--The Merger Agreement." If a vote of the stockholders of
SMS is necessary to effect the Merger, Sodexho has agreed in the Merger
Agreement to vote or cause to be voted all Shares owned by it or any of its
subsidiaries in favor of adoption of the Merger Agreement.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION, AND YOU SHOULD CAREFULLY READ BOTH IN THEIR ENTIRETY
BEFORE YOU MAKE A DECISION WITH RESPECT TO THE OFFER.
6
SPECIAL FACTORS
BACKGROUND OF THE OFFER
Formation of SMS
SMS is the result of the combination in March 1998 of the operations of
Marriott Management Services and Sodexho North America. On March 27, 1998,
Marriott International, Inc. spun off its lodging, senior living and
distribution services businesses to its stockholders, retaining its Marriott
Management Services business. Immediately thereafter, the Marriott Management
Services business was merged with the North American operations of Sodexho and
the company changed its name to Sodexho Marriott Services, Inc. In connection
with the merger, Sodexho received 29,949,925 Shares, which at that time
represented 48.4% of the outstanding common stock of SMS.
In March 1998, SMS and Sodexho entered into a number of agreements. These
agreements include: a Stockholder Agreement, a Tax Sharing Agreement, a Royalty
Agreement, an Assistance Agreement and a Guaranty Agreement. Under the
Stockholder Agreement, Sodexho is entitled to designate three directors to the
eight-member SMS Board. Under the Tax Sharing Agreement, the parties made
certain representations and agreements with respect to the tax treatment of the
1998 transaction, including a restriction on Sodexho's ability to acquire a 50
percent or greater ownership interest in SMS before March 27, 2001. Under the
Royalty Agreement, SMS has the right to use the name "Sodexho" in connection
with SMS's operations in the United States and Canada for a period of ten
years. The annual royalty rate was initially 0.05 percent of the annual gross
revenues of SMS until March 27, 2001 and thereafter was to be a rate negotiated
by the parties in good faith based on the fair market value. As described
below, the parties have agreed to extend the initial 0.05 percent rate until
August 31, 2001. Under the Assistance Agreement, Sodexho provides various
services to SMS, including services relating to purchasing, catering, site
support, marketing, management and administration, legal, fiscal, human
resources, communications and cash management. The annual fee for these
services is currently 0.15 percent of SMS's annual gross revenues. Each year,
the independent directors of SMS assess the fair market value of the services
that Sodexho provides to SMS to confirm that it exceeds the combined fee paid
by SMS under the Royalty Agreement and the Assistance Agreement. Under the
Guaranty Agreement, Sodexho guarantees SMS's obligations under its $620 million
credit facility. SMS pays Sodexho a guarantee fee of 0.50 percent per annum of
the outstanding amount under this facility.
On March 26, 2001, SMS sent to Sodexho a proposed amendment to the Royalty
Agreement to extend the 0.05 percent royalty rate beyond its initial expiration
date of March 27, 2001 until August 31, 2001 in light of the pending
acquisition proposal from Sodexho. After initially rejecting this request, on
April 9, 2001 Sodexho accepted the proposed extension.
Recent Contacts and Negotiations
In April 2000, Sodexho management began to consider various alternatives
with respect to its investment in SMS. In October 2000, Sodexho retained
Goldman Sachs International ("Goldman Sachs") as its financial advisor in
connection with the consideration of these alternatives. Throughout October,
November and December of 2000, Sodexho, together with representatives of
Goldman Sachs and Davis Polk & Wardwell ("Davis Polk"), legal counsel to
Sodexho, evaluated several options, including maintaining or increasing its
stake in SMS, making an offer for all publicly-held Shares, and increasing its
representation on the SMS Board. In January 2001, Sodexho management decided to
recommend to the Sodexho board of directors that Sodexho should pursue an offer
for all Shares held by the public. Sodexho's reasons for pursuing an offer are
discussed under "Special Factors--Purpose and Structure of the Offer and the
Merger; Reasons of Sodexho for the Offer and the Merger."
At a meeting on January 24, 2001, Sodexho's board of directors authorized an
offer at $27.00 per Share. Immediately after the meeting, Pierre Bellon,
Chairman and Chief Executive Officer of Sodexho, together with a representative
of Davis Polk, called William J. Shaw, Chairman of the Board of SMS, and Robert
A. Stern,
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Senior Vice President and General Counsel of SMS, to propose that Sodexho
acquire all Shares it did not already own for $27.00 per Share in cash. After
the call, Mr. Bellon sent a letter to Mr. Shaw confirming the proposal and
stating that Sodexho would not consider a sale of any portion of its SMS stake.
The following morning, on January 25, 2000, Sodexho issued a press release
announcing its proposal.
On January 29, 2001, the SMS Board met to discuss the Sodexho proposal.
Because Sodexho is the beneficial owner of approximately 47% of the outstanding
common stock of SMS and certain of the SMS directors (Pierre Bellon, Bernard
Carton and Edouard de Royere) serve on the SMS Board as representatives of
Sodexho and may have an interest in the consummation of the proposal that
conflicts with the interests of SMS and its other stockholders, the SMS Board
formed a Special Committee composed of two independent directors,
Daniel J. Altobello, a private investor and former Chairman of Onex Food
Services, Inc., and Mary S. Metz, President of the S.H. Cowell Foundation. The
SMS Board appointed Mr. Altobello as chairman of the Special Committee. Neither
member of the Special Committee is an officer or employee of SMS, Sodexho or
any of their affiliates. The SMS Board delegated to the Special Committee,
among other things, the responsibility and authority to review, evaluate and,
if appropriate, negotiate the terms of the proposal. Sodexho's designees on the
SMS Board, Pierre Bellon, Bernard Carton and Edouard de Royere, attended the
meeting but did not participate in the discussion or vote. Later on January 29,
2001, SMS publicly announced the formation of the Special Committee.
The Special Committee was authorized by the SMS Board to retain independent
financial and legal advisors to assist it in its evaluation of the Sodexho
proposal. During February 2001, the members of the Special Committee received
presentations from several internationally recognized investment banking firms
for the purpose of retaining independent financial advisors to the Special
Committee and ultimately decided to retain UBS Warburg. During this month the
Special Committee also conducted interviews with several nationally recognized
law firms, and retained Shaw Pittman, Washington, D.C. ("Shaw Pittman"), as its
legal advisor and Potter Anderson & Corroon LLP, Wilmington, Delaware ("Potter
Anderson"), as its Delaware legal advisor.
On February 21, 2001, the Special Committee held its first meeting at the
offices of Shaw Pittman. At the meeting, Potter Anderson advised the Special
Committee as to its fiduciary duties and responsibilities in considering and
acting upon the acquisition proposal. The Special Committee also discussed with
its legal advisors and UBS Warburg various possible deal structures, current
conditions in the financial markets, and the implications of Sodexho's
statement in its January 24, 2001 letter that it would not consider a sale of
any portion of its ownership interest in SMS as part of any alternative to its
proposal.
On February 26, 2001, at the Sodexho annual shareholders meeting, Pierre
Bellon spoke briefly about the pending proposal to acquire SMS, noting that at
the $27.00 per Share price, the accretion to Sodexho's earnings was limited and
Sodexho intended to pursue the acquisition only if it would clearly benefit
Sodexho's shareholders.
On February 27, 2001, at the direction of the Special Committee, SMS entered
into an engagement letter with UBS Warburg and issued a press release
announcing that the Special Committee had retained financial and legal
advisors.
On February 28, 2001, UBS Warburg began its financial due diligence review
of SMS, which included a review of public and non-public documents relating to
SMS, including historical and projected financial information, as well as
research reports, industry information and various agreements to which SMS is a
party.
On March 5, 2001, representatives of UBS Warburg and Shaw Pittman met with
SMS senior management to discuss SMS's business, prospects and financial
objectives, including management's financial forecasts for the period from
September 2, 2000 through September 2, 2005. On that day, Shaw Pittman
commenced its legal due diligence review of SMS.
On March 13, 2001, the Special Committee held a telephonic meeting during
which a summary of the due diligence review by UBS Warburg was discussed. The
Special Committee reviewed with UBS Warburg a number of factors, including
management's financial projections, the potential financial impact on SMS of a
8
favorable determination by the federal government with respect to SMS's bids on
two military contracts and the consequences to SMS of a potential acquisition
by Sodexho of Wood Management Services, a competitor of SMS. The Special
Committee also discussed with UBS Warburg some of SMS's strengths and
weaknesses, including its market position, its customer base, its balance
sheet, its prospects for growth, the effect of changes in the labor market and
the health care industry and certain factors relating to SMS's ability to
expand internationally. The Special Committee asked UBS Warburg to prepare a
valuation analysis of SMS.
On March 13, 2001, Shaw Pittman called Davis Polk to report that the Special
Committee had instructed UBS Warburg to contact Goldman Sachs to facilitate any
confirmatory due diligence that Sodexho would like to perform, subject to the
parties signing a confidentiality agreement. Davis Polk responded that in view
of Sodexho's existing knowledge of SMS's operations through its participation
on the SMS Board since 1998, Sodexho had concluded that it needed little
additional due diligence material. On April 5, 2001, Sodexho and SMS signed a
confidentiality agreement.
In the course of its evaluation of Sodexho's proposal throughout February
and March 2001, the Special Committee concluded, in light of Sodexho's
statement that it would not consider a sale of its interest in SMS, that an
acquisition of SMS by a third party was not a feasible alternative. Accordingly
UBS Warburg was not authorized to and did not solicit indications of interest
from any third party with respect to an acquisition of SMS.
On March 15, 2001, SMS issued a press release announcing that SMS had been
awarded two military contracts with anticipated revenues of $850 million over
eight years.
On March 22, 2001, representatives of UBS Warburg and Goldman Sachs met in
New York to discuss their respective client's approaches to valuation. UBS
Warburg advised Goldman Sachs that UBS Warburg's preliminary financial analysis
indicated that SMS was worth more than $27.00 per Share and suggested that
Goldman Sachs and Sodexho refine their analysis of SMS with a view to making a
higher offer.
On March 29, 2001, representatives of UBS Warburg and Goldman Sachs spoke
via conference call to discuss in further detail approaches to valuation of the
transaction. During this conference call Goldman Sachs focused in particular on
the accretion/dilution impact of the transaction to Sodexho's earnings per
share.
On April 9, 2001, representatives of UBS Warburg and Goldman Sachs spoke via
conference call to review Goldman Sachs' model with respect to the
accretion/dilution impact of the transaction to Sodexho. UBS Warburg and
Goldman Sachs agreed on the technical aspects of the accretion/dilution
analysis, but disagreed on whether the appropriate measure of
accretion/dilution was before or after amortization of goodwill.
On April 11, 2001, the Special Committee held a telephonic meeting at which
UBS Warburg reported to the Special Committee on its communications with
Goldman Sachs. The Special Committee discussed negotiating strategies for UBS
Warburg to use with Goldman Sachs, as well as due diligence requests by
Sodexho. After discussions with its legal advisors, the Special Committee
provided guidance to UBS Warburg for further negotiations.
On April 12, 2001, representatives of UBS Warburg and Goldman Sachs met in
New York. The discussion focused mainly on valuation metrics. At this meeting,
UBS Warburg conveyed the Special Committee's formal rejection of Sodexho's
$27.00 offer. On instructions from Sodexho, Goldman Sachs indicated that
Sodexho would be willing to increase its offer to $30.00 per Share. UBS Warburg
and Goldman Sachs discussed timing generally, including Sodexho's upcoming
board meeting and delivery of a draft of the Merger Agreement. Following that
meeting, representatives of UBS Warburg contacted the members of the Special
Committee to advise them of the proposed increase in the offer price.
9
On April 17, 2001, Davis Polk sent a draft of the Merger Agreement to Shaw
Pittman.
In a series of conversations between April 17, 2001 and April 22, 2001, UBS
Warburg indicated that the Special Committee would be unlikely to support an
offer at $30.00 per Share and would consider a transaction at a price per Share
in the mid-$30s. At Sodexho's request, Goldman Sachs informed UBS Warburg that
Sodexho would not consider a transaction at or anywhere near $35.00 per Share.
Additionally, Goldman Sachs explained that Sodexho's board was scheduled to
meet on April 25, 2001 and would at that meeting determine whether to proceed
with the transaction or publicly announce termination of discussions. On behalf
of Sodexho, Goldman Sachs requested clarification regarding the Special
Committee's view on price before the Sodexho board meeting.
On April 20, 2001, representatives of Shaw Pittman had a telephone
conference with representatives of Davis Polk in which they expressed their
preliminary views regarding the principal issues raised by their review of the
draft Merger Agreement, including that the proposed $75 million fee payable to
Sodexho by SMS upon termination of the Merger Agreement by SMS under certain
conditions was unacceptably high, and that the representations and warranties
of the parties in the draft Merger Agreement should be substantially modified.
On April 23, 2001, the Special Committee held a telephonic meeting during
which UBS Warburg formally reported to the Special Committee that on April 12,
2001, Goldman Sachs had indicated to it that Sodexho would be willing to raise
its offer to $30.00 per Share. The Special Committee provided further guidance
to UBS Warburg as to price negotiations. The Special Committee also discussed
the draft Merger Agreement with its legal advisors and provided guidance as to
the negotiation of the Merger Agreement. The Special Committee noted that SMS's
management had prepared an analysis of the treatment of stock options in
connection with the proposed transaction with Sodexho. The Special Committee
agreed to defer consideration of management's analysis until the parties had
reached agreement on price.
Following this meeting, UBS Warburg called Goldman Sachs and reported that
the Special Committee had rejected the offer at $30.00 per Share and repeated
that the Special Committee believed that a price per Share in the mid-$30s was
appropriate.
On April 24, 2001, Shaw Pittman sent Davis Polk a markup of the Merger
Agreement reflecting the comments of the Special Committee and its advisors.
Also on April 24, 2001, at Sodexho's request, representatives from SMS and Shaw
Pittman participated in a conference call with Sodexho to answer questions
relating to SMS equity-based compensation.
On April 25, 2001, the Sodexho board of directors met in Paris and
authorized a best and final offer of $32.00 per Share in cash. On instructions
from the Sodexho board, Goldman Sachs spoke with UBS Warburg and sent a letter
to Mr. Altobello, confirming that $32.00 per Share was Sodexho's best and final
price. In view of this, and noting that it was not in the interest of either
party to needlessly prolong discussions, Sodexho indicated to Mr. Altobello
that, unless accepted by 5:00 p.m. Eastern Time on April 26, 2001, the offer
would expire and, consistent with its disclosure obligations, Sodexho would
publicly announce the termination of discussions. Later that evening, Davis
Polk provided Shaw Pittman with a draft press release regarding such an
announcement.
The Special Committee held a telephonic meeting on the evening of April 25,
2001 to discuss the April 25, 2001 letter. At the request of the Special
Committee, UBS Warburg discussed its preliminary views regarding the fairness
of the $32.00 proposal. The Special Committee instructed UBS Warburg to respond
to Sodexho's statement that $32.00 per Share was its best and final offer with
a counteroffer of $32.50 per Share.
On the morning of April 26, 2001, UBS Warburg called Goldman Sachs to
request that Sodexho increase its offer to $32.50 per Share. After consultation
with Sodexho, Goldman Sachs advised UBS Warburg that Sodexho would under no
circumstances increase its offer. Following that discussion, the Special
Committee
10
held a telephonic meeting in order to discuss Sodexho's response. UBS Warburg
reported that Goldman Sachs had confirmed Sodexho's position that the $32.00
proposal was Sodexho's best and final offer and that UBS Warburg believed it
could deliver a fairness opinion based on that price. The Special Committee
agreed that it would end negotiations with Sodexho as to price and accept the
offer subject to certain conditions, including negotiation by counsel of a
definitive Merger Agreement on terms acceptable to the Special Committee,
receipt and review by the Special Committee of an updated financial analysis by
UBS Warburg, and the delivery by UBS Warburg of a fairness opinion.
Representatives of UBS Warburg then so advised Goldman Sachs. Later that
evening, Shaw Pittman distributed to management of SMS for the first time the
marked-up version of the draft Merger Agreement, and indicated to Davis Polk
that management was expected to make a number of proposals regarding treatment
of options and other related compensation issues.
The next morning, Davis Polk and Shaw Pittman met in New York to discuss the
Merger Agreement. The parties made progress on many issues, including the scope
of the parties' respective representations and warranties, but were unable to
resolve several important points. In particular, the size of the break-up fee,
the right of Sodexho to match any competing offer made for SMS, and Sodexho's
ability to terminate the Offer because of a material adverse change in SMS's
business were left open at the end of the meeting. On that same day and over
the course of the weekend, SMS management also began discussions with
Davis Polk about the treatment in the transaction of various stock-based awards
held by SMS employees.
On April 29 and 30, 2001, UBS Warburg provided the Special Committee with a
summary of its financial analysis of Sodexho's proposal.
On Monday, April 30, 2001 and Tuesday, May 1, 2001 Shaw Pittman, Davis Polk
and SMS management continued to discuss the remaining open issues on the Merger
Agreement. These issues were resolved on the afternoon of May 1, 2001, with
Sodexho agreeing, among other things, to reduce the break-up fee to $20
million. On the evening of May 1, 2001, the Special Committee held a telephonic
meeting with its legal and financial advisors. UBS Warburg reviewed with the
Special Committee its financial analyses and orally expressed its opinion
(subsequently confirmed in writing) that as of the date of the opinion $32.00
per Share is fair to the SMS stockholders (other than Sodexho and its
affiliates) from a financial point of view. In addition, Shaw Pittman reviewed
with the Special Committee the principal terms of the Merger Agreement,
including the changes made as a result of the negotiations that took place from
April 27, 2001 through May 1, 2001. After further discussion and consideration
of the advice of its financial and legal advisors, the Special Committee (1)
determined that it is fair to and in the best interests of SMS and its
stockholders (other than Sodexho and its affiliates) to consummate the Offer
and the Merger upon the terms and subject to the conditions of the Merger
Agreement and in accordance with Delaware law, (2) resolved to recommend that
the SMS Board approve and declare advisable the Offer, the Merger and the
Merger Agreement, and (3) resolved to recommend that the SMS stockholders
accept the Offer, tender their Shares pursuant thereto and adopt the Merger
Agreement and the Merger if submitted for their approval.
Later in the evening of May 1, 2001, a meeting of the SMS Board was convened
at the offices of Shaw Pittman to discuss the transaction and consider the
recommendation of the Special Committee. All board members were present except
Messrs. Bellon, Carton and de Royere, Sodexho's designees on the SMS Board, who
did not attend the meeting in light of the subject matter being considered. At
the meeting, the Special Committee advised the SMS Board of its conclusions. In
addition, the financial and legal advisors to the Special Committee made oral
presentations to the SMS Board summarizing the financial analysis of the
proposed transaction and the Merger Agreement. After discussions with the
Special Committee's financial and legal advisors, the SMS Board, by unanimous
decision of those directors in attendance, (1) determined that the Merger
Agreement and the transactions contemplated thereby are fair to and in the best
interests of SMS and its stockholders (other than Sodexho), (2) approved and
declared advisable the Merger Agreement and (3) resolved to recommend that
SMS's stockholders accept the Offer and approve the Merger Agreement if
submitted for their approval.
On the evening of May 1, 2001, the parties executed the Merger Agreement.
11
On May 2, 2001, Sodexho and SMS announced in separate press releases that
the parties had executed the Merger Agreement providing for the Offer and the
acquisition of all Shares held by the public at a price of $32.00 per Share.
RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE SMS BOARD; FAIRNESS OF THE
OFFER AND THE MERGER
Recommendation of the Special Committee and the SMS Board
The Special Committee, at a meeting held on May 1, 2001:
(1) determined that it is fair to and in the best interests of SMS and
its stockholders (other than Sodexho and its affiliates) to consummate the
Offer and the Merger upon the terms and subject to the conditions of the
Merger Agreement and in accordance with Delaware law;
(2) resolved to recommend that the SMS Board approve and declare
advisable the Offer, the Merger and the Merger Agreement; and
(3) resolved to recommend that SMS's stockholders accept the Offer,
tender their shares pursuant thereto and adopt the Merger Agreement and the
Merger if submitted for their approval.
On May 1, 2001, the SMS Board, by unanimous decision of those directors
participating and based upon the recommendation of the Special Committee:
(1) determined that the Merger Agreement and the transactions
contemplated thereby are fair to and in the best interests of SMS and its
stockholders (other than Sodexho);
(2) approved and declared advisable the Merger Agreement; and
(3) resolved to recommend that SMS's stockholders accept the Offer and
approve the Merger Agreement if submitted for their approval.
Messrs. Pierre Bellon, Bernard Carton and Edouard de Royere did not attend
the meeting in light of their positions, in the case of Mr. Bellon as Chairman
and Chief Executive Officer of Sodexho, in the case of Mr. Carton as Senior
Vice President and Chief Financial Officer of Sodexho, and in the case of
Mr. de Royere as a director of Sodexho.
Fairness of the Offer and the Merger
The Special Committee
In reaching the recommendations described above, the Special Committee
considered a number of factors, including the following:
1. SMS Operating and Financial Condition. The Special Committee took into
account the current and historical financial condition and results of
operations of SMS, as well as the prospects and strategic objectives of SMS,
including the risks involved in achieving those prospects and objectives, and
the current and expected conditions in the general economy and in the food
services and facilities management industries.
2. Transaction Financial Terms/Premium to Market Price. The Special
Committee considered the relationship of the Offer Price to the historical
market price of Shares. The Offer Price represents a premium of 28.6% over the
closing price per share on January 24, 2001, the day before the public
announcement of Sodexho's preliminary proposal to acquire all of the
outstanding Shares, a premium of 30.9% over the closing price per Share one
week prior to Sodexho's announcement, a premium of 53.8% over the closing price
per Share one month prior to Sodexho's announcement, and a premium of 18.5%
over Sodexho's initial offer price of $27 per Share. The Special Committee
discussed with its financial advisors whether, in comparing the premiums
represented by the Offer Price with premiums paid in comparable transactions,
it would be most
12
appropriate to compare the proposed transaction with transactions in which a
controlling stockholder acquires from the public the remaining interest in a
company rather than transactions in which a buyer acquires a controlling
interest in a company.
The Special Committee believes that, after extensive negotiations on its
behalf with Sodexho's representatives, SMS has obtained the highest price per
Share that Sodexho is willing to pay. The Special Committee took into account
the fact that the terms of the Offer were determined through extensive
negotiations between Sodexho and SMS and its financial and legal advisors, all
of whom are unaffiliated with Sodexho. The Special Committee also considered
the risk that further price negotiations with Sodexho could cause Sodexho to
abandon the transaction.
The Special Committee also considered the form of consideration to be paid
to SMS's stockholders in the Offer and the Merger, and the certainty of value
of such cash consideration compared to stock. The Special Committee was aware
that the consideration to be received by SMS's stockholders in the Offer and
the Merger would be taxable to such stockholders for federal income tax
purposes.
3. Strategic Alternatives. The Special Committee considered the fact that
Sodexho currently owns approximately 47% of the capital stock of SMS. The
Special Committee also took into account Sodexho's statement in its letter of
January 24, 2001 that it has no interest in, and would not consider, a sale of
any portion of its ownership interest in SMS as part of any alternative to its
proposal. Accordingly, the Special Committee concluded that an acquisition of
SMS by a third party was not a feasible alternative.
4. UBS Warburg's Fairness Opinion. The Special Committee took into account
presentations from UBS Warburg and the fairness opinion, dated May 1, 2001,
that, based upon and subject to certain considerations and assumptions, the
consideration to be received by the holders of Shares (other than Sodexho and
its affiliates) in the Offer and the Merger is fair from a financial point of
view to such holders. A copy of the fairness opinion is attached to this Offer
to Purchase as Annex B and incorporated herein by reference. For information
regarding the analysis conducted by UBS Warburg, see "Special Factors--Opinion
of Financial Advisor." SMS stockholders are urged to read the fairness opinion
and the section entitled "Special Factors--Opinion of Financial Advisor" in
their entirety. The Special Committee was aware that UBS Warburg becomes
entitled to certain fees described under "The Offer--Fees and Expenses" upon
the consummation of the Offer.
5. Timing of Completion. The Special Committee considered the anticipated
timing of the consummation of the transactions contemplated by the Merger
Agreement. In that regard, the Special Committee noted that stockholders who
tender in the Offer would receive their consideration earlier than they would
have had SMS pursued only a merger transaction. The Special Committee further
noted that if sufficient Shares were tendered in the Offer to enable Sodexho to
effect a merger without a stockholder vote then all the stockholders would
receive their consideration more quickly than they would have had SMS pursued a
merger transaction that required a stockholder vote.
6. Limited Conditions to Consummation. The Special Committee considered the
fact that the obligation of Sodexho to consummate the Offer and the Merger is
subject to a limited number of conditions, including, among others, the
condition that sufficient Shares be tendered that, when added to the Shares
already owned by Sodexho and its affiliates, would give Sodexho and its
affiliates a majority of the outstanding Shares on a fully-diluted basis. The
Special Committee also considered the fact that consummation of the Offer and
the Merger is not subject to a financing condition. Subject to the limited
conditions set forth in the Merger Agreement, Sodexho is required to purchase
Shares in the Offer. Once Sodexho purchases any Shares in the Offer, Sodexho
will be obligated to consummate the Merger subject to the limited conditions
set forth in the Merger Agreement.
7. Appraisal Rights. The Special Committee considered the fact that
stockholders who do not tender their Shares pursuant to the Offer and who
perfect their appraisal rights will have the right to dissent from the Merger
and to demand appraisal of the fair value of their Shares under the DGCL,
whether or not a stockholder vote is required, as described under "Special
Factors--Appraisal Rights."
13
8. Possible Conflicts of Interest. The Special Committee also took into
account the possible conflicts of interest of certain directors and members of
management of both SMS and Sodexho discussed below under "Special Factors--
Interests of Certain Persons in the Offer and the Merger."
The SMS Board
In reaching its determinations referred to above, the SMS Board considered
the following factors, each of which, in the view of the SMS Board, supported
such determinations:
(1) the conclusions and recommendations of the Special Committee;
(2) the factors referred to above as having been taken into account by
the Special Committee, including the receipt by the Special Committee of
the opinion of UBS Warburg that, based upon and subject to the assumptions
stated therein, the $32.00 per Share to be received by SMS's stockholders
(other than Sodexho and its affiliates) in the Offer and the Merger
pursuant to the Merger Agreement is fair from a financial point of view to
such stockholders, and the financial analysis presented by UBS Warburg to
the SMS Board; and
(3) the fact that the Offer Price and the terms and conditions of the
Merger Agreement were the result of extensive negotiations between the
Special Committee and Sodexho.
The members of the SMS Board, including the members of the Special Committee
but excluding members who are directors or officers of Sodexho, evaluated the
Offer and the Merger in light of their knowledge of the business, financial
condition and prospects of SMS, and based upon the advice of financial and
legal advisors.
The SMS Board, including the members of the Special Committee, believes that
the Offer and the Merger are procedurally fair based upon a number of factors,
including:
(1) the fact that the Special Committee consisted of independent
directors appointed to represent the interests of SMS's stockholders (other
than Sodexho and its affiliates);
(2) the fact that the Special Committee retained and was advised by its
own independent legal counsel;
(3) the fact that the Special Committee retained and was advised by UBS
Warburg, as its independent financial advisor, to assist it in evaluating a
potential transaction with Sodexho;
(4) the nature of the deliberations pursuant to which the Special
Committee evaluated the Offer and the Merger and the alternatives thereto;
and
(5) the fact that the Offer Price resulted from extensive bargaining
between representatives of the Special Committee, on the one hand, and
representatives of Sodexho, on the other.
The SMS Board and the Special Committee recognized that, while the
consummation of the Offer and the Merger will result in all stockholders (other
than Sodexho and its affiliates) being entitled to receive $32.00 per Share in
cash for each of their Shares, it will eliminate the opportunity for current
stockholders (other than Sodexho and its affiliates) to participate in the
benefit of increases, if any, in the value of SMS's business following the
Merger. Nevertheless, the Special Committee and the SMS Board concluded that
this fact did not justify foregoing the receipt of the immediate cash premium
represented by the Offer Price.
Neither the Special Committee nor the SMS Board considered the liquidation
of SMS's assets to be a viable course of action. Therefore, no appraisal of
liquidation values was sought for purposes of evaluating the Offer and the
Merger.
In view of the wide variety of factors considered in connection with their
evaluation of the Offer and the Merger, neither the Special Committee nor the
SMS Board found it practicable to, and did not, quantify or otherwise attempt
to assign relative weights to the specific factors they considered in reaching
their determinations.
14
The foregoing discussion of the information and factors considered by the
Special Committee and the SMS Board is not intended to be exhaustive but is
believed to include all material factors considered by the Special Committee
and the SMS Board. SMS's executive officers have not been asked to make a
recommendation as to the Offer or the Merger.
OPINION OF FINANCIAL ADVISOR
Under the terms of an engagement letter dated February 27, 2001, the Special
Committee retained UBS Warburg to provide financial advisory services and a
financial fairness opinion to the Special Committee in connection with the
Offer and the Merger. At the meeting of the Special Committee held on May 1,
2001, UBS Warburg delivered its oral opinion to the effect that, as of that
date and based on and subject to the matters described in the opinion, the
$32.00 per Share cash consideration to be received by the holders of the Shares
(other than Sodexho and its affiliates) in the Offer and the Merger is fair
from a financial point of view to such holders.
THE FOLLOWING SUMMARY OF THE UBS WARBURG OPINION IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION. THE FULL TEXT OF THE
OPINION SETS FORTH THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS
CONSIDERED AND LIMITATIONS ON THE SCOPE OF THE REVIEW UNDERTAKEN, BY UBS
WARBURG. THE OPINION IS INCLUDED AS ANNEX B TO THIS OFFER TO PURCHASE AND IS
INCORPORATED IN THIS OFFER TO PURCHASE BY REFERENCE. THE OPINION WILL ALSO BE
MADE AVAILABLE FOR INSPECTION AND COPYING AT THE PRINCIPAL EXECUTIVE OFFICES OF
SMS DURING ITS REGULAR BUSINESS HOURS BY ANY INTERESTED STOCKHOLDER OF SMS OR
REPRESENTATIVE WHO HAS BEEN SO DESIGNATED IN WRITING. WE ENCOURAGE YOU TO READ
CAREFULLY THE UBS WARBURG OPINION IN ITS ENTIRETY.
UBS Warburg's opinion:
. is directed to the Special Committee;
. relates only to the fairness from a financial point of view of the $32.00
per Share cash consideration to be received by SMS stockholders (other
than Sodexho and its affiliates) whose Shares are tendered in the Offer
or converted in the Merger;
. does not constitute a recommendation to any stockholder as to whether
such stockholder should tender its Shares in the Offer or how such
stockholder should vote with respect to the Merger; and
. is necessarily based on economic, monetary, market and other conditions
as in effect on, and the information made available to UBS Warburg as of,
the date of the opinion.
In arriving at its opinion, UBS Warburg, among other things:
. reviewed certain publicly available business and historical financial
information relating to SMS;
. reviewed the reported prices and trading activity for the Shares;
. reviewed certain internal financial information and other data relating
to the business and financial prospects of SMS, including estimates and
financial forecasts prepared by management of SMS, that were provided to
UBS Warburg by SMS and not publicly available;
. conducted discussions with members of the senior management of SMS
concerning the business and financial prospects of SMS;
. reviewed publicly available financial and stock market data with respect
to certain other companies in lines of business UBS Warburg believed to
be generally relevant;
. compared the financial terms of the Offer and the Merger with the
publicly available financial terms of certain other transactions which
UBS Warburg believed to be generally relevant;
15
. reviewed drafts of the Merger Agreement; and
. conducted such other financial studies, analyses, and investigations, and
considered such other information as UBS Warburg deemed necessary or
appropriate.
In connection with its review, with the Special Committee's consent, UBS
Warburg:
. assumed that the final executed form of the Merger Agreement did not
differ in any material respect from the drafts that UBS Warburg examined,
and that SMS, Sodexho and Purchaser will comply with all the material
terms of the Merger Agreement;
. did not assume any responsibility for independent verification of any of
the information reviewed by UBS Warburg for the purpose of this opinion
and have relied on it as being complete and accurate in all material
respects;
. did not make any independent evaluation or appraisal of any of the assets
or liabilities (contingent or otherwise) of SMS, nor was UBS Warburg
furnished with any such evaluation or appraisal; and
. assumed that the financial projections internally prepared by SMS were
reasonably prepared on bases reflecting the best currently available
estimates and good faith judgments of the management of SMS as to the
future performance of SMS.
UBS Warburg was not asked to, and did not, at the Special Committee's
direction, offer any opinion as to the material terms of the Merger Agreement
or the form of the transactions contemplated by the Merger Agreement. In
addition, in connection with its engagement by the Special Committee, UBS
Warburg was not authorized to and did not solicit indications of interest from
any party with respect to a business combination with SMS.
In preparing its opinion, UBS Warburg performed a variety of financial and
comparative analyses. The preparation of a fairness opinion is a complex
analytical process involving various determinations as to the most appropriate
and relevant methods of financial analysis and the application of those methods
to the particular circumstances and, therefore, is not susceptible to partial
analysis or summary descriptions. In arriving at its opinion, UBS Warburg made
qualitative judgments as to the significance and relevance of each analysis and
factor considered by it. Accordingly, UBS Warburg believes that its analyses
must be considered as a whole and that selecting portions of its analyses and
the factors considered by it, without considering all analyses and factors,
could create an incomplete view of the processes underlying the analyses set
forth in its opinion.
In performing its analyses, UBS Warburg made numerous assumptions with
respect to industry performance, general business, financial, market and
economic conditions and other matters, many of which are beyond the control of
SMS. No company, transaction or business used in those analyses as a comparison
is identical to SMS or its businesses or the Offer and the Merger, nor is an
evaluation of the results entirely mathematical. Rather, the analyses involve
complex considerations and judgments concerning financial and operating
characteristics and other factors that could affect the operating results,
public trading or other values of the companies or transactions being analyzed.
The estimates contained in the analyses performed by UBS Warburg and the
ranges of valuations resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which
may be significantly more or less favorable than suggested by these analyses.
In addition, analyses relating to the value of securities do not purport to be
appraisals or to reflect the prices at which a business might actually be sold
or the prices at which any securities may trade at the present time or at any
time in the future.
The following is a summary of the material financial analyses used by UBS
Warburg in connection with the rendering of its opinion. The financial analyses
summarized below include information presented in tabular format. In order to
understand the financial analyses fully, the tables must be read together with
the text of each
16
summary. Considering the data set forth below without considering the full
narrative description of the financial analyses, including the methodologies
and assumptions underlying the analyses, could create a misleading or
incomplete view of the financial analyses.
Historical Stock Performance. UBS Warburg reviewed trading prices for the
Shares prior to the announcement by Sodexho of its initial offer to purchase
the outstanding Shares not owned by Sodexho or its affiliates on January 25,
2001. This share price performance review indicated that for the latest twelve
months ended January 24, 2001, the low and high closing prices for the shares
were $10.31 and $25.69, respectively. UBS Warburg also reviewed the closing
price of the Shares on January 24, 2001 and average closing prices over periods
prior to January 25, 2001 as set forth in the following table:
Selected Statistics Price
------------------- ------
January 24, 2001 closing price.................................... $24.88
30 day average.................................................... $22.58
90 day average.................................................... $20.90
52 week average................................................... $16.31
Selected Comparable Public Company Analysis. UBS Warburg compared certain
financial information, ratios and public market multiples for SMS to the
corresponding data for the following eight publicly-traded food and facilities
services companies:
. ABM Industries, Inc.
. Autogrill SpA
. Chemed Corporation
. Compass Group Plc
. Elior
. ISS A/S
. Rentokil Initial Plc
. The ServiceMaster Company
UBS Warburg chose the selected companies because they were publicly-traded
companies that, for purposes of the analysis, UBS Warburg considered reasonably
similar to SMS in that these companies operate in the food and facilities
services industry. These certain public companies may significantly differ from
SMS based on, among other things, the size of the companies, the geographic
coverage of the companies' operations and the particular segments of the food
and facilities services industry in which the companies focus. UBS Warburg
noted that several of the comparable companies are global businesses, are
traded on foreign stock exchanges and have higher earnings before interest,
taxes, depreciation and amortization, referred to as EBITDA, margins than SMS.
UBS Warburg reviewed, among other information, the comparable companies'
multiples of total enterprise value, referred to as TEV, which consists of the
market value on a fully-diluted basis of the particular company's equity plus
total debt outstanding and minority interests of the particular company, minus
cash, cash equivalents, marketable securities and unconsolidated investments
to:
. latest twelve months, referred to as LTM, EBITDA
UBS Warburg also reviewed, among other information, the comparable
companies' projected price/cash earnings per share multiples, referred to as
P/Cash EPS, based on I/B/E/S International Inc., referred to as IBES, consensus
earnings estimates and other published research analyst estimates all adjusted
to exclude the amortization of goodwill for the calendar years ending December
31, 2001 and December 31, 2002.
17
The SMS comparable companies analysis resulted in the following ranges of
multiples as of April 27, 2001:
Implied Multiple
Multiple for SMS at
Analysis Multiple Range Mean/Median $32.00 per share
-------- -------------- ----------- ----------------
TEV/LTM EBITDA 7.4x to 15.4x 10.0x/10.0x 10.1x
P/2001E Cash EPS 11.6x to 20.6x 14.9x/14.0x 19.1x
P/2002E Cash EPS 11.7x to 17.7x 13.5x/12.7x 16.7x
Selected Comparable Transaction Analysis. UBS Warburg reviewed publicly
available financial information relating to the following certain mergers and
acquisitions in the food and facilities services industry since November 1998:
Acquiror Target
-------- ------
Lufthansa AG........................... LSG SkyChefs
Compass Group Plc...................... Selecta Group
Compass Group Plc...................... Morrison Management Specialists, Inc.
Ecolab, Inc............................ Henkel-Ecolab
Granada Group Plc...................... Compass Group Plc
Autogrill SpA.......................... Host Marriott Services Corp.
The ServiceMaster Company.............. LandCare USA, Inc.
UBS Warburg chose the certain transactions because they were business
combinations that, for the purposes of the analysis, UBS Warburg considered to
be reasonably similar to the Offer and the Merger in that these transactions
involved companies in the food and facilities services industry. The certain
transactions may differ significantly from the Offer and the Merger based on,
among other things, the size of the transactions, the structure of the
transactions, whether or not a change of control was effected, the expected
synergies associated with the transactions and the dates that the transactions
were announced and consummated.
UBS Warburg reviewed, among other things, the TEV implied for each of the
relevant transactions as a multiple of LTM EBITDA. UBS Warburg also reviewed
the equity market value, referred to as EMV, when available, implied in the
relevant transactions as a multiple of LTM cash earnings and the premiums paid
one day, one week and one month prior to the announcement of the transactions
where the target was a public company.
The analysis indicated the following implied multiples and implied premiums
for the certain transactions and for the Offer and the Merger:
Implied
Multiple/Premium
Multiple/Premium Multiple/Premium for SMS at
Analysis Range Mean/Median $32.00 per share
---------------- ---------------- ----------- ----------------
TEV/LTM EBITDA 7.2x to 17.6x 11.6x/9.4x 10.1x
EMV/LTM Cash Earnings 14.6x to 36.3x 25.4x/25.1x 21.2x
Premium to One Day 3.5% to 61.5% 27.1%/30.1% 28.6%
Premium to One Week (11.4%) to 78.7% 28.2%/30.4% 30.9%
Premium to One Month (8.9%) to 111.8% 41.5%/38.5% 53.8%
All multiples for the certain transactions were based on publicly-available
information at the time of the announcement of the particular transaction. LTM
data for SMS was based on its applicable Form 10-K and 10-Q.
Premiums Paid Analysis. UBS Warburg reviewed certain purchase price per
share premiums paid in publicly-disclosed mergers and acquisitions and
publicly-disclosed cash acquisitions in non-financial industries
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announced and completed, excluding certain outlier transactions, from January
1, 1999 through April 23, 2001 with deal sizes of more than $50.0 million where
at least 10% of the target was acquired. UBS Warburg noted that Sodexho owned a
significant portion of SMS prior to the announcement of the Offer and the
Merger. This analysis indicated mean premiums to the target's closing stock
prices on dates prior to the announcement as set forth in the following table:
Mean Premiums Implied Premium
Paid in Mean Premiums for SMS at
Period Prior Certain Paid in Certain $32.00 per
to Announcement Transactions Cash Transactions share
--------------- ------------- ----------------- ---------------
One day 32.1% 30.8% 28.6%
One week 38.0% 35.8% 30.9%
One month 45.5% 43.0% 53.8%
UBS Warburg also reviewed generally with the Special Committee certain
purchase price per share premiums paid under two different set of criteria as
follows: (1) where the target was acquired in a minority squeeze-out and (2)
where less than 50%, but more than 5% of the target was owned prior to the
announcement of the transaction and greater than 50% was owned after the
transaction.
Discounted Cash Flow Analysis. UBS Warburg performed a discounted cash flow
analysis, using the financial forecast prepared by management of SMS. The
discounted cash flow analysis determined the discounted present value of the
unleveraged after-tax cash flows generated over the five-year period covered by
financial forecast and then added a terminal value based upon multiples of
EBITDA and a range of growth perpetuity based on unleveraged after-tax free
cash flow. The unleveraged after-tax cash flows and terminal values were
discounted using a range of discount rates that UBS Warburg deemed appropriate,
based on SMS' weighted average cost of capital and other qualitative factors.
UBS Warburg noted that SMS debt is guaranteed by Sodexho. The valuation ranges
indicated by this analysis are summarized in the table below:
Approximate
Terminal Value Terminal Implied Range
Analysis Value Range per Share
-------------- ----------- -------------
EBITDA 8.0x to 10.0x $29.00 to $39.00
Terminal Growth 2.5% to 3.5% $23.50 to $35.50
Pursuant to the engagement letter, in connection with its advisory services,
including delivery of its financial fairness opinion, UBS Warburg is entitled
to a transaction fee and reimbursement of certain expenses as set forth in "The
Offer--Fees and Expenses."
The Special Committee selected UBS Warburg based on its experience,
expertise and reputation. UBS Warburg is an internationally recognized
investment banking firm that regularly engages in the valuation of securities
in connection with mergers and acquisitions, negotiated underwritings,
competitive bids, secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
Prior to this engagement, UBS Warburg had not provided investment banking and
other financial services to SMS. In the ordinary course of business, UBS
Warburg, its successors and affiliates may trade or have traded securities of
SMS for their own accounts and, accordingly, may at any time hold a long or
short position in such securities.
POSITION OF SODEXHO AND THE PURCHASER REGARDING FAIRNESS OF THE OFFER AND THE
MERGER
Sodexho and the Purchaser believe that the consideration to be received by
SMS's stockholders (other than Sodexho and its affiliates) pursuant to the
Offer and the Merger is fair to and in the best interests of SMS's stockholders
(other than Sodexho and its affiliates). Sodexho and the Purchaser base their
belief on the following factors:
. the $32.00 offer price represents a premium of 28.6% over the closing
price per Share of $24.875 on January 24, 2001, the last trading day
before public announcement of Sodexho's initial proposal to
19
SMS, and a premium of 44% and 71% over the average closing prices per
Share for the 30-day and 180-day periods prior to January 24, 2001,
respectively;
. the Offer and the Merger will each provide consideration to the
stockholders entirely in cash;
. the Offer and the Merger and the other terms and conditions of the Merger
Agreement were the result of extensive negotiations between the Special
Committee and Sodexho and their respective financial and legal advisors;
. the conclusions and recommendations of the Special Committee and the SMS
Board that each of the Offer and the Merger is fair to and in the best
interests of SMS's stockholders (other than Sodexho and its affiliates);
. the Special Committee received an opinion from UBS Warburg that the
$32.00 per Share in cash to be received by the holders of Shares (other
than Sodexho and its affiliates) in the Offer and the Merger is fair from
a financial point of view to such holders; and
. the financial performance of SMS.
Sodexho and the Purchaser did not find it practicable to assign, nor did
they assign, relative weights to the individual factors considered in reaching
their conclusions as to fairness. In light of the nature of SMS's business,
Sodexho and the Purchaser did not deem net book value or liquidation value to
be relevant indicators of the value of Shares. Although Goldman Sachs generally
acted as financial advisor to Sodexho in this transaction and, in particular,
advised Sodexho on negotiating strategies and assisted Sodexho in its
negotiations with the Special Committee and its financial advisor, UBS Warburg,
Goldman Sachs was not asked to and did not deliver an opinion as to the
fairness from a financial point of view to the stockholders of SMS or any other
person of the $32.00 per Share to be received by the stockholders of SMS.
PURPOSE AND STRUCTURE OF THE OFFER AND THE MERGER; REASONS OF SODEXHO FOR THE
OFFER AND THE MERGER
The purpose of the Offer and the Merger is for Sodexho to increase its
ownership of SMS from approximately 47% to 100%. Upon completion of the Merger,
SMS will become a wholly-owned subsidiary of Sodexho. The acquisition of Shares
not owned by Sodexho has been structured as a cash tender offer followed by a
cash merger in order to effect a prompt and orderly transfer of ownership of
SMS from the public stockholders to Sodexho and the Purchaser and to provide
stockholders with cash for all of their Shares.
Sodexho has decided to acquire SMS at this time because (1) the acquisition
will allow Sodexho access to 100% of SMS's cash flow and enhance financing
flexibility for the entire Sodexho group, including SMS, (2) the acquisition
will provide increased operational flexibility between Sodexho and SMS,
particularly in marketing to global clients and purchasing from global
suppliers, (3) the acquisition will reinforce employee incentives with respect
to the Sodexho group as a whole by linking even more closely Sodexho and SMS
associates and aligning their incentive programs through Sodexho stock-based
awards, (4) Sodexho believes the acquisition will enhance investor perception
of Sodexho through simplification of the group structure, (5) the contractual
restrictions imposed in connection with the formation of SMS in 1998 limiting
Sodexho's ability to increase its ownership of SMS expired in March 2001, and
(6) Sodexho believes the combination of the operations of SMS with those of
Wood Dining Services, a US company engaged in the on-site managed food services
business which Sodexho agreed to acquire on April 6, 2001, will permit the
realization of synergies.
PLANS FOR SMS AFTER THE OFFER AND THE MERGER; CERTAIN EFFECTS OF THE OFFER
Pursuant to the Merger Agreement, upon completion of the Offer, Sodexho and
the Purchaser intend to effect the Merger in accordance with the Merger
Agreement. See "Special Factors--The Merger Agreement."
20
Except as otherwise described in this Offer to Purchase, Sodexho has no
current plans or proposals or negotiations which relate to or would result in:
(1) other than the Merger, an extraordinary corporate transaction, such
as a merger, reorganization or liquidation involving SMS or any of its
subsidiaries;
(2) any purchase, sale or transfer of a material amount of assets of SMS
or any of its subsidiaries;
(3) any change in the management of SMS or any change in any material
term of the employment contract of any executive officer; or
(4) any other material change in SMS's corporate structure or business.
Nevertheless, Sodexho may initiate a review of SMS and its assets,
corporate structure, capitalization, operations, properties, policies,
management and personnel to determine what changes, if any, would be
desirable, following the Merger in order best to organize and integrate the
activities of SMS and Sodexho. In particular, Sodexho plans to change the SMS
Board by electing persons as directors of SMS who likely will be employees or
officers of Sodexho or SMS or their affiliates, and may also consider material
changes in the present dividend rate and policy, indebtedness and
capitalization of SMS and may consider pursuing acquisition opportunities
through SMS. In addition, Sodexho may take actions to achieve potential scale
efficiencies. Sodexho will also take steps to align goals and rewards in the
merged SMS organization such as adopting a Sodexho incentive plan for SMS
management. Sodexho expressly reserves the right to make any changes that it
deems necessary or appropriate in light of its review or in light of future
developments.
As a result of the Offer, the direct and indirect interest of Sodexho in
SMS's net book value and net earnings will increase to the extent of the
number of Shares acquired under the Offer. Following consummation of the
Merger, Sodexho's indirect interest in such items will increase to 100% and
Sodexho and its subsidiaries will be entitled to all benefits resulting from
that interest, including all income generated by SMS's operations and any
future increase in SMS's value and the right to elect all members of the SMS
Board. Similarly, Sodexho will also bear the risk of losses generated by SMS's
operations and any decrease in the value of SMS after the Merger. Upon
consummation of the Merger, SMS will become a privately held corporation.
Accordingly, stockholders other than Sodexho will not have the opportunity to
participate directly in the earnings and growth of SMS after the Merger and
will not have any right to vote on corporate matters. Similarly, stockholders
will not face the risk of losses generated by SMS's operations or decline in
the value of SMS after the Merger.
As a result of the Merger, public trading of SMS Common Stock will cease
and the registration of such shares under the Exchange Act will be terminated.
Consequently, following the Merger, SMS will be relieved of the duty to file
annual and other periodic reports and proxy and information statements under
the Exchange Act, and its officers, directors and more than 10% stockholders
will be relieved of the reporting requirements under, and the "short swing"
profit liability provisions of, Section 16 of the Exchange Act. SMS will no
longer be a public company and its stock will no longer be traded on the NYSE.
THE MERGER AGREEMENT
The following is a summary of the material provisions of the Merger
Agreement, a copy of which is attached as Annex A to this Offer to Purchase.
The summary is qualified in its entirety by reference to the Merger Agreement.
The following summary may not contain all of the information important to you.
Capitalized terms not otherwise defined in the following summary or elsewhere
in this Offer to Purchase shall have the meanings set forth in the Merger
Agreement.
21
The Offer. The Merger Agreement provides for the making of the Offer by the
Purchaser as promptly as practicable (but no later than May 21, 2001).
Purchaser's obligation to accept for payment and pay for Shares tendered
pursuant to the Offer is subject to the satisfaction of the Minimum Condition
and the other conditions set forth in "The Offer--Conditions of the Offer." We
expressly reserve the right to waive any of the conditions to the Offer and to
make any change in the terms of or conditions to the Offer, provided that no
change or waiver may be made, without the prior written consent of SMS, that
changes the form of consideration to be paid, decreases the price per Share or
the number of Shares sought in the Offer or imposes conditions to the Offer in
addition to those set forth in "The Offer--Conditions of the Offer."
In addition, the Purchaser has the right to extend the Offer, without the
consent of SMS, (1) from time to time if, at the scheduled or extended
expiration date of the Offer, any condition to the Offer has not been
satisfied or waived, until such conditions are satisfied or waived, (2) for
any period required by any rule, regulation, interpretation or position of the
SEC or the staff thereof applicable to the Offer or any period required by
applicable law, (3) on one or more occasions for an aggregate period of not
more than 10 business days beyond the latest expiration date that would
otherwise be permitted under clause (1) or (2) above, if, on such expiration
date, the number of Shares tendered (and not withdrawn), together with the
Shares then owned by Sodexho or any of its subsidiaries, represents less than
90% of the outstanding Shares on a fully-diluted basis, and (4) pursuant to a
"subsequent offering period" under Rule 14d-11 of the Exchange Act.
If the Purchaser purchases Shares pursuant to the Offer, the Merger
Agreement provides that Sodexho will be entitled to designate representatives
to serve on the SMS Board in proportion to our ownership of Shares following
such purchase. SMS will take all reasonable action necessary to cause
Sodexho's designees to be elected or appointed to the SMS Board, each
committee of the SMS Board (other than the Special Committee and the Audit
Committee) and each board of directors of each material subsidiary of SMS.
Recommendation. The SMS Board, acting on the unanimous recommendation of
the Special Committee:
(1) has determined that the Merger Agreement and the transactions
contemplated thereby are fair to and in the best interests of SMS and its
stockholders (other than Sodexho);
(2) has approved and declared advisable the Merger Agreement; and
(3) has resolved to recommend that SMS's stockholders accept the Offer
and approve the Merger Agreement if submitted for their approval.
This recommendation of the SMS Board may be withdrawn, or modified in a
manner adverse to Sodexho, only if SMS has received an unsolicited Acquisition
Proposal (as defined below) which the SMS Board determines in good faith
constitutes a Superior Proposal (as defined below), the SMS Board determines
in good faith, after consultation with outside legal counsel, that the failure
to take such action could reasonably be deemed to constitute a breach of its
fiduciary duties under applicable law and SMS delivers three business days
prior written notice advising Sodexho that it intends to take such action.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, at the time at which SMS (or, if applicable,
Purchaser) files a Certificate of Merger (or, if applicable, a certificate of
ownership and merger) with the Delaware Secretary of State (or such later time
as indicated in such certificate) (the "Effective Time"), the Purchaser will
be merged with and into SMS in accordance with Delaware Law, whereupon the
separate existence of the Purchaser shall cease and SMS shall be the surviving
corporation (the "Surviving Corporation").
At the Effective Time, (1) each Share outstanding immediately prior to the
Effective Time, together with the associated preferred stock purchase right
issued under SMS's stockholder rights plan, will, except as otherwise provided
in clause (2) below and except for Shares of holders exercising appraisal
rights, be converted into the right to receive $32.00 in cash or any higher
price paid for each Share in the Offer, without interest (the "Merger
Consideration"); (2) each Share held in the treasury of SMS or held by Sodexho
or any of its subsidiaries shall be canceled, and no payment shall be made
with respect thereto; and (3) each share of
22
common stock of the Purchaser shall be converted into and become one share of
common stock of the Surviving Corporation and shall constitute the only
outstanding shares of capital stock of the Surviving Corporation.
The Merger Agreement further provides that, at the Effective Time, the
certificate of incorporation of SMS will be the certificate of incorporation of
the Surviving Corporation until amended in accordance with applicable law, and
the bylaws of the Surviving Corporation in effect at the Effective Time will be
amended to conform to the bylaws of the Purchaser in effect immediately prior
to the Effective Time until further amended in accordance with applicable law.
The directors of the Purchaser at the Effective Time will be the directors of
the Surviving Corporation and the officers of SMS at the Effective Time will be
the officers of the Surviving Corporation.
The Surviving Corporation will indemnify and hold harmless the present and
former officers and directors of SMS in respect of acts or omissions occurring
at or prior to the Effective Time to the fullest extent permitted by Delaware
law or any other applicable laws or provided under SMS's certificate of
incorporation and bylaws in effect on the date of the Merger Agreement. For six
years after the Effective Time the Surviving Corporation will provide officers'
and directors' liability insurance in respect of acts or omissions occurring
prior to the Effective Time covering each such person currently covered by
SMS's officers' and directors' liability insurance policy on terms with respect
to coverage and amount no less favorable than those of such policy in effect on
the date of the Merger Agreement, provided that the Surviving Corporation will
not be obligated to pay premiums in excess of 200% of the amount per annum paid
by SMS in its last full fiscal year.
SMS Options and Other Stock-Based Awards. The Merger Agreement contains
provisions addressing the treatment of SMS options and other stock-based
awards, as follows:
Vested Options. At or immediately prior to the Effective Time, each
stock option to purchase Shares outstanding under any SMS employee stock
option or compensation plan or arrangement which is vested immediately
prior to the Effective Time (the "Vested Options") shall be canceled, and
SMS shall pay each holder of any such option at or promptly after the
Effective Time an amount in cash determined by multiplying (1) the excess,
if any, of Merger Consideration per Share over the applicable exercise
price of such option by (ii) the number of Shares such holder could have
purchased had such holder exercised such option in full immediately prior
to the Effective Time.
Unvested Options. At or immediately prior to the Effective Time, each
option to purchase SMS Shares other than Vested Options shall be converted
into the right to receive options to purchase ordinary shares of Sodexho or
American Depositary Shares representing ordinary shares of Sodexho. The
number and exercise price of such options will be determined in accordance
with applicable tax and accounting rules and the other terms of such
options will be substantially similar to their existing terms, except that
a moratorium on exercise will be imposed until registration statements with
respect to Sodexho ordinary shares have been declared effective by the SEC.
Notwithstanding the foregoing, if registration statements with respect to
Sodexho ordinary shares have not been declared effective by the SEC by
March 31, 2002, the parties have agreed to cancel any options which become
vested between the Effective Time and the effective date of the
registration statements in exchange for cash payments. Special provisions
in the Merger Agreement address the treatment of unvested options held by
employees who separate from SMS or who die between the Effective Time and
the effective date of the registration statements.
Restricted Stock Units. At or immediately prior to the Effective Time,
each restricted stock unit granted under SMS's compensation plans shall be
converted into the right to receive a similar award with respect to
ordinary shares of Sodexho or American Depositary Shares representing
ordinary shares of Sodexho. The terms of such awards will be substantially
similar to their existing terms, but shall be adjusted to the extent
necessary to preserve their existing value and a moratorium on vesting will
be imposed until registration statements with respect to Sodexho ordinary
shares have been declared effective by the SEC. Notwithstanding the
foregoing, if registration statements with respect to Sodexho ordinary
23
shares have not been declared effective by the SEC by December 15, 2001,
the parties have agreed to cancel any awards which otherwise would become
vested between the Effective Time and the effective date of the
registration statements in exchange for cash payments. Special provisions
in the Merger Agreement address the treatment of restricted stock units
held by employees who separate from SMS or who die between the Effective
Time and the effective date of the registration statements.
Deferred Shares and Restricted Shares. Unless otherwise agreed by
Sodexho and SMS, at the Effective Time each deferred share (whether vested
or unvested) and each restricted share of SMS outstanding immediately prior
to the Effective Time shall be canceled in exchange for the right to
receive the Merger Consideration at the Effective Time.
Employee Stock Purchase Plan. Prior to the Effective Time, each
outstanding option under the SMS Employee Stock Purchase Plan will be
exercised and each Share purchased pursuant to such exercise shall be
converted into the right to receive the Merger Consideration. At or before
the Effective Time, the SMS Employee Stock Purchase Plan will terminate.
Stockholders Meeting. Pursuant to the Merger Agreement, SMS shall cause a
meeting of its stockholders to be duly called and held as soon as reasonably
practicable after the consummation of the Offer for the purpose of voting on
the adoption of the Merger Agreement, unless a vote of SMS stockholders is not
required by Delaware law. In connection with such meeting, SMS will use all
reasonable efforts to obtain the necessary approvals by its stockholders of the
Merger Agreement.
Certain Covenants. Prior to the Effective Time, SMS and its subsidiaries
shall conduct their business in the ordinary course consistent with past
practice and shall use commercially reasonable efforts to preserve intact their
business organizations and relationships with third parties and to keep
available the services of their present officers and employees. In addition,
except with the prior written consent of Sodexho or as expressly contemplated
by the Merger Agreement, SMS will not, and will not permit any subsidiary to:
. change SMS's certificate of incorporation or bylaws;
. merge or consolidate with any other person or acquire a material amount
of stock or assets of any other person;
. dispose of any material subsidiary or material amount of assets,
securities or property except pursuant to existing contracts or
commitments and in the ordinary course consistent with past practice;
. take any action that would make any representation and warranty of SMS
under the Merger Agreement inaccurate in any respect at, or as of any
time prior to, the Effective Time or omit to take any action necessary to
prevent any such representation or warranty from being inaccurate in any
respect at any such time;
. make or change any tax election or tax accounting method or take any
other action which would reasonably be expected to have the effect of
materially increasing the tax liabilities or reducing the tax assets of
SMS and its material subsidiaries; and
. agree or commit to do any of the foregoing.
SMS and Sodexho have agreed to promptly notify the other of (1) any notice
or other communication alleging that the consent of any person is or may be
required in connection with the transactions contemplated by the Merger
Agreement, (2) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by the Merger Agreement, and (3) any actions, suits, claims, investigations or
proceedings commenced or, to its knowledge, threatened against, relating to or
involving or otherwise affecting SMS or Sodexho or any of their respective
subsidiaries that relate to the consummation of the transactions contemplated
by the Merger Agreement.
24
Representations and Warranties. Pursuant to the Merger Agreement, SMS has
made customary representations and warranties to Sodexho and Purchaser,
including representations relating to:
. corporate existence and power . disclosure documents
. corporate authorization . absence of changes
. governmental authorization . litigation
. non-contravention . finders' fees
. Capitalization . taxes
. material subsidiaries . employee benefit plans
. SEC filings . antitakeover statutes and
. financial statements rights agreement
Pursuant to the Merger Agreement, Sodexho and Purchaser have made customary
representations and warranties to SMS, including representations relating to:
. corporate existence and power . disclosure documents
. corporate authorization . finders' fees
. governmental authorization . tax sharing agreement matters
. non-contravention
Certain of the representations and warranties of SMS, Sodexho and Purchaser
are qualified as to "materiality" or "Material Adverse Effect." "Material
Adverse Effect" means, with respect to any person, a material adverse effect on
the condition (financial or otherwise), business, assets or results of
operations of such person and its subsidiaries, taken as a whole.
No Solicitation. In the Merger Agreement, SMS has agreed that SMS and its
subsidiaries will not, and SMS will cause the officers, directors and employees
of SMS and its subsidiaries not to, and SMS will not knowingly permit the
investment bankers, attorneys, consultants and other agents or advisors of SMS
and its subsidiaries to, directly or indirectly, (1) take any action to
solicit, initiate or knowingly facilitate or encourage the submission of any
Acquisition Proposal (as defined below), (2) engage in discussions or
negotiations with, or disclose any nonpublic information relating to SMS or any
of its subsidiaries or afford access to the properties, books or records of SMS
or any of its subsidiaries to, any person who is considering making, or has
made, an Acquisition Proposal, or (3) grant any waiver or release under any
standstill or similar agreement with respect to any class of equity securities
of SMS. However, SMS may engage in discussions or negotiations with, and
furnish nonpublic information or access to, any person in response to an
unsolicited Acquisition Proposal if (x) the SMS Board determines in good faith
that such Acquisition Proposal could reasonably be expected to result in a
Superior Proposal and, after consultation with outside legal counsel, that the
failure to take such action could reasonably be deemed to constitute a breach
of its fiduciary duties under applicable law, (y) such Person executes a
confidentiality agreement with terms no less favorable to SMS than those
contained in its confidentiality agreement with Sodexho and (z) SMS shall have
delivered to Sodexho three business days' prior written notice advising Sodexho
that it intends to take such action.
"Acquisition Proposal" means, any offer or proposal for, or any indication
of interest in, any (1) direct or indirect acquisition or purchase of a
business or assets that constitute 20% or more of the net revenues, net income
or assets of SMS and its subsidiaries, taken as a whole, (2) direct or indirect
acquisition or purchase of 20% or more of any class of equity securities of SMS
or any of its subsidiaries whose business constitutes 20% or more of the net
revenues, net income or assets of SMS and its subsidiaries, taken as a whole,
(3) tender offer or exchange offer that if consummated would result in any
person beneficially owning 20% or more of any class of equity securities of SMS
or any of its subsidiaries whose business constitutes 20% or more of the net
revenues, net income or assets of SMS and its subsidiaries, taken as a whole,
or (4) merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving SMS or any of its
subsidiaries whose business constitutes 20% or more of the net revenue, net
income or assets of SMS and its subsidiaries, taken as a whole, other than the
transactions contemplated by the Merger Agreement.
25
"Superior Proposal" means any bona fide Acquisition Proposal for or in
respect of more than 50% of the outstanding Shares on terms that the SMS Board
determines in its good faith judgment (after consultation with a financial
advisor of nationally recognized reputation, taking into account all the terms
and conditions of the Acquisition Proposal) are more favorable to SMS's
stockholders than the transactions contemplated by the Merger Agreement and is
reasonably capable of being consummated.
Conditions to the Merger. The obligations of each of Sodexho, Purchaser and
SMS to consummate the Merger are subject to the satisfaction at or prior to the
Effective Time of the following conditions:
. if required by Delaware law, the Merger Agreement shall have been
approved and adopted by the stockholders of SMS in accordance with such
law;
. no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the
Merger; and
. Purchaser shall have purchased Shares pursuant to the Offer.
In addition, the obligations of the Purchaser and Sodexho to consummate the
Merger are subject to the condition that SMS shall have performed in all
material respects all of its obligations under the Merger Agreement required to
be performed by it at or prior to the Effective Time, except where such failure
to perform would not have, individually or in the aggregate, a Material Adverse
Effect on SMS.
Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time (notwithstanding any approval
of the Merger Agreement by the stockholders of SMS):
(1) by mutual written agreement of SMS and Sodexho;
(2) by either SMS or Sodexho, if:
(a) the Offer has not been consummated on or before August 31, 2001,
provided that this right to terminate the Merger Agreement will not be
available to any party whose breach of any provision of the Merger
Agreement results in the failure of the Offer to be consummated by such
time; or
(b) there shall be any law or regulation that makes acceptance for
payment of, and payment for, the Shares pursuant to the Offer or
consummation of the Merger illegal or otherwise prohibited or any
judgment, injunction, order or decree of any court or governmental body
having competent jurisdiction enjoining the Purchaser from accepting
for payment of, and paying for, the Shares pursuant to the Offer or SMS
or Sodexho from consummating the Merger and such judgment, injunction,
order or decree shall have become final and nonappealable;
(3) by Sodexho, if,
(a) the SMS Board shall have failed to recommend, or shall have
withdrawn or modified in a manner adverse to Sodexho its approval or
recommendation of, the Merger Agreement or the Offer or the Merger or
shall have approved or recommended an Acquisition Proposal, or
(b) SMS shall have entered into, or publicly announced its intention
to enter into, a definitive agreement or an agreement in principle with
respect to an Acquisition Proposal, or
(c) Sodexho has terminated the Offer because of a failure of any of
the conditions set forth in Annex I to the Merger Agreement;
(4) by SMS, if, prior to the acceptance for payment of the Shares under
the Offer,
(a) (A) the SMS Board authorizes SMS, subject to complying with the
terms of the Merger Agreement, to enter into a written agreement
concerning a Superior Proposal, (B) SMS shall have complied with its
obligations described under "--No Solicitation" above, (C) SMS shall
have given Sodexho a prior written notice of its intention to terminate
the Merger Agreement, attaching a
26
description of all material terms and conditions of the Superior
Proposal to such notice, (D) Sodexho does not make, within three
business days after receipt of such notice, an offer which the SMS
Board determines, in good faith after consultation with its financial
advisors, is at least as favorable to the stockholders of SMS as the
Superior Proposal, it being understood that SMS shall not enter into
any such written agreement during such three business day period, and
(E) SMS prior to such termination pays to Sodexho in immediately
available funds the termination fee described below; or
(b) the Purchaser shall have breached its obligation to commence the
Offer under the Merger Agreement; or
(c) the Purchaser shall have terminated the Offer in breach of its
obligations under the Merger Agreement, provided that SMS is not then
in breach of its obligations under the Merger Agreement; or
(d) after the expiration date of the Offer (as such date may be
extended), the Purchaser shall have failed to accept for payment or pay
for Shares validly tendered and not withdrawn pursuant to the Offer,
provided that all conditions to the Offer set forth in Annex I to the
Merger Agreement shall have been satisfied or waived.
Fees and Expenses. Except as discussed below, the Merger Agreement provides
that all costs and expenses incurred in connection with the transactions
contemplated by the Merger Agreement shall be paid by the party incurring such
costs and expenses.
The Merger Agreement provides that, if
. SMS terminates the Merger Agreement as described under item (4)(a) under
"--Termination" above,
. Sodexho terminates the Merger Agreement as described under item (3)(a) or
(3)(b) under "--Termination" above, or
. (1) the Offer is not consummated because of failure to satisfy the
Minimum Condition, (2) either SMS or Sodexho terminates the Merger
Agreement as described under item (2)(a) under "--Termination" above, (3)
prior to the expiration or termination of the Offer an Acquisition
Proposal is made, and (4) SMS enters into a definitive agreement within
twelve months after termination of the Merger Agreement in respect of any
Acquisition Proposal and that transaction is consummated,
then SMS shall pay to Sodexho an amount equal to $20 million at the times
specified in the Merger Agreement.
The Merger Agreement further provides that if Sodexho terminates the Merger
Agreement as described under item (3)(c) under "--Termination" above in
circumstances where SMS has breached its obligations or representations under
the Merger Agreement, SMS will pay to Sodexho an amount equal to Sodexho's
reasonable out-of-pocket expenses (not to exceed $15 million) incurred in
connection with the Merger Agreement and the transactions contemplated thereby.
The Merger Agreement provides that if SMS terminates the Merger Agreement as
described under items (4)(b), (4)(c) or (4)(d) under "--Termination" above,
Sodexho will pay to SMS an amount equal to SMS's reasonable out-of-pocket
expenses (not to exceed $4 million) incurred in connection with the Merger
Agreement and the transactions contemplated thereby.
Amendment and Waivers. Any provision of the Merger Agreement may be amended
or waived prior to the Effective Time if, but only if, such amendment or waiver
is in writing and is signed, in the case of an amendment, by each party to the
Merger Agreement or, in the case of a waiver, by each party against whom the
waiver is to be effective, provided that, after the adoption of the Merger
Agreement by the stockholders of SMS and without their further approval, no
such amendment or waiver shall reduce the amount or change the
27
kind of consideration to be received in exchange for the Shares. Failure or
delay in exercising a right, power or privilege under the Merger Agreement
shall not operate as a waiver.
APPRAISAL RIGHTS
Under Section 262 of the DGCL, any holder of Shares at the Effective Time (a
"Remaining Stockholder") who does not wish to accept the Merger Consideration
pursuant to the Merger has the right to seek an appraisal and be paid the "fair
value" of its Shares at the Effective Time (exclusive of any element of value
arising from the accomplishment or expectation of the Merger) judicially
determined and paid to it in cash provided that such holder complies with the
provisions of such Section 262 of the DGCL.
The following is a brief summary of the statutory procedures to be followed
by a Remaining Stockholder in order to dissent from the Merger and perfect
appraisal rights under Delaware law. This summary is not intended to be
complete and is qualified in its entirety by reference to Section 262 of the
DGCL, the text of which is set forth in Annex C hereto. Any Remaining
Stockholder considering demanding appraisal is advised to consult legal
counsel. Appraisal rights will not be available unless and until the Merger is
consummated.
Remaining Stockholders of record who desire to exercise their appraisal
rights must fully satisfy all of the following conditions. A written demand for
appraisal of Shares must be delivered to the Secretary of SMS (x) before the
taking of the vote on the approval and adoption of the Merger Agreement if the
Merger is being consummated following approval thereof at a meeting of SMS's
stockholders (a "Long-Form Merger") or (y) within 20 days after the date that
the Surviving Corporation mails to the Remaining Stockholders a notice (the
"Notice of Merger") to the effect that the Merger has been approved and/or is
effective and that appraisal rights are available (and includes in such notice
a copy of Section 262 of the DGCL and any other information required thereby)
if the Merger is being effected without a vote or meeting of SMS's stockholders
either in a Short-Form Merger pursuant to Section 253 of the DGCL or otherwise
by stockholder written consent without a meeting of stockholders (both of which
are referred to in this discussion as a "Short-Form Merger"). If the Merger is
effected as a Long-Form Merger, this written demand for appraisal of Shares
must be in addition to and separate from any proxy or vote abstaining from or
against the approval and adoption of the Merger Agreement, and neither voting
against, abstaining from voting, nor failing to vote on the Merger Agreement
will constitute a demand for appraisal within the meaning of Section 262 of the
DGCL. In the case of both a Long-Form Merger and a Short-Form Merger, any
stockholder seeking appraisal rights must hold the Shares for which appraisal
is sought on the date of the making of the demand, continuously hold such
Shares through the Effective Time, and otherwise comply with the provisions of
Section 262 of the DGCL. Any holder of Shares who votes or delivers a written
consent in favor of the Merger Agreement, as the case may be, will lose
appraisal rights under Section 262.
In the case of both a Short-Form Merger and a Long-Form Merger, a demand for
appraisal must be executed by or for the stockholder of record, fully and
correctly, as such stockholder's name appears on the stock certificates. If
Shares are owned of record in a fiduciary capacity, such as by a trustee,
guardian or custodian, such demand must be executed by the fiduciary. If Shares
are owned of record by more than one person, as in a joint tenancy or tenancy
in common, such demand must be executed by all joint owners. An authorized
agent, including an agent for two or more joint owners, may execute the demand
for appraisal for a stockholder of record; however, the agent must identify the
record owner and expressly disclose the fact that, in exercising the demand, he
is acting as agent for the record owner.
A record owner, such as a broker, who holds Shares as a nominee for others,
may exercise appraisal rights with respect to the Shares held for all or less
than all beneficial owners of Shares as to which the holder is the record
owner. In such case, the written demand must set forth the number of Shares
covered by such demand. Where the number of Shares is not expressly stated, the
demand will be presumed to cover all Shares outstanding in the name of such
record owner. Beneficial owners who are not record owners and who intend to
exercise appraisal rights should instruct the record owner to comply strictly
with the statutory requirements with respect to the exercise of appraisal
rights before the date of any meeting of stockholders of SMS called to
28
approve the Merger in the case of a Long-Form Merger and within 20 days
following the mailing of the Notice of Merger in the case of a Short-Form
Merger.
Remaining Stockholders who elect to exercise appraisal rights must mail or
deliver their written demands to: Joan McGlockton, Secretary, Sodexho Marriott
Services, Inc., 9801 Washingtonian Boulevard, Suite 1251, Gaithersburg,
MD 20878. The written demand for appraisal should specify the stockholder's
name and mailing address, the number of Shares covered by the demand and that
the stockholder is thereby demanding appraisal of such Shares. In the case of a
Long-Form Merger, SMS must, within ten days after the Effective Time, provide
notice of the Effective Time to all stockholders who have complied with Section
262 of the DGCL and have not voted for approval and adoption of the Merger
Agreement.
Remaining Stockholders electing to exercise their appraisal rights under
Section 262 must not vote for the approval and adoption of the Merger Agreement
or consent thereto in writing. Voting or consenting in favor of the approval
and adoption of the Merger Agreement, or delivering a proxy in connection with
the stockholders meeting called to approve the Merger Agreement (unless the
proxy votes against, or expressly abstains from the vote on, the approval and
adoption of the Merger Agreement), will constitute a waiver of the
stockholder's right of appraisal and will nullify any written demand for
appraisal submitted by the stockholder.
Regardless of whether the Merger is effected as a Long-Form Merger or a
Short-Form Merger, within 120 days after the Effective Time, either SMS or any
stockholder who has complied with the required conditions of Section 262 and
who is otherwise entitled to appraisal rights may file a petition in the
Delaware Court of Chancery demanding a determination of the fair value of the
Shares of the dissenting stockholders. This petition must also be served on the
Surviving Corporation. If a petition for an appraisal is timely filed, after a
hearing on such petition, the Delaware Court of Chancery will determine which
stockholders are entitled to appraisal rights and thereafter will appraise the
Shares owned by such stockholders, determining the fair value of such Shares,
exclusive of any element of value arising from the accomplishment or
expectation of the Merger, together with a fair rate of interest to be paid, if
any, upon the amount determined to be the fair value. In determining fair
value, the Delaware Court of Chancery is to take into account all relevant
factors. In Weinberger v. UOP, Inc., et al., the Delaware Supreme Court
discussed the factors that could be considered in determining fair value in an
appraisal proceeding, stating that "proof of value by any techniques or methods
which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered and that "[f]air price
obviously requires consideration of all relevant factors involving the value of
a company." The Delaware Supreme Court stated that in making this determination
of fair value the court must consider "market value, asset value, dividends,
earnings prospects, the nature of the enterprise and any other facts which were
known or which could be ascertained as of the date of merger which throw any
light on future prospects of the merged corporation . . ." The Delaware Supreme
Court has construed Section 262 to mean that "elements of future value,
including the nature of the enterprise, which are known or susceptible of proof
as of the date of the merger and not the product of speculation, may be
considered." However, the court noted that Section 262 provides that fair value
is to be determined "exclusive of any element of value arising from the
accomplishment or expectation of the merger."
Remaining Stockholders who in the future consider seeking appraisal should
have in mind that the fair value of their Shares determined under Section 262
could be more than, the same as, or less than the Merger Consideration if they
do seek appraisal of their Shares, and that opinions of investment banking
firms as to fairness from a financial point of view are not necessarily
opinions as to fair value under Section 262 of the DGCL. The cost of the
appraisal proceeding may be determined by the Delaware Court of Chancery and
taxed upon the parties as the Delaware Court of Chancery deems equitable in the
circumstances. Upon application of a dissenting stockholder, the Delaware Court
of Chancery may order that all or a portion of the expenses incurred by any
dissenting stockholder in connection with the appraisal proceeding, including,
without limitation, reasonable attorneys' fees and the fees and expenses of
experts, be charged pro rata against the value of all Shares entitled to
appraisal. In the absence of such a determination or assessment, each party
bears its own expenses.
29
Any Remaining Stockholder who has duly demanded appraisal in compliance with
Section 262 of the DGCL will not, after the Effective Time, be entitled to vote
the Shares subject to such demand for any purpose, or to receive payment of
dividends or other distributions on such Shares, except for dividends or other
distributions payable to stockholders of record at a date prior to the
Effective Time.
At any time within 60 days after the Effective Time, any former holder of
Shares shall have the right to withdraw his or her demand for appraisal and to
accept the Merger Consideration. After this period, such holder may withdraw
his or her demand for appraisal only with the consent of SMS as the Surviving
Corporation. If no petition for appraisal is filed with the Delaware Court of
Chancery within 120 days after the Effective Time, stockholders' rights to
appraisal shall cease and all stockholders shall be entitled to receive the
Merger Consideration. Inasmuch as SMS has no obligation to file such a
petition, and Sodexho has no present intention to cause or permit the Surviving
Corporation to do so, any stockholder who desires such a petition to be filed
is advised to file it on a timely basis. No petition timely filed in the
Delaware Court of Chancery demanding appraisal shall be dismissed as to any
stockholder without the approval of the Delaware Court of Chancery, and such
approval may be conditioned upon such terms as the Delaware Court of Chancery
deems just.
Failure to take any required step in connection with the exercise of
appraisal rights may result in the termination or waiver of such rights.
APPRAISAL RIGHTS CANNOT BE EXERCISED AT THIS TIME. THE INFORMATION SET FORTH
ABOVE IS FOR INFORMATIONAL PURPOSES ONLY WITH RESPECT TO ALTERNATIVES AVAILABLE
TO STOCKHOLDERS IF THE MERGER IS CONSUMMATED. STOCKHOLDERS WHO WILL BE ENTITLED
TO APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER WILL RECEIVE ADDITIONAL
INFORMATION CONCERNING APPRAISAL RIGHTS AND THE PROCEDURES TO BE FOLLOWED IN
CONNECTION THEREWITH BEFORE SUCH STOCKHOLDERS HAVE TO TAKE ANY ACTION RELATING
THERETO.
STOCKHOLDERS WHO SELL SHARES IN THE OFFER WILL NOT BE ENTITLED TO EXERCISE
APPRAISAL RIGHTS WITH RESPECT THERETO BUT, RATHER, WILL RECEIVE THE PRICE PAID
IN THE OFFER THEREFOR.
TRANSACTIONS AND ARRANGEMENTS CONCERNING THE SHARES
Other than purchases or sales under SMS's employee benefits plans described
in the following paragraph, to the knowledge of SMS, Sodexho and the Purchaser,
no transactions in the Shares have been effected during the past 60 days by
SMS, Sodexho, the Purchaser, Bellon S.A., any of their respective associates or
major subsidiaries, or any person listed in Schedule I.
Pursuant to the SMS Employee Stock Purchase Plan, Mellon Investor Services
LLC has purchased 37,302 Shares since March 1, 2001, on behalf of the plan
participants, all of whom are or were employees of SMS. The aggregate purchase
price for such acquisition was $944,922. The highest per Share purchase price
paid was $31.74 and the lowest per Share purchase price paid was $29.14. As of
the date hereof, none of such Shares have been allocated to the individual plan
participants. Pursuant to the SMS 401(k) Employees' Retirement Savings Plan, T.
Rowe Price Trust Company has purchased 80,939.291 Shares since March 1, 2001,
on behalf of the 401(k) plan participants, all of whom are or were employees of
SMS. The aggregate purchase price for such acquisition was $2,426,744. The
highest per Share purchase price paid was $31.75 and the lowest per Share
purchase price paid was $28.09. As of the date hereof, none of such Shares have
been allocated to any director, executive officer or affiliate of SMS.
Neither Sodexho nor the Purchaser has purchased any Shares during the past
two years.
Except as set forth in this Offer to Purchase, neither Sodexho nor the
Purchaser nor, to Sodexho's knowledge, any person listed in Schedule I hereto
(including Bellon S.A.), is a party to any agreement, arrangement or
understanding with any other person with respect to any securities of SMS
(including, without limitation, any agreement, arrangement or understanding
concerning the transfer or the voting of any such
30
securities, joint ventures, loan or option arrangements, puts or calls,
guarantees of loans, guarantees against loss or the giving or withholding of
proxies, consents or authorizations).
Except as described in this Offer to Purchase, to Sodexho's knowledge,
during the past two years no negotiations, transactions or material contacts
concerning a merger, consolidation, or acquisition, a tender offer for or other
acquisition of any securities of SMS, an election of directors of SMS, or a
sale or other transfer of a material amount of assets of SMS, has been entered
into or has occurred between (1) Sodexho, the Purchaser, Bellon S.A. or any
person listed in Schedule I hereto, on the one hand, and SMS or any of its
affiliates, on the other hand or (2) any affiliates of SMS or (3) between SMS
or any of its affiliates and any unaffiliated person with a direct interest
therein.
SMS has not made any underwritten public offering of Shares during the past
three years.
SMS has informed Sodexho that, to the best of SMS's knowledge, after
reasonable inquiry, all directors and executive officers of SMS who hold
Shares, other than those individuals, if any, for whom the tender of Shares
could cause them liability under the provisions of Section 16(b) of the
Exchange Act or to the extent their Shares are restricted shares, intend to
tender Shares held by them pursuant to the Offer.
RELATED PARTY TRANSACTIONS
1998 Agreements
In March 1998, SMS and Sodexho entered into a number of agreements. These
agreements include: a Stockholder Agreement, a Tax Sharing Agreement, a Royalty
Agreement, an Assistance Agreement and a Guaranty Agreement. These agreements
are described under "Special Factors--Background of the Offer--Formation of
SMS" and are more fully described in SMS's Definitive Proxy Statement for a
Special Meeting of Stockholders to be held on March 17, 1998 under the sections
entitled "The Transactions--Arrangements between SMS and Sodexho" and "The
Transactions--Arrangements between SMS and New Marriott--Tax Sharing
Agreement", which sections are incorporated by reference herein.
SMS paid Sodexho $2.25 million and $2.0 million under the Royalty Agreement
in its 1999 fiscal year and 2000 fiscal year, respectively.
SMS paid Sodexho $2.25 million and $7.0 million under the Assistance
Agreement in its 1999 fiscal year and 2000 fiscal year, respectively.
SMS paid Sodexho $3.2 million and $3.15 million under the Guaranty Agreement
in its 1999 fiscal year and 2000 fiscal year, respectively.
Sodexho paid SMS $9.21 million during the 2000 fiscal year under the Tax
Sharing Agreement relating to tax returns filed prior to the formation of SMS.
See Note 10 of the Notes to the Consolidated Financial Statements on page 44 of
SMS's Annual Report on Form 10-K for the fiscal year ended September 1, 2000,
which section is incorporated by referenced herein.
Other Relationships and Transactions.
Sodexho also guarantees (1) the payment when due of certain deferred
compensation amounts payable by SMS to SMS employees and (2) the obligations of
SMS with respect to certain insurance costs. These agreements and arrangements
are described in more detail in Note 5 and Note 8 of the Notes to the
Consolidated Financial Statements on pages 36-37 and 39-40 of SMS's Annual
Report on Form 10-K for the fiscal year ended September 1, 2000, which sections
are incorporated by reference herein. SMS paid Sodexho $0.3 million pursuant to
these agreements and arrangements in each of its 1999 fiscal year and 2000
fiscal year.
During the 2000 fiscal year, SMS and Sodexho entered into a Software
Sublicense Agreement pursuant to which SMS subleases a certain facilities
management software program from Sodexho. SMS made no payments to Sodexho under
this agreement in fiscal year 2000.
31
INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER
Employment Agreements
Thirteen of SMS's executive officers have employments agreements on the
following terms. The employment agreements provide for twenty-four months of
the benefits specified below in the case of disability, termination for other
than cause, death or disability, or voluntary termination for good cause. "Good
cause" includes, among other things, if at any time prior to March 27, 2006,
the stock of SMS is no longer publicly traded or if Sodexho owns greater than
or equal to 90% of the outstanding Shares (which events may occur upon
completion of the Offer and will occur upon completion of the Merger). The
benefits are: salary continuation; continued participation in health and dental
benefits; continued stock vesting; continued 401(k) participation; and pro-
rated incentive compensation based on time worked during the fiscal year.
Treatment of Shares, Options and Other Stock-Based Awards
Any Shares (to the extent not tendered pursuant to the Offer), stock options
or other stock-based awards held by any officer of SMS will be converted as
described under "Special Factors--The Merger Agreement--The Merger" and "--SMS
Options and Other Stock-Based Awards."
Indemnification
Under the Merger Agreement, the directors and officers of SMS are entitled
to certain rights of indemnification and to be insured by the Surviving
Corporation or Sodexho with respect to certain matters from and after the
completion of the Merger. See "Special Factors--The Merger Agreement--Certain
Covenants."
Special Committee Compensation
The members of the Special Committee received compensation in connection
with serving on the Special Committee as follows: Daniel J. Altobello,
Chairman--$85,000 and Mary Metz, member--$70,000. The SMS Board and the Special
Committee believe that the foregoing payments do not affect the Special
Committee's independence or impartiality.
The Special Committee and the SMS Board were aware of these actual and
potential conflicts of interest and considered them along with the other
matters described under "Special Factors--Recommendation of the Special
Committee and the SMS Board; Fairness of the Offer and the Merger."
GOLDMAN SACHS REPORTS
Sodexho retained Goldman Sachs as its financial advisor in connection with
the SMS transaction. In this capacity, Goldman Sachs prepared and delivered the
Goldman Sachs Reports (as defined below) to the senior management and board of
directors of Sodexho. Goldman Sachs relied upon the accuracy and completeness
of all of the financial and other information discussed with or reviewed by it
and assumed such accuracy and completeness for purposes of preparing the
Goldman Sachs Reports. Accordingly, Goldman Sachs did not attempt to verify the
accuracy or completeness of the information supplied by Sodexho or obtained
through other sources. In addition, Goldman Sachs did not make an independent
evaluation or appraisal of the assets and liabilities of SMS and Goldman Sachs
was not furnished with any such evaluation or appraisal. The Goldman Sachs
Reports were provided solely for the information and assistance of the senior
management and board of directors of Sodexho in connection with their
consideration of the transaction.
In connection with preparing the Goldman Sachs Reports, Goldman Sachs
reviewed, among other things: Annual Reports on Form 10-K of SMS for the two
years ended September 1, 2000; certain interim reports to stockholders and
Quarterly Reports on Form 10-Q of SMS; certain other communications from SMS to
its stockholders; and certain other publicly available information on SMS as
filed by SMS with the SEC. Goldman
32
Sachs also reviewed Sodexho management projections estimating Sodexho's
performance, which incorporate estimates regarding SMS's performance, as SMS is
consolidated by Sodexho under French GAAP. Goldman Sachs also held discussions
with members of the senior management of Sodexho regarding their assessment of
the past and current business operations, financial condition and future
prospects of Sodexho.
On January 19, 2001, representatives of Goldman Sachs provided summaries of
certain financial information and analyses regarding SMS and the proposed
transaction (the "January 19th Report") to certain members of the senior
management of Sodexho. The January 19th Report has been filed as Exhibit (c)(3)
to the Schedule TO. The summary of the material analyses contained in the
January 19th Report set forth below is qualified by reference to the full text
of the January 19th Report.
The January 19th Report contains various financial analyses, including:
. Review of the various strategies for the financing of the transaction by
Sodexho, including analysis of its pro forma effect on Sodexho's balance
sheet,
. Comparison of the volume of Shares traded at various prices, as well as
the weighted average price, the total volume of Shares traded and the
average daily trading volume of the Shares, for the period from the
formation of SMS on March 27, 1998 to January 16, 2001, for the one-year
period from January 17, 2000 to January 16, 2001, for the period from
March 27, 2000 to January 16, 2001 and for the three-month period from
October 16, 2000 to January 16, 2001,
. Comparison of the volume of Shares traded at specific prices, as well as
the weighted average price, the total volume of Shares traded and the
average daily trading volume of the Shares, for the period from March 1,
2000 to April 27, 2000,
. Review of the ownership history of the top twenty-five United States
institutional and fund stockholders of SMS,
. Review of the historical closing market prices of the Shares from March
27, 1998 to January 16, 2001,
. Comparison of the daily indexed trading history for the Shares, a
composite comprised of Morrison Management Specialists, Inc. and
ServiceMaster Company, and the S&P 500 since the formation of SMS on
March 27, 1998 to January 16, 2001,
. Comparison of the daily indexed common stock price history for shares of
SMS, S&P Pharmaceuticals, S&P Foods and Goldman Sachs Technologies
indices for the period from March 27, 2000 to January 16, 2001,
. Review of the daily indexed common stock price history for shares of
SMS, ServiceMaster Company and Morrison Management Specialists for the
period from March 27, 2000 to January 16, 2001,
. Review of the daily indexed common stock price history for shares of SMS
and ServiceMaster Company for the period from December 1, 1999 to
January 16, 2001, and
. Summaries of the financial terms of various selected transactions
involving buyouts of minority and majority shareholders of public
companies.
Goldman Sachs also reviewed and compared certain financial information
relating to SMS to corresponding financial information and public market
multiples as of January 17, 2001 for the following seven publicly-traded
companies in the catering and business service industry in Europe and the
United States:
Europe
. Sodexho,
. Autogrill SpA,
. Groupe Elior,
33
. Compass Hospitality, and
.International Service System A/S.
United States
.Morrison Management Specialists, Inc., and
.ServiceMaster Company.
The selected companies were chosen because they are publicly-traded
companies with operations that for purposes of analysis may be considered
similar to SMS's business. Goldman Sachs compared the following information for
the selected companies to that of SMS:
. Percent of the highest closing price per share for the preceding 52
weeks represented by the closing price per share as of January 17, 2001,
. Equity market capitalization and enterprise value,
. Ratios of enterprise value to calendar year 2000 revenues, calendar year
2001 revenues and calendar year 2002 revenues,
. Ratios of enterprise value to calendar year 2000 earnings before
interest and taxes, or EBIT, calendar year 2001 EBIT and calendar year
2002 EBIT,
. Ratios of equity market capitalization to calendar year 2000 earnings
per share, calendar year 2001 earnings per share and calendar year 2002
earnings per share, and
. Ratio of price to calendar year 2000 earnings per share ratio to the
estimated five year cumulative annual growth rate in earnings per share,
or EPS, based on Institutional Brokers Estimate System, or I/B/E/S,
data.
The results of these analyses are summarized as follows:
Enterprise Value/ Market Value/
----------------------------------------- --------------------
CY 2000
Revenues EBIT EPS P E / 5-
-------------------- -------------------- -------------------- Year EPS
CY2000 CY2001 CY2002 CY2000 CY2001 CY2002 CY2000 CY2001 CY2002 Growth
------ ------ ------ ------ ------ ------ ------ ------ ------ --------
Company
SMS..................... 0.5x 0.5x 0.5x 12.4x 11.2x 10.0x 22.9x 18.7x 15.3x 1.6x
Sodexho................. 0.8x 0.7x 0.7x 16.0x 14.6x 13.1x 53.4x 31.0x 28.0x 2.8x
Autogrill SpA........... 1.4x 1.3x 1.2x 32.4x 27.9x 23.8x 318.0x 70.7x 45.4x 13.8x
Groupe Elior............ 1.1x 1.0x 0.9x 21.9x 18.8x 16.7x 51.6x 25.0x 24.7x 3.4x
Compass Hospitality..... 1.8x 1.6x 1.5x 14.9x 13.8x 12.4x 20.5x 18.4x 16.1x 1.6x
International Service
System................. 0.9x 0.8x 0.8x 34.7x 27.6x 23.9x 85.8x 54.9x 38.8x 5.7x
European Mean........... 1.3x 1.2x 1.1x 26.0x 22.0x 19.2x 52.6x 32.8x 26.5x 3.6x
European Median......... 1.2x 1.1x 1.1x 27.1x 23.2x 20.3x 51.6x 25.0x 24.7x 3.4x
Morrison Management
Specialists, Inc....... 0.6x 0.5x 0.5x 16.3x 13.3x 11.4x 24.9x 20.0x 17.1x 1.4x
ServiceMaster Company... 0.9x 0.9x 0.8x 12.0x 10.9x 9.6x 18.7x 17.5x 14.7x 1.6x
Goldman Sachs also compared the following information for the selected
companies to that of SMS:
. Growth rates of revenues, EBIT and EPS for calendar year 2001 and
calendar year 2002,
. EBIT and net income margins for calendar year 2001 and calendar year
2002,
. Net debt as a percentage of market equity, and
. Long term EPS growth, based on I/B/E/S data.
34
The results of these analyses are summarized as follows:
Growth Margins
------------------------------------------ ---------------------------
Net Long
Revenues EBIT EPS EBIT Net Income Debt/ Term
------------- ------------- -------------- ------------- ------------- Market EPS
CY2001 CY2002 CY2001 CY2002 CY2001 CY2002 CY2000 CY2001 CY2001 CY2002 Equity Growth
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Company
SMS..................... 4.3% 8.0% 10.4% 12.3% 22.5% 21.9% 4.2% 4.5% 1.4% 1.7% 60.6% 14.5%
Sodexho................. 6.3% 10.6% 9.5% 11.9% 72.5% 10.6% 5.0% 5.1% 1.2% 1.9% 25.4% 19.3%
Autogrill SpA........... 8.6% 8.6% 15.8% 17.5% 350.0% 55.6% 4.4% 4.7% 0.3% 1.4% 33.0% 23.0%
Groupe Elior............ 9.6% 8.3% 16.3% 12.6% 106.4% 1.3% 4.9% 5.2% 1.6% 2.9% 33.1% 15.3%
Compass Hospitality..... 6.8% 7.5% 7.9% 11.4% 11.6% 14.6% 11.8% 11.9% 6.6% 6.9% 30.1% 12.5%
International Service
System................. 12.7% 6.2% 26.0% 15.2% 56.1% 41.8% 2.7% 3.0% 0.9% 1.3% 18.5% 15.0%
European Mean........... 9.4% 7.6% 16.5% 14.2% 58.0% 19.2% 5.9% 6.2% 2.3% 3.1% 28.7% 16.5%
European Median......... 9.1% 7.9% 16.0% 13.9% 56.1% 14.6% 4.6% 4.9% 1.2% 2.2% 31.6% 15.2%
Morrison Management
Specialists, Inc....... 13.2% 15.7% 22.5% 16.8% 24.4% 17.2% 3.8% 4.1% 2.2% 2.4% 11.6% 18.0%
ServiceMaster Company... 4.4% 6.3% 10.6% 13.5% 6.3% 19.4% 7.4% 7.9% 3.2% 3.2% 51.8% 12.0%
ServiceMaster Management
Services 1.0% 1.0% -4.5% 7.8% N.A. N.A. 3.6% 3.4% N.A. N.A. N.A. N.A.
The selected companies analyses were based on historical and projected
financial data from publicly available information and from Wall Street
research reports and estimates. The long term earnings per share growth
estimates were from I/B/E/S. The European Mean and Median ratios excluded
Sodexho.
The January 19th Report also contains a summary of certain information
relating to eight North American and eight European transactions in the
catering industry, excluding in-flight catering transactions, since March 1993.
Goldman Sachs's summary of the selected transactions compared total transaction
enterprise value as a multiple of latest twelve months, or LTM, sales, LTM EBIT
and the transaction equity value as a multiple of LTM net income of the target
company in the selected transactions. The summary resulted in (1) a range of
LTM sales multiples for the selected transactions in North America from 0.3x to
0.7x, with a mean of 0.5x and a median of 0.5x, and in Europe a range from 0.5x
to 1.3x, with a mean of 0.7x and a median of 0.6x; (2) a range of LTM EBIT
multiples for the selected transactions in North America from 12.4x to 23.6x,
with a mean of 16.2x and a median of 14.4x, and in Europe a range from 11.1x to
23.7x, with a mean of 14.3x and a median of 12.3x; and (3) a range of LTM net
income multiples for the selected transactions in North America from 19.8x to
22.7x, with a mean of 21.3x and a median of 21.3x, and in Europe a range from
20.5x to 35.9x, with a mean of 26.5x and a median of 23.1x. Goldman Sachs
presented this analysis to Sodexho because Goldman Sachs believed that the
Special Committee of the SMS Board would review a similar analysis as part of
their deliberations. At the same time, however, Goldman Sachs emphasized to
Sodexho its view that valuation methodologies relating to a change of control
were not appropriate under the circumstances.
On January 24, 2001, representatives of Goldman Sachs provided certain
financial information and analyses (the "January 24th Report" and, together
with the January 19th Report, the "Goldman Sachs Reports") to the board of
directors of Sodexho. The January 24th Report has been filed as Exhibit (c)(4)
to the Schedule TO. The following is a summary of the material analyses
contained in the January 24th Report.
The January 24th Report contains various financial analyses, including:
. Comparison of the daily indexed trading history for Shares from the
formation of SMS on March 27, 1998 to January 16, 2001, and
. An analysis of premiums paid in acquisitions of public companies where
the consideration was composed only of cash and the acquiror's existing
ownership of the target company was greater than 40%, based on company
filings and public information.
35
Goldman Sachs also conducted a sensitivity analysis of the financial effect
of the merger on Sodexho. Goldman Sachs compared certain potential cash offer
prices per share by Sodexho for SMS and calculated:
. the implied premium to the closing price of $25.44 per Share on January
23, 2001,
. the percentage accretion represented by Sodexho's 2002 and 2003 EPS
following consummation of the transaction (without giving effect to
goodwill deductions resulting from the transaction) relative to
Sodexho's stand-alone 2002 and 2003 EPS,
. the percentage accretion represented by Sodexho's 2002 and 2003 EPS
following consummation of the transaction (giving effect to goodwill
deductions resulting from the transaction) relative to Sodexho's stand-
alone 2002 and 2003 EPS,
. Sodexho's 2002 earnings before interest, taxes, depreciation and
amortization, or EBITDA, as a multiple of Sodexho's 2002 interest
expense following consummation of the transaction and
. Sodexho's 2002 funds from operations, or FFO, as a percentage of net
debt following consummation of the transaction.
The results of the analysis is summarized below:
Implied
Premium
on SMS
Stock 2002
Price 2002 EPS 2003 EPS 2002 EPS 2003 EPS EBITDA 2002
Cash on Accretion Accretion Accretion Accretion Interest FFO/Net
Offer/Share 1/23/01 pre-goodwill pre-goodwill post-goodwill post-goodwill Cover Debt
- ----------- ------- ------------ ------------ ------------- ------------- -------- -------
$25.00 -2% 8.8% 10.9% 5.5% 8.5% 5.10x 33.6%
$26.00 2% 8.2% 10.4% 4.5% 7.7% 5.07x 33.2%
$27.00 5% 7.7% 9.9% 3.4% 6.9% 5.04x 32.7%
$28.00 10% 7.1% 9.4% 2.4% 6.0% 5.01x 32.3%
$29.00 14% 6.5% 8.9% 1.4% 5.2% 4.98x 31.9%
The above analysis assumed a 50% equity financing by Sodexho of the total
consideration through a rights issue. The implied premium is based on the
closing price of $25.44 per Share on January 23, 2001. The analysis also
assumed an exchange rate of Dollar/Euro of 0.95 with a Sodexho share price of
Euro 200.00 (prior to the 4-to-1 stock split by Sodexho that became effective
after the date of the January 24th Report). The financial information used in
the above analysis was based on Sodexho management projections estimating
Sodexho's performance, which incorporate estimates regarding SMS's performance,
as SMS is consolidated by Sodexho under French GAAP.
The preparation of the Goldman Sachs Reports was a complex process and is
not necessarily susceptible to summary description. Selecting portions of the
Goldman Sachs Reports or of the summary set forth above, without considering
the Goldman Sachs Reports as a whole, could create an incomplete view of the
Goldman Sachs Reports. No company or transaction used in the above analyses as
a comparison is directly comparable to Sodexho or SMS or the contemplated
transaction. The analyses were prepared solely for purpose of Goldman Sachs
providing the Goldman Sachs Reports to the senior management and board of
directors of Sodexho. These analyses do not purport to be appraisals or
necessarily reflect the prices at which businesses or securities actually may
be sold. Analyses based upon forecasts of future results are not necessarily
indicative of actual future results, which may be significantly more or less
favorable than suggested by such analyses. Because such analyses are inherently
subject to uncertainty, being based upon numerous factors or events beyond the
control of the parties or their respective advisors, none of Sodexho, SMS,
Goldman Sachs or any other person assumes responsibility if future results are
materially different from those forecast.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes. Goldman Sachs is
familiar with Sodexho having acted as its
36
financial advisor in connection with, and having participated in certain of the
negotiations leading to, the Merger Agreement. Goldman Sachs may also provide
investment banking services to Sodexho in the future. Sodexho selected Goldman
Sachs as its financial advisor because it is an internationally recognized
investment banking firm that has substantial experience in transactions similar
to the Offer and the Merger.
Goldman Sachs provides a full range of financial, advisory and brokerage
services and in the course of its normal trading activities may from time to
time effect transactions and hold positions in the securities or options on
securities of Sodexho for its own account and for the account of customers. As
of May 15, 2001, Goldman Sachs accumulated a long position of 18,562 Shares and
a long position of 988 shares of Sodexho, against which Goldman Sachs is short
11,722 shares of Sodexho.
Pursuant to a letter agreement, dated October 20, 2000, Sodexho engaged
Goldman Sachs to act as its financial advisor in connection with the Offer and
the Merger. Pursuant to the terms of the engagement letter, Sodexho has agreed
to pay Goldman Sachs as compensation for its services as financial advisor in
connection with the Offer (including the services of Goldman, Sachs & Co. as
Dealer Manager) a fee of $7,100,000, of which $250,000 has been paid, with the
balance due upon the closing of the Offer. Sodexho also has agreed to reimburse
Goldman Sachs for certain reasonable out-of-pocket expenses incurred in
connection with the Offer and the Merger (including the fees and disbursements
of outside counsel) and to indemnify Goldman Sachs against certain liabilities,
including certain liabilities under the federal securities laws.
Copies of the Goldman Sachs Reports have been filed as Exhibits (c)(3) and
(c)(4) to the Schedule TO filed by Sodexho and are incorporated herein by
reference. The foregoing summary does not purport to be a complete description
of the analyses performed by Goldman Sachs and is qualified by reference to the
Goldman Sachs Reports filed as exhibits to the Schedule TO. Copies of the
Goldman Sachs Reports are available for inspection and copying at the principal
executive offices of SMS during regular business hours by any stockholder of
SMS, or a stockholder's representative who has been so designated in writing.
Copies of the Goldman Sachs Reports shall be provided by SMS to any stockholder
or any representative of a stockholder who has been so designated in writing
upon written request and at the expense of the requesting stockholder or
representative.
37
THE OFFER
1. Terms of the Offer; Expiration Date. On the terms and subject to the
conditions set forth in the Offer, the Purchaser will accept for payment and
pay for all Shares that are validly tendered prior to the Expiration Date and
not withdrawn.
"Expiration Date" means 12:00 Midnight, New York City time, on Thursday,
June 14, 2001, unless the Purchaser extends the period of time for which the
Offer is open under the terms set forth in the Merger Agreement, in which event
"Expiration Date" means the latest time and date at which the Offer, as so
extended, shall expire.
The Offer is subject to the conditions set forth in "The Offer--Conditions
of the Offer". If any such condition is not satisfied, we may (a) extend the
Offer and, subject to certain conditions and to your withdrawal rights as set
forth in "The Offer--Withdrawal Rights," retain all Shares until the expiration
of the Offer as so extended; (b) waive such condition and, subject to any
requirement to extend the period of time during which the Offer is open,
purchase all Shares validly tendered prior to the Expiration Date and not
withdrawn or delay acceptance for payment or payment for Shares, subject to
applicable law; or (c) terminate the Offer as to any Shares not then paid for.
For a description of our right to extend, amend, delay or terminate the Offer,
see "The Offer--Extension of the Tender Period; Termination; Amendment;
Subsequent Offering Period"; and "The Offer--Conditions of the Offer."
2. Extension of Tender Period; Termination; Amendment; Subsequent Offering
Period. The "Initial Expiration Date" of the Offer will be the twentieth
business day from the date the Offer is commenced. The Purchaser has the right
to extend the Offer beyond the Initial Expiration Date, without the consent of
SMS, in the following events:
(1) from time to time if, at the Initial Expiration Date (or extended
expiration date of the Offer, if applicable), any of the conditions to the
Offer shall not have been satisfied or waived until such conditions are
satisfied or waived;
(2) for any period required by any rule, regulation, interpretation or
position of the SEC or the staff thereof applicable to the Offer or any
period required by applicable law;
(3) on one or more occasions for an aggregate period not to exceed ten
business days beyond the latest expiration date that would otherwise be
permitted under clause (1) or (2), if the number of Shares validly tendered
and not withdrawn, together with Shares then owned by Sodexho or any of its
subsidiaries, represents less than 90% of the then outstanding number of
Shares on a fully-diluted basis; or
(4) pursuant to a "subsequent offering period" under Rule 14d-11 under
the Exchange Act.
We expressly reserve the right to waive any of the conditions to the Offer
and to make any change in the terms of our conditions to the Offer, provided
that without the consent of SMS we cannot make any change or waiver that
changes the form of consideration to be paid in the Offer, decreases the price
per Share or the number of Shares sought, or imposes additional conditions to
the Offer.
If we increase or, with the consent of SMS, decrease the consideration to be
paid for Shares pursuant to the Offer and the Offer is scheduled to expire at
any time before the expiration of a period of ten business days from, and
including, the date that notice of such increase or decrease is first
published, sent or given in the manner specified below, the Offer will be
extended until the expiration of such period of ten business days. If we make a
material change in the terms of the Offer (other than a change in price or
percentage of securities sought) or in the information concerning the Offer, or
waive a material condition of the Offer, we will extend the Offer, if required
by applicable law, for a period sufficient to allow you to consider the amended
terms of the Offer. In a published release, the SEC has stated that in its view
an offer must remain open for a minimum period of time following a material
change in the terms of such offer. The release states that an offer should
remain open for a minimum of five business days from the date the material
change is first published, sent or
38
given to stockholders, and that if material changes are made with respect to
information that approaches the significance of price and percentage of Shares
sought, a minimum of ten business days may be required to allow adequate
dissemination and investor response. The term "business day" means any day
other than Saturday, Sunday or a federal holiday and shall consist of the time
period from 12:01 A.M. through 12:00 Midnight, New York City time.
Any extension, delay, termination, waiver or amendment will be followed as
promptly as practicable by a public announcement, in the case of an extension
of the Offer, to be made no later than 9:00 A.M., New York City time, on the
next business day after the previously scheduled Expiration Date, in accordance
with the public announcement requirements of Rule 14e-1(d) under the Exchange
Act. Subject to applicable law (including Rules 14d-4(d) and 14d-6(c) under the
Exchange Act, which require that material changes in the information published,
sent or given to any stockholders in connection with the Offer be promptly
disseminated to stockholders in a manner reasonably designed to inform them of
such changes), and without limiting the manner in which we may choose to make
any public announcement, we have no obligation to publish, advertise or
otherwise communicate any public announcement other than by issuing a press
release to the Dow Jones News Service.
If we extend the time during which the Offer is open, or if we are delayed
in our acceptance for payment of or payment for Shares pursuant to the Offer
for any reason, then, without prejudice to our rights under the Offer, the
Depositary may retain tendered Shares on our behalf and those Shares may not be
withdrawn except to the extent tendering stockholders are entitled to
withdrawal rights as described herein under "The Offer--Withdrawal Rights."
However, our ability to delay the payment for Shares that we have accepted for
payment is limited by (1) Rule 14e-1(c) under the Exchange Act, which requires
that a bidder pay the consideration offered or return the securities deposited
by or on behalf of stockholders promptly after the termination or withdrawal of
such bidder's offer and (2) the terms of the Merger Agreement, which require
that, on the terms and subject to prior satisfaction (or waiver) of the
conditions to the Offer, we must accept for payment and pay for Shares promptly
after expiration of the Offer.
Pursuant to Rule 14d-11 under the Exchange Act, after the expiration of the
Offer, if all of the conditions to the Offer have been satisfied or waived, we
may, subject to certain conditions, include a subsequent offering period (a
"Subsequent Offering Period") pursuant to which we may add a period of between
three and 20 business days to permit additional tenders of Shares. We may
include a Subsequent Offering Period so long as, among other things, (1) the
initial 20 business day period of the Offer has expired, (2) all conditions to
the Offer are deemed satisfied or waived by the Purchaser on or before the
Expiration Date, (3) we accept and promptly pay for all Shares validly tendered
during the Offer, (4) we announce the results of the Offer, including the
approximate number and percentage of Shares deposited in the Offer, no later
than 9:00 A.M., New York City time on the next business day after the
Expiration Date and immediately begin the Subsequent Offering Period and (5) we
immediately accept and promptly pay for Shares as they are tendered during the
Subsequent Offering Period. In addition, we may extend any initial Subsequent
Offering Period by any period or periods, provided that the aggregate of the
Subsequent Offering Periods (including extensions thereof) is no more than 20
business days. We have not at this time made a final decision to include or to
not include a Subsequent Offering Period. Such decision will be made in our
sole discretion, and there is no assurance that we will or will not include
such a Subsequent Offering Period. In the event we elect to include a
Subsequent Offering Period, we will notify stockholders of SMS in a manner
consistent with the requirements of the SEC.
No withdrawal rights apply to Shares tendered in a Subsequent Offering
Period and no withdrawal rights apply during the Subsequent Offering Period
with respect to Shares tendered in the Offer and accepted for payment. The same
consideration and offer price will be paid to stockholders tendering Shares in
the Offer or in any Subsequent Offering Period. Any extension, termination or
amendment or extension of a Subsequent Offering Period will be followed as
promptly as practicable by a public announcement thereof. Without limiting the
manner in which we may choose to make any public announcement, we will have no
obligation (except as otherwise required by applicable law) to publish,
advertise or otherwise communicate any such public announcement other than by
making a release to the Dow Jones News Service. In the case of an
39
extension of the Offer, we will make a public announcement of such extension no
later than 9:00 A.M., New York City time, on the next business day after the
previously scheduled Expiration Date.
SMS has provided us with its stockholder list and security position listings
so we can disseminate the Offer to holders of Shares. We will send this Offer
to Purchase and the related Letter of Transmittal to record holders of Shares
and to brokers, dealers, banks, trust companies and other nominees whose names
appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
3. Acceptance for Payment and Payment. Upon the terms and subject to the
conditions of the Offer, we will accept for payment and pay for all Shares
validly tendered prior to the Expiration Date and not withdrawn promptly after
the Expiration Date. For a description of our right to terminate the Offer and
not accept for payment or pay for Shares or to delay acceptance for payment or
payment for Shares, see "The Offer--Terms of the Offer; Expiration Date."
For purposes of the Offer, we shall be deemed to have accepted for payment
tendered Shares when, as and if we give oral or written notice of our
acceptance to the Depositary. We will pay for Shares accepted for payment
pursuant to the Offer by depositing the purchase price with the Depositary. The
Depositary will act as your agent for the purpose of receiving payments from us
and transmitting such payments to you. In all cases, payment for Shares
accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of certificates for such Shares (or of a confirmation
of a book-entry transfer of such Shares into the Depositary's account at the
Book-Entry Transfer Facility (as defined in "The Offer--Procedure for Tendering
Shares")), a properly completed and duly executed Letter of Transmittal and any
other required documents. Accordingly, payment may be made to tendering
stockholders at different times if delivery of the Shares and other required
documents occurs at different times. For a description of the procedure for
tendering Shares pursuant to the Offer, see "The Offer--Procedure for Tendering
Shares."
Under no circumstances will we pay interest on the consideration paid for
Shares pursuant to the Offer, regardless of any delay in making such payment.
If we increase the consideration to be paid for Shares pursuant to the
Offer, we will pay such increased consideration for all Shares purchased
pursuant to the Offer.
We reserve the right to transfer or assign, in whole or from time to time in
part, to one or more of our affiliates the right to purchase Shares tendered
pursuant to the Offer, but any such transfer or assignment will not relieve us
of our obligations under the Offer or prejudice your rights to receive payment
for Shares validly tendered and accepted for payment.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if certificates are submitted for more Shares than are tendered,
certificates for such unpurchased or untendered Shares will be returned (or, in
the case of Shares tendered by book-entry transfer, such Shares will be
credited to an account maintained at the Book-Entry Transfer Facility as
defined below), without expense to you, as promptly as practicable following
the expiration or termination of the Offer.
4. Procedure for Tendering Shares. To tender Shares pursuant to the Offer,
either (1) the Depositary must receive at one of its addresses set forth on the
back cover of this Offer to Purchase (A) a properly completed and duly executed
Letter of Transmittal and any other documents required by the Letter of
Transmittal and (B) certificates for the Shares to be tendered or delivery of
such Shares pursuant to the procedures for book-entry transfer described below
(and a confirmation of such delivery including an Agent's Message (as defined
below) if the tendering stockholder has not delivered a Letter of Transmittal),
in each case by the Expiration Date, or (2) the guaranteed delivery procedure
described below must be complied with. Current or former SMS employees who wish
to tender their Shares acquired and held under the SMS Employee Stock Purchase
Plan by Mellon Investor Services LLC must comply with the procedures
40
described below under Employee Stock Purchase Plan. Outstanding options to
purchase Shares held by SMS employees enrolled in the SMS Employee Stock
Purchase Plan during calendar year 2001 will not be eligible to be tendered in
the Offer, but will be exercised (unless the employee has withdrawn from the
plan) and each Share purchased pursuant to such exercise shall automatically be
converted into the right to receive the Merger Consideration at the Effective
Time.
Book Entry Delivery. The Depositary will establish an account with respect
to the Shares at The Depository Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Offer within two business days after the date of
this Offer to Purchase, and any financial institution that is a participant in
the system of the Book-Entry Transfer Facility may make delivery of Shares by
causing the Book-Entry Transfer Facility to transfer such Shares into the
Depositary's account in accordance with the procedures of the Book-Entry
Transfer Facility. However, although delivery of Shares may be effected through
book-entry transfer, the Letter of Transmittal properly completed and duly
executed together with any required signature guarantees or an Agent's Message
and any other required documents must, in any case, be received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase by the Expiration Date, or the guaranteed delivery procedure described
below must be complied with. Delivery of the Letter of Transmittal and any
other required documents to the Book-Entry Transfer Facility does not
constitute delivery to the Depositary. "Agent's Message" means a message,
transmitted by the Book-Entry Transfer Facility to, and received by, the
Depositary and forming a part of a book-entry confirmation which states that
the Book-Entry Transfer Facility has received an express acknowledgment from
the participant in the Book-Entry Transfer Facility tendering the Shares that
are the subject of such book-entry confirmation which such participant has
received, and agrees to be bound by, the terms of the Letter of Transmittal and
that SMS may enforce such agreement against such participant.
Signature Guarantees. Except as otherwise provided below, all signatures on
a Letter of Transmittal must be guaranteed by a financial institution
(including most banks, savings and loan associations and brokerage houses) that
is a member of a recognized Medallion Program approved by The Securities
Transfer Association Inc., including the Securities Transfer Agents Medallion
Program (STAMP), the Stock Exchange Medallion Program (SEMP) and the New York
Stock Exchange, Inc. Medallion Signature Program (MSP) (each an "Eligible
Institution"). Signatures on a Letter of Transmittal need not be guaranteed (1)
if the Letter of Transmittal is signed by the registered holder of the Shares
tendered therewith and such holder has not completed the box entitled "Special
Payment Instructions" on the Letter of Transmittal or (2) if such Shares are
tendered for the account of an Eligible Institution. See Instructions 1 and 5
of the Letter of Transmittal.
Guaranteed Delivery. If you wish to tender Shares pursuant to the Offer and
cannot deliver such Shares and all other required documents to the Depositary
by the Expiration Date, or cannot complete the procedure for delivery by book-
entry transfer on a timely basis, you may nevertheless tender such Shares if
all of the following conditions are met:
(1) such tender is made by or through an Eligible Institution;
(2) a properly completed and duly executed Notice of Guaranteed Delivery
in the form provided by the Purchaser is received by the Depositary (as
provided below) by the Expiration Date; and
(3) the certificates for such Shares (or a confirmation of a book-entry
transfer of such Shares into the Depositary's account at the Book-Entry
Transfer Facility), together with a properly completed and duly executed
Letter of Transmittal with any required signature guarantee or an Agent's
Message and any other documents required by the Letter of Transmittal, are
received by the Depositary within three New York Stock Exchange trading
days after the date of execution of the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile transmission or mail to the Depositary and must include a guarantee
by an Eligible Institution in the form set forth in such Notice. Facsimiles may
be sent to (781) 575-4826, Attn: Sodexho Marriott. To obtain confirmation that
a facsimile has been received, call (781) 575-4816.
41
The method of delivery of Shares and all other required documents, including
through the Book-Entry Transfer Facility, is at your option and risk, and the
delivery will be deemed made only when actually received by the Depositary. If
certificates for Shares are sent by mail, we recommend registered mail with
return receipt requested, properly insured.
Employee Stock Purchase Plan. Current or former SMS employees participating
in the SMS Employee Stock Purchase Plan (which we refer to in this Offer to
Purchase as the "ESPP") who wish to tender Shares acquired under the ESPP
during calendar year 2000 held by Mellon Investor Services LLC should so
indicate by completing, executing, and returning to Mellon Investor Services
LLC the confidential direction form included in the notice sent to such
participants. Participants in the ESPP may not use the Letter of Transmittal or
the guaranteed delivery procedures to tender their interests in Shares held
under the ESPP on their behalf, but must use the separate direction form sent
to them. Under the terms of the ESPP, participants who fail to timely instruct
Mellon Investor Services LLC to tender the Shares held under the ESPP on their
behalf will be deemed to have chosen not to tender their Shares. Outstanding
options to purchase Shares held by SMS employees enrolled in the ESPP during
calendar year 2001 will not be eligible to be tendered in the Offer, but will
be exercised (unless the employee has withdrawn from the ESPP) and each Share
purchased pursuant to such exercise shall automatically be converted into the
right to receive the Merger Consideration at the Effective Time.
Back-up Withholding. Under the federal income tax laws, the Depositary will
be required to withhold 31% of the amount of any payments made to certain
stockholders pursuant to the Offer. In order to avoid such backup withholding,
you must provide the Depositary with your correct taxpayer identification
number and certify that you are not subject to such backup withholding by
completing the Substitute Form W-9 included in the Letter of Transmittal. If
you are a non-resident alien or foreign entity not subject to back-up
withholding, you must give the Depositary a completed Form W-8BEN Certificate
of Foreign Status or other appropriate form prior to receipt of any payment.
Grant of Proxy. By executing a Letter of Transmittal (or delivering an
Agent's Message), you irrevocably appoint our designees as your proxies in the
manner set forth in the Letter of Transmittal to the full extent of your rights
with respect to the Shares tendered and accepted for payment by us (and any and
all other Shares or other securities issued or issuable in respect of such
Shares on or after May 1, 2001). All such proxies are irrevocable and coupled
with an interest in the tendered Shares. Such appointment is effective only
upon our acceptance for payment of such Shares. Upon such acceptance for
payment, all prior proxies and consents granted by you with respect to such
Shares and other securities will, without further action, be revoked, and no
subsequent proxies may be given nor subsequent written consents executed (and,
if previously given or executed, will cease to be effective). Our designees
will be empowered to exercise all your voting and other rights as they, in
their sole discretion, may deem proper at any annual, special or adjourned
meeting of SMS's stockholders, by written consent or otherwise. We reserve the
right to require that, in order for Shares to be validly tendered, immediately
upon our acceptance for payment of such Shares, we are able to exercise full
voting rights with respect to such Shares and other securities (including
voting at any meeting of stockholders then scheduled or acting by written
consent without a meeting).
The tender of Shares pursuant to any one of the procedures described above
will constitute your acceptance of the Offer, as well as your representation
and warranty that (1) you own the Shares being tendered within the meaning of
Rule 14e-4 promulgated under the Exchange Act, (2) the tender of such Shares
complies with Rule 14e-4 and (3) you have the full power and authority to
tender, sell, assign and transfer the Shares tendered, as specified in the
Letter of Transmittal. Our acceptance for payment of Shares tendered by you
pursuant to the Offer will constitute a binding agreement between us with
respect to such Shares, upon the terms and subject to the conditions of the
Offer.
Validity. We will determine, in our sole discretion, all questions as to the
form of documents and the validity, eligibility (including time of receipt) and
acceptance for payment of any tender of Shares, and our determination shall be
final and binding. We reserve the absolute right to reject any or all tenders
of Shares that we determine not to be in proper form or the acceptance for
payment of, or payment for, which may, in the
42
opinion of our counsel, be unlawful. We also reserve the absolute right to
waive any defect or irregularity in any tender of Shares. Our interpretation of
the terms and conditions of the Offer will be final and binding. None of the
Purchaser, the Dealer Manager, the Depositary, the Information Agent or any
other person will be under any duty to give notification of any defect or
irregularity in tenders or waiver of any such defect or irregularity or incur
any liability for failure to give any such notification.
5. Withdrawal Rights. You may withdraw tenders of Shares made pursuant to
the Offer at any time prior to the Expiration Date. Thereafter, such tenders
are irrevocable, except that they may be withdrawn
after July 15, 2001, unless such Shares are accepted for payment as provided in
this Offer to Purchase. If we extend the period of time during which the Offer
is open or are delayed in accepting for payment or paying for Shares pursuant
to the Offer for any reason, then, without prejudice to our rights under the
Offer, the Depositary may, on our behalf, retain all Shares tendered, and such
Shares may not be withdrawn except as otherwise provided in this Section.
To withdraw tendered Shares, a written or facsimile transmission notice of
withdrawal with respect to the Shares must be timely received by the Depositary
at one of its addresses set forth on the back cover of this Offer to Purchase,
and the notice of withdrawal must specify the name of the person who tendered
the Shares to be withdrawn and the number of Shares to be withdrawn and the
name of the registered holder of Shares, if different from that of the person
who tendered such Shares. If the Shares to be withdrawn have been delivered to
the Depositary, a signed notice of withdrawal with (except in the case of
Shares tendered by an Eligible Institution) signatures guaranteed by an
Eligible Institution must be submitted prior to the release of such Shares. In
addition, such notice must specify, in the case of Shares tendered by delivery
of certificates, the name of the registered holder (if different from that of
the tendering stockholder) and the serial numbers shown on the particular
certificates evidencing the Shares to be withdrawn or, in the case of Shares
tendered by book-entry transfer, the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares.
Withdrawals may not be rescinded, and Shares withdrawn will thereafter be
deemed not validly tendered for purposes of the Offer. However, withdrawn
Shares may be re-tendered by again following one of the procedures described in
"The Offer--Procedures for Tendering Shares" at any time prior to the
Expiration Date.
If we include a Subsequent Offering Period (as described in more detail in
"The Offer--Extensions of the Tender Period") following the Offer, no
withdrawal rights will apply to Shares tendered in such Subsequent Offering
Period or to Shares previously tendered in the Offer and accepted for payment.
We will determine, in our sole discretion, all questions as to the form and
validity (including time of receipt) of any notice of withdrawal, and our
determination shall be final and binding. None of the Purchaser, the Dealer
Manager, the Depositary, the Information Agent or any other person will be
under any duty to give notification of any defect or irregularity in any notice
of withdrawal or waiver of any such defect or irregularity or incur any
liability for failure to give any such notification.
6. Certain United States Federal Income Tax Consequences
This summary of the material United States federal income tax consequences
of the Offer and the Merger is for general information only and is based on the
law as currently in effect. This summary does not discuss all of the tax
consequences that may be relevant to a stockholder in light of its particular
circumstances or to stockholders subject to special rules, such as financial
institutions, broker-dealers, tax-exempt organizations, stockholders that hold
their Shares as part of a straddle or a hedging or conversion transaction and
stockholders who acquired their Shares through the exercise of an employee
stock option or otherwise as compensation. This summary does not discuss the
tax consequences of the Offer and the Merger for non-United States holders.
Stockholders are urged to consult their own tax advisors as to the
particular tax consequences to them of the offer and the Merger, including the
effect of United States state and local tax laws or foreign tax laws.
43
A United States holder refers to a stockholder that is, for United States
federal income tax purposes:
. a citizen or resident of the United States,
. a corporation or other entity taxable as a corporation created or
organized in the United States or under the laws of the United States or
of any political subdivision of the United States, or
. an estate or trust, the income of which is includible in gross income for
federal income tax purposes regardless of its source.
The receipt by a United States holder of cash for Shares pursuant to the
Offer or the Merger will be a taxable transaction under the United States
Internal Revenue Code of 1986, as amended (the "Code"). A United States holder
will generally recognize gain or loss in an amount equal to the difference
between the cash received by the stockholder pursuant to the Offer or the
Merger and the stockholder's adjusted tax basis in the Shares tendered pursuant
to the Offer or converted in the Merger. That gain or loss will be a capital
gain or loss if the Shares are a capital asset in the hands of the stockholder,
and will be a long-term capital gain or loss if the Shares have been held for
more than one year. Stockholders are urged to consult their own tax advisors as
to the federal income tax treatment of a capital gain or loss (including
limitations on the deductibility of a capital loss).
A United States holder may be subject to backup withholding at a rate of 31%
unless it provides its taxpayer identification number and certifies that the
number is correct or properly certifies that it is awaiting a taxpayer
identification number. See "Procedures for Accepting the Offer and Tendering
Shares--Other Requirements." Backup withholding is not an additional tax.
Amounts so withheld can be refunded or credited against the federal income tax
liability of the stockholder, provided appropriate information is forwarded to
the IRS. A tendering United States holder should complete the Substitute Form
W-9 that is included in the Letter of Transmittal.
None of Sodexho, the Purchaser or SMS will recognize gain or loss for United
States federal income tax purposes with respect to the Offer or the Merger.
7. Price Range of Shares; Dividends. The Shares are listed and principally
traded on the New York Stock Exchange under the symbol "SDH". The following
table sets forth for the periods indicated the high and low sales prices per
Share on the NYSE based on published financial sources.
High Low
------ ------
Fiscal Year 1999
First Quarter.................................................. $33.38 $24.63
Second Quarter................................................. $29.25 $22.00
Third Quarter.................................................. $25.13 $18.88
Fourth Quarter................................................. $23.25 $13.75
Fiscal Year 2000
First Quarter.................................................. $19.31 $13.81
Second Quarter................................................. $15.75 $10.13
Third Quarter.................................................. $15.25 $10.44
Fourth Quarter................................................. $18.94 $14.00
Fiscal Year 2001
First Quarter.................................................. $21.63 $15.63
Second Quarter................................................. $29.75 $19.75
Third Quarter (through May 15, 2001)........................... $31.77 $28.15
On January 24, 2001, the last full trading day before public announcement of
Sodexho's initial proposal to acquire all Shares it did not already own, the
closing price per Share on the NYSE was $24.875. On May 1,
44
2001, the last full trading day before public announcement of the Merger
Agreement, the closing price per Share on the NYSE was $29.50. On May 15, 2001,
a recent trading day before the date of this Offer to Purchase, the closing
price per Share on the NYSE was $31.75. We advise you to obtain a recent
quotation for Shares before deciding whether to tender your Shares.
On December 10, 1999, SMS paid a dividend of $0.08 per Share to holders of
record as of November 22, 1999. SMS has not paid any subsequent dividends.
SMS's credit facilities contain covenants restricting its ability to pay
dividends. In general, the restrictive covenants do not permit SMS to pay
dividends to stockholders in an amount greater than 40 percent of SMS's net
income, or 45 percent when the ratio of SMS's consolidated debt to earnings
before interest, taxes, depreciation or amortization, or EBITDA, is less than 4
but not less than 3. This restriction will no longer apply when such ratio is
less than 3.
As of May 11, 2001, there were 63,723,383 Shares outstanding.
8. Certain Information Concerning SMS. General. SMS is the leading provider
in North America of outsourced food and facilities management services, to
businesses, health care facilities, colleges and universities, and primary and
secondary schools, with $4.7 billion in sales for the fiscal year ended
September 1, 2000. SMS operates at 5,000 locations across the United States and
Canada. Food services include food and beverage procurement, preparation and
menu planning, as well as the operation and maintenance of food service and
catering facilities, generally on a client's premises. Facilities management
services include plant maintenance, energy management, grounds keeping, and
housekeeping and custodial services. The address and phone number of its
principal executive office are 9801 Washingtonian Boulevard, Gaithersburg, MD
20878, (301) 987-4500.
Available Information. SMS is subject to the informational requirements of
the Exchange Act and in accordance therewith files periodic reports, proxy
statements and other information with the SEC relating to its business,
financial condition and other matters. SMS is required to disclose in such
proxy statements certain information, as of particular dates, concerning SMS's
directors and officers, their remuneration, stock options granted to them, the
principal holders of SMS's securities and any material interest of such persons
in transactions with SMS. Such reports, proxy statements and other information
may be inspected at the public reference facilities maintained by the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; 7 World Trade
Center, Suite 1300, New York, New York 10048 and Citicorp Center, Suite 1400,
500 W. Madison Street, Chicago, Illinois 60661. Copies of such material can
also be obtained at prescribed rates from the Public Reference Section of the
SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, or free
of charge at the Web site maintained by the SEC at http://www.sec.gov.
Except as otherwise stated in this Offer to Purchase, the information
concerning SMS contained herein has been taken from or is based upon reports
and other documents on file with the SEC or otherwise publicly available.
Although Sodexho has no knowledge that would indicate that any statements
contained herein based upon such reports and documents are untrue, Sodexho
takes no responsibility for the accuracy or completeness of the information
contained in such reports and other documents or for any failure by SMS to
disclose events that may have occurred and may affect the significance or
accuracy of any such information but that are unknown to Sodexho.
45
Selected Financial Information. The following table presents selected
consolidated financial information of SMS which has been excerpted or derived
from the audited financial statements contained in SMS's annual report on Form
10-K for the fiscal year ended September 1, 2000 (the "SMS 10-K") and the
unaudited financial statements contained in SMS's Quarterly Report on Form 10-Q
for the thirteen weeks ended March 2, 2001 (the "SMS 10-K"). The financial
information that follows is qualified in its entirety by reference to the SMS
10-K and the SMS 10-Q and other documents filed by SMS with the SEC which
contain comprehensive financial information. The SMS 10-K and the SMS 10-Q and
such other documents may be examined and copies may be obtained from the
offices of the SEC in the manner set forth above.
26 Weeks Ended 34 Weeks Fiscal Year
----------------- Ended -------------------------
March 2, March 3, Fiscal Year Fiscal Year August 28,
2001 2000 2000(1) 1999(1) 1998(1) 1997(2) 1996(3) 1995(3)
-------- -------- ----------- ----------- ---------- ------- ------- -------
(in millions, except per share data)
Income Statement Data:
Sales................... $2,596 $2,467 $4,734 $4,502 $2,828 $5,026 $4,318 $3,634
Operating Profit Before
Corporate Expenses and
Interest............... 198 181 319 299 119 157 177 130
Total Corporate Expenses
and Interest(4)........ (106) (106) (207) (207) (151) (172) (127) (78)
------ ------ ------ ------ ------ ------ ------ ------
Income (Loss) From
Continuing Operations,
Before Taxes and
Extraordinary Item..... 92 75 112 92 (32) (15) 50 52
(Provision) Benefit for
Income Taxes from
Continuing Operations.. (39) (33) (49) (41) 13 15 (17) (20)
------ ------ ------ ------ ------ ------ ------ ------
Income (Loss) From
Continuing Operations,
Before Discontinued
Operations and
Extraordinary Item..... 53 42 63 51 (19) -- 33 32
Discontinued Operations,
Net of Income
Taxes(5)............... -- -- -- -- 77 335 273 215
------ ------ ------ ------ ------ ------ ------ ------
Income Before
Extraordinary Item..... 53 42 63 51 58 335 306 247
Loss from Extraordinary
Item, Net of Income
Taxes(6) -- -- -- -- (44) -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Net Income.............. $ 53 $ 42 $ 63 $ 51 $ 14 $ 335 $ 306 $ 247
====== ====== ====== ====== ====== ====== ====== ======
Per Share Data(7):
Basic Earnings Per
Share:
Continuing Operations.. $ 0.84 $ 0.67 $ 1.01 $ 0.82 $(0.36) $ -- $ 1.03 $ 1.03
Discontinuing
Operations(5)......... -- -- -- -- 1.48 10.53 8.56 6.89
------ ------ ------ ------ ------ ------ ------ ------
Basic Earnings Per Share
before
Extraordinary Item..... 0.84 0.67 1.01 0.82 1.12 10.53 9.59 7.92
Extraordinary Item(6) -- -- -- -- (0.85) -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Basic Earnings Per
Share.................. $ 0.84 $ 0.67 $ 1.01 $ 0.82 $ 0.27 $10.53 $ 9.59 $ 7.92
====== ====== ====== ====== ====== ====== ====== ======
Basic Weighted-Average
Shares................. 63.3 62.9 63.0 62.1 52.0 31.8 31.9 31.2
Diluted Earnings Per
Share:
Continuing Operations.. $ 0.83 $ 0.67 $ 1.00 $ 0.81 $(0.36) $ -- $ 0.97 $ 0.97
Discontinued
Operations(5)......... -- -- -- -- 1.48 10.53 8.08 6.51
------ ------ ------ ------ ------ ------ ------ ------
Diluted Earnings Per
Share before
Extraordinary Item..... 0.83 0.67 1.00 0.81 1.12 10.53 9.05 7.48
Extraordinary Item(6).. -- -- -- -- (0.85) -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Diluted Earnings Per
Share.................. $ 0.83 $ 0.67 $ 1.00 $ 0.81 $ 0.27 $10.53 $ 9.05 $ 7.48
====== ====== ====== ====== ====== ====== ====== ======
Diluted Weighted-Average
Shares................. 64.1 63.5 63.5 63.9 52.0 31.8 33.8 33.0
46
26 Weeks Ended 34 Weeks Fiscal Year
----------------- Ended -----------------------
March 2, March 3, Fiscal Year Fiscal Year August 28,
2001 2000 2000(1) 1999(1) 1998(1) 1997(2) 1996(3) 1995(3)
-------- -------- ----------- ----------- ---------- ------- ------- -------
(in millions, except per share data)
Cash Dividends
Declared(8)............ $ -- $ 0.08 $ 0.08 $ -- $ 0.36 $ 1.40 $ 1.28 $ 1.12
Ratio of Earnings to
Fixed Charges(9)....... 3.4 2.7 2.3 2.0 2.5 4.0 4.5 4.8
Book Value at Period
End(10)................ n/m n/m n/m n/m n/m 46.4 40.0 33.6
Balance Sheet Data (at end of
period):
Total Current Assets.... $ 744 $ 707 $ 682 $ 642 $ 605 $ 914 $ 764 $ 784
Total Noncurrent
Assets................. 677 696 682 705 736 4,095 3,416 2,437
------ ------ ------ ------ ------ ------ ------ ------
Total Assets............ $1,421 $1,403 $1,364 $1,347 $1,341 $5,009 $4,180 $3,221
====== ====== ====== ====== ====== ====== ====== ======
Total Current
Liabilities............ $ 809 $ 788 $ 765 $ 718 $ 695 $1,149 $1,092 $ 934
Total Long-Term and
Convertible
Subordinated Debt...... 859 940 900 1,010 1,091 1,829 1,300 795
Total Other Noncurrent
Liabilities............ 110 110 112 113 110 568 528 438
Stockholders' (Deficit)
/Equity................ (357) (435) (413) (494) (555) 1,463 1,260 1,054
------ ------ ------ ------ ------ ------ ------ ------
Total Liabilities and
Stockholders'
(Deficit)/Equity....... $1,421 $1,403 $1,364 $1,347 $1,341 $5,009 $4,180 $3,221
====== ====== ====== ====== ====== ====== ====== ======
- --------
(1) On April 15, 1998, the SMS Board changed the fiscal year from the Friday
closest to the end of December to the Friday closest to the end of August,
thereby creating a 34-week Transition Period. On March 27, 1998, SMS
acquired Sodexho North America. In addition, fiscal year 2000 had 52 weeks
ended on September 1, 2000, fiscal year 1999 had 53 weeks and ended on
September 3, 1999. The historical data for fiscal year 1997 and prior
years does not include the revenue and expenses of the acquired business.
(2) Operating results in fiscal year 1997 (52 weeks ended January 2, 1998)
include a loss before income taxes of $22 million ($14 million after tax,
or $0.40 per share) on the sale of the MMS-UK operations to Sodexho in
connection with the 1998 merger transactions.
(3) Fiscal year 1996 includes 53 weeks ending on January 3, 1997, with fiscal
year 1995 including 52 weeks ending on December 29, 1995.
(4) Total corporate expenses include the amortization of intangible assets.
For fiscal year 1999 and the 34 weeks ended August 28, 1998, $16 million
and $31 million pretax, respectively, of integration and restructuring
charges were recognized.
(5) On March 27, 1998, SMS distributed to its stockholders the Lodging, MSLS
and MDS divisions as part of the 1998 transactions. For reporting
purposes, the Lodging segment is considered Discontinued Operations prior
to March 27, 1998. MSLS and MDS are considered part of continuing
operations for the same periods.
(6) On March 27, 1998, SMS refinanced its debt as part of the 1998
transactions, resulting in a $71 million pretax charge from the early
extinguishment of debt ($44 million after-tax).
(7) Earnings per share data have been restated to reflect the adoption in 1997
of Statement of Financial Accounting Standards No. 128, "Earnings Per
Share." All per share data has been adjusted to reflect a one-for-four
reverse stock split effective March 27, 1998.
(8) The SMS Board declared on October 13, 1999, an $0.08 per common share
dividend for fiscal year 1999, paid on December 10, 1999 to stockholders
of record on November 22, 1999.
(9) Earnings have been calculated by adding interest expense and the portion
of rentals estimated to represent the interest factor to income before
income taxes. Fixed charges include interest charges (including
capitalized interest).
(10) Book value per share is calculated as to total stockholders' equity at the
end of the period divided by the diluted number of shares of Common Stock
outstanding at the end of the period. Book value is not meaningful for the
34 weeks ended August 28, 1998 to present, as SMS had a Stockholders'
Deficit Balance.
47
Certain Projections. As a significant stockholder of SMS, Sodexho and its
representatives on the SMS Board were routinely given access to nonpublic
management projections of possible future performance of SMS. Following the
receipt by the SMS Board on January 24, 2001 of Sodexho's initial proposal to
acquire all of the outstanding Shares it did not already own, SMS did not give
Sodexho and its representatives on the SMS Board routine access to such
projections. SMS provided Sodexho with the January 2001 projections summarized
below prior to January 24, 2001.
The SMS projections were not prepared with a view to public disclosure or
compliance with published guidelines of the SEC or the guidelines established
by the American Institute of Certified Public Accountants regarding projections
or forecasts. The SMS projections are included in this Offer to Purchase only
because such information was provided to Sodexho and was in the possession of
Sodexho during its evaluation of a business combination transaction. These
projections are based on then-current expectations, forecasts and assumptions
of SMS management and involve risks and uncertainties, some of which are
outside of SMS's control, that could cause actual outcomes and results to
differ materially from current expectations. These risks and uncertainties
include, among other things: (1) the ability of SMS to adapt to various
changes, including changes in its structure, senior management and relationship
with Sodexho, (2) the potential adverse impact of SMS's substantial
indebtedness, including restrictions and remedies available within the related
debt covenants, (3) the ability of SMS to attract, hire, train and retain
competent management personnel, (4) competition in the food services and
facilities management industries, (5) the effects of general economic
conditions, (6) the ability of SMS to retain clients and obtain new clients on
satisfactory terms, and other factors described from time to time in SMS's
filings with the SEC. Accordingly, there can be no assurance that the
assumptions made in preparing any of the SMS projections will prove accurate or
that any of the SMS projections will be realized. It is expected that there
will be differences between actual and projected results, and actual results
may be materially greater or less than those contained in any of the SMS
projections. The inclusion of any of the SMS projections herein should not be
regarded as an indication that any of Sodexho, the Purchaser or SMS or their
respective affiliates or representatives considered or consider any of the SMS
projections to be a reliable prediction of future events, and none of the SMS
projections should be relied upon as such. None of Sodexho, the Purchaser or
SMS or any of their respective affiliates or representatives has made or makes
any representations to any person regarding the ultimate performance of SMS
compared to the information contained in any of SMS projections, and none of
them has updated or intends to update or otherwise revise any of the SMS
projections to reflect circumstances existing after the date when made or to
reflect the occurrence of future events even in the event that any or all of
the assumptions underlying any of the SMS projections are shown to be in error.
January 2001 SMS Projections
Fiscal Year
--------------------------------------
Projected
--------------------------------------
2001 2002 2003 2004 2005
------ ------ ------ ------ ------
Dollars in millions
Total Revenues.......................... $4,970 $5,244 $5,559 $6,011 $6,263
EBITDA.................................. $ 300 $ 320 $ 355 $ 390 $ 430
Depreciation............................ $ (48) $ (49) $ (52) $ (58) $ (59)
Amortization............................ $ (37) $ (36) $ (34) $ (33) $ (32)
------ ------ ------ ------ ------
EBIT.................................... $ 215 $ 235 $ 269 $ 299 $ 338
Interest Expense........................ $ (78) $ (74) $ (71) $ (54) $ (43)
------ ------ ------ ------ ------
Earnings before Taxes................... $ 137 $ 160 $ 198 $ 245 $ 295
Provision for Taxes..................... $ (59) $ (68) $ (83) $ (102) $ (121)
------ ------ ------ ------ ------
Net Income.............................. $ 78 $ 92 $ 115 $ 143 $ 174
====== ====== ====== ====== ======
48
9. Certain Information Concerning the Purchaser, Sodexho and Bellon S.A. The
Purchaser is a Delaware corporation incorporated on April 3, 2001. It is
wholly-owned subsidiary of Sodexho. The Purchaser has not engaged in any
activities other than in connection with or as contemplated by the Merger
Agreement or in connection with arranging financing required to consummate the
transactions contemplated by the Merger Agreement. The Purchaser's business
address is 3 Avenue Newton, 78180 Montigny-le-Bretonneux, France.
Sodexho is a French corporation. Sodexho was founded in 1966 by its current
Chairman, Pierre Bellon. It is today the world leader in food and management
services. With 286,000 employees and operations in 70 countries at 22,000
sites, Sodexho generated Euro 10.5 billion in sales in fiscal year ended August
31, 2000. Sodexho has held 29,949,925 Shares since SMS's formation in 1998,
which currently represents about 47.1 percent of the outstanding Shares. Prior
to the closing of the Merger, Sodexho may transfer these Shares to the
Purchaser.
Bellon S.A. is a privately held French corporation and the beneficial owner
of approximately 40.2 percent of Sodexho. Pierre Bellon, together with members
of his family, beneficially owns an approximate 54.9 percent economic interest
(representing a 70.8 percent voting interest) in Bellon S.A.
The name, business address, principal occupation or employment, five year
employment history and citizenship of each director and executive officer of
Sodexho, the Purchaser and Bellon S.A. and certain other information are set
forth on Schedule I.
10. Source and Amount of Funds. We will need approximately $1.15 billion to
purchase all Shares held by non-affiliates of Sodexho pursuant to the Offer and
to pay related fees and expenses. We intend to pay for all Shares validly
tendered and not withdrawn in the Offer and to provide funding for the Merger
and related expenses through borrowings under a Euro 1,332,500,000
multicurrency term loan facility ("Facility A2") provided under a term and
revolving facilities agreement dated as of April 6, 2001, as amended on
April 27, 2001, among Sodexho, Citibank International plc, Goldman Sachs
International and SG Investment Banking as arrangers, Societe Generale as agent
and issuing bank, and certain other financial institutions (the "Facilities
Agreement").
Maturity. Facility A2 has a maturity of 364 days (subject to extension, at
the option of Sodexho, for an additional one year subject to certain
conditions) and is to be repaid in full at maturity.
Interest Rates and Fees. All amounts outstanding under Facility A2 will bear
interest at an annual rate equal to the sum of (i) an applicable margin
(between 50 basis points and 140 basis points, depending generally on Sodexho's
long term credit rating as published by Standard & Poor's), (ii) as applicable,
LIBOR (defined as the British Bankers Association Interest Settlement Rate for
the relevant currency and period) or EURIBOR (defined as the percentage rate
per annum determined by the Banking Federation for the European Union for the
relevant period) and (iii) an amount determined by the agent, as necessary, to
reflect mandatory costs associated with compliance by each lender with
applicable reserve requirements.
The applicable margin will be decreased by 15 basis points if Sodexho
applies the net proceeds of a contemplated capital increase to prepay certain
facilities under the Facilities Agreement in specified amounts.
Interest payments will be made on the last date of each interest period
(which shall be 1, 2, 3 or 6 months or, to the extent available to each lender,
9 or 12 months) and, in the case of interest periods of longer than 6 months,
semi-annually in arrears.
Sodexho has agreed to pay certain arrangement, agency, and commitment fees
in connection with the Facilities Agreement. The commitment fee will accrue on
the unused amount of Facility A2 at a rate per annum of 33 1/3% of the
applicable margin, payable quarterly in arrears.
49
Mandatory Prepayments. Under the following circumstances mandatory
prepayments are required under Facility A2. First, if any subsidiary borrower
ceases to be a subsidiary of Sodexho, the facilities borrowed and or made
available to that borrower shall be repaid and cancelled. Second, if Bellon
S.A. ceases to hold at least 33 1/3% of the shares and/or voting rights of
Sodexho, Facility A2 shall be repaid and cancelled in full. Third, Facility A2
is to be mandatorily prepaid and permanently reduced by an amount equal to the
net proceeds received by Sodexho or any of its subsidiaries from: (i) any note,
bond or other debt securities issued by Sodexho or any of its subsidiaries in
any of the capital markets of the United States, Europe or Japan (subject to
certain exceptions) and (ii) any issue of equity or equity related security
(excluding stock options, the exercise of existing warrants and a proposed
international share ownership plan for employees).
Conditions to Borrowing. The availability of Facility A2 is subject to
satisfaction of conditions precedent typical for this type of facility
including (i) the expiration of all applicable waiting periods under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976; (ii) confirmation that all
fees and expenses then due have been paid, and (iii) receipt by the lenders of
customary documentation, including legal opinions, documentation relating to
the existence of Sodexho and its subsidiaries, and documentation relating to
the Offer and the Merger.
Guarantees. Sodexho, Purchaser and each other subsidiary borrower under the
Facilities Agreement guarantee the payment of all amounts under the Facilities
Agreement. In addition, if any amounts remain outstanding under SMS's existing
indebtedness or Sodexho exercises its option to extend the maturity of Facility
A2 in an amount in excess of Euro 250,000,000, it is contemplated that Sodexho
Operations, LLC, a wholly-owned subsidiary of SMS, will, no later than 60 days
from the date of the first drawing under Facility A2, guarantee the payment of
all amounts outstanding under the Facilities Agreement.
Covenants. The Facilities Agreement contains covenants typical for such
types of facilities including (1) maintenance of authorizations and consents;
(2) compliance with laws and regulations; (3) negative pledge (subject to
certain exceptions); (4) restrictions on disposals of assets; (5) restriction
on subsidiary borrowings and guarantees; (6) no merger or consolidation
(subject to certain exceptions); (7) no substantial changes to the general
nature of the business; (8) maintenance of insurance; (9) compliance of the
Offer with applicable laws and regulations; (10) pari passu ranking; (11)
payment of taxes; (12) transactions with affiliates to be on arms length terms
(subject to certain exceptions); (13) no contravention of Regulations T, U or X
of the Federal Reserve Board or any other applicable laws or regulations; and
(14) proper capitalization of Purchaser for the purposes of US laws and
regulations.
Events of Default. The Facilities Agreement also contains events of default
typical for such type of facilities including (1) non-payment of amounts under
the Facilities Agreement (subject to certain grace periods); (2) breach of
financial ratios; (3) breach of representations or misleading statements in any
material respect; (4) cross default on other debt of at least Euro 30,000,000;
(5) inability generally to pay debts; (6) bankruptcy, winding-up, foreclosure;
(7) expropriation, attachment, execution of assets; (8) ceasing to carry on all
or a substantial part of its business; (9) unlawfulness or repudiation of
finance documents; (10) judgments having a material adverse effect; (11)
occurrence of certain ERISA events; and (12) material adverse change affecting
(A) the ability of Sodexho to perform the payment obligations or (B) the
business or financial condition of Sodexho and its subsidiaries taken as a
whole.
The Facilities Agreement also provides the following additional facilities:
(1) $930,000,000 five-year term loan to refinance existing indebtedness of SMS,
if required, (2) $150,000,000 multicurrency revolving and letter of credit
facility to fund working capital requirements of SMS following the refinancing
of existing SMS indebtedness, and (3) Euro 600,000,000 364-day multicurrency
term loan facility to finance an unrelated acquisition by Sodexho.
11. Effect of the Offer on the Market for the Shares; Stock Exchange
Listing(s); Registration under the Exchange Act. If the Merger is consummated,
stockholders who have not tendered their Shares in the Offer will receive cash
in an amount equal to the price per Share provided pursuant to the Offer,
unless the
50
stockholder exercises its appraisal rights under Delaware law. Therefore, if
such Merger takes place, the only difference between tendering Shares in the
Offer and not tendering Shares in the Offer is that tendering stockholders will
be paid earlier. If, however, the Merger is not consummated, the purchase of
Shares pursuant to the Offer will reduce the number of Shares that might
otherwise trade publicly and may reduce the number of holders of Shares, which
could adversely affect the liquidity and market value of the remaining Shares
held by stockholders other than Sodexho. We cannot predict whether the
reduction in the number of Shares that might otherwise trade publicly would
have an adverse or beneficial effect on the market price for, or marketability
of, the Shares or whether such reduction would cause future market prices to be
greater or less than the Offer Price.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of the NYSE for continued listing
and may, therefore, be delisted from such exchange. According to the NYSE's
published guidelines, the NYSE would consider delisting the Shares if, among
other things (1) there were fewer than 400 holders, (2) there were fewer than
1,200 holders and the average monthly trading volume was less than 100,000
Shares over the most recent 12 months, (3) the number of publicly held Shares
(excluding Shares held by officers, directors, their immediate families and
other concentrated holdings of 10% or more) were less than 600,000, or (4) the
aggregate market value of the publicly held Shares were less than $15 million.
If, as a result of the purchase of Shares pursuant to the Offer, the Shares no
longer meet the requirements of the NYSE for continued listing and the listing
of Shares is discontinued, the market for the Shares could be adversely
affected.
If the NYSE were to delist the Shares, it is possible that the Shares would
trade on another securities exchange or in the over-the-counter market and that
price quotations for the Shares would be reported by such exchange or through
the NASDAQ National Market or other sources. The extent of the public market
for the Shares and availability of such quotations would, however, depend upon
such factors as the number of holders and/or the aggregate market value of the
publicly-held Shares at such time, the interest in maintaining a market in the
Shares on the part of securities firms, the possible termination of
registration of the Shares under the Exchange Act and other factors.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of such Shares. Depending upon factors similar to those
described above regarding listing and market quotations, the Shares might no
longer constitute "margin securities" for the purposes of the Federal Reserve
Board's margin regulations and, therefore, could no longer be used as
collateral for loans made by brokers.
The Shares are currently registered under the Exchange Act. Registration may
be terminated upon application of SMS to the SEC if the Shares are neither
listed on a national securities exchange nor held by 300 or more holders of
record. Termination of the registration of the Shares under the Exchange Act
would substantially reduce the information required to be furnished by SMS to
holders of Shares and to the SEC and would make certain of the provisions of
the Exchange Act, such as the short-swing profit recovery provisions of Section
16(b), the requirement of furnishing a proxy statement pursuant to Section
14(a) in connection with a stockholders' meeting and the requirements of Rule
13e-3 under the Exchange Act with respect to "going private" transactions, no
longer applicable to the Shares. Furthermore, "affiliates" of SMS and persons
holding "'restricted securities" of SMS may be deprived of the ability to
dispose of such securities pursuant to Rule 144 promulgated under the
Securities Act of 1933. If registration of the Shares under the Exchange Act
were terminated, the Shares would no longer be "margin securities" or eligible
for listing or NASDAQ National Market reporting.
12. Dividends and Distributions. Pursuant to the Merger Agreement, without
the prior written approval of Sodexho or the Purchaser or as otherwise
contemplated in the Merger Agreement, SMS has agreed not to declare or pay any
dividend on, or make any other distribution in respect of outstanding shares of
its capital stock.
51
13. Conditions of the Offer. Notwithstanding any other provision of the
Offer, the Purchaser shall not be required to accept for payment or pay for any
Shares, and may terminate the Offer, if
(1) at the Expiration Date, the Minimum Condition shall not have been
satisfied; or
(2) at any time on or after May 1, 2001 and prior to the Expiration
Date, any of the following conditions exists:
(a) there shall be instituted or pending any action or proceeding by
any governmental authority (domestic, foreign or supranational) before
any court or governmental authority or agency (domestic, foreign or
supranational), (1) challenging or seeking to make illegal, to delay
materially or otherwise to restrain or prohibit the making of the
Offer, the acceptance for payment of or payment for some or all of the
Shares pursuant to the Offer or the consummation of the Merger, or
seeking to obtain material damages in connection with the Offer or the
Merger, (2) seeking to restrain or prohibit the ownership or operation
by Sodexho or its affiliates of all or any portion of the business of
SMS and its subsidiaries, or of Sodexho and its subsidiaries, or to
compel Sodexho or any of its affiliates to dispose of or hold separate
all or any portion of the business or assets of SMS and its
subsidiaries or of Sodexho and its subsidiaries, (3) seeking to impose
limitations on the ability of Sodexho, the Purchaser or any of their
affiliates effectively to exercise full rights of ownership of the
Shares, including the right to vote any Shares on any matters properly
presented to SMS's stockholders, (4) seeking to require divestiture by
Sodexho, the Purchaser or any of their affiliates of any Shares, or
(5) that otherwise would reasonably be expected to have a Material
Adverse Effect on SMS or Sodexho, or
(b) there shall have been any action taken, or any statute, rule,
regulation, injunction, order or decree proposed, enacted, enforced,
promulgated, issued or deemed applicable to the Offer or the Merger, by
any court or governmental authority or agency (domestic, foreign or
supranational) that would reasonably be expected, directly or
indirectly, to result in any of the consequences referred to in clauses
(1) through (5) of paragraph (a) above, or
(c) there shall have been any event, occurrence, development or
state of circumstances or facts that has had or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on SMS, or
(d) SMS shall have breached or failed to perform in all material
respects any of its obligations under the Merger Agreement, except
where such breach or failure to perform would not have, individually or
in the aggregate a Material Adverse Effect on SMS, or
(e) any of the representations and warranties of SMS contained in
the Merger Agreement (without giving effect to any qualifications
contained therein as to "materiality" or "Material Adverse Effect")
shall not be true and correct in all respects when made or at any time
prior to the consummation of the Offer as if made at and as of such
time, except where failure to be true or correct would not have,
individually or in the aggregate a Material Adverse Effect on SMS, or
(f) the Merger Agreement shall have been terminated in accordance
with its terms, or
(g) the SMS Board shall have failed to recommend, or shall have
withdrawn or modified in a manner adverse to Sodexho its approval or
recommendation of, the Merger Agreement or the Offer or the Merger or
shall have approved or recommended an Acquisition Proposal, or
(h) SMS shall have entered into, or publicly announced its intention
to enter into, a definitive agreement or an agreement in principle with
respect to an Acquisition Proposal.
The foregoing conditions are for the sole benefit of Sodexho and Purchaser
and may, subject to the terms of the Merger Agreement, be waived by Sodexho and
Purchaser in whole or in part at any time and from time to time prior to the
Expiration Date in their discretion. The failure by Sodexho or Purchaser at any
time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right, the waiver of any such
52
right with respect to particular facts and circumstances shall not be deemed a
waiver with respect to any other facts and circumstances, and each such right
shall be deemed an ongoing right that may be asserted at any time and from time
to time prior to consummation of the Offer.
14. Certain Legal Matters; Regulatory Approvals. General. We are not aware
of any governmental license or regulatory permit that appears to be material to
SMS's business that might be adversely affected by our acquisition of Shares
pursuant to the Offer or, except as set forth below, of any approval or other
action by any government or governmental administrative or regulatory authority
or agency, domestic or foreign, that would be required for our acquisition or
ownership of Shares pursuant to the Offer. Should any such approval or other
action be required, we currently contemplate that, except as described below
under "State Takeover Laws," such approval or other action will be sought.
There is, however, no current intent to delay the purchase of Shares tendered
pursuant to the Offer pending the outcome of any such matter. There can be no
assurance that any such approval or other action, if needed, would be obtained
(with or without substantial conditions) or that if such approvals were not
obtained or such other actions were not taken adverse consequences might not
result to SMS's business or certain parts of SMS's business might not have to
be disposed of, any of which could cause us to elect to terminate the Offer
without the purchase of Shares thereunder. Our obligation under the Offer to
accept for payment and pay for Shares is subject to certain conditions. See
"The Offer--Conditions of the Offer."
State Takeover Laws. SMS is incorporated under the laws of the State of
Delaware. In general, Section 203 of the DGCL ("Section 203") prevents an
"interested stockholder" (including a person who owns or has the right to
acquire 15% or more of the corporation's outstanding voting stock) from
engaging in a "business combination" (defined to include mergers and certain
other actions) with a Delaware corporation for a period of three years
following the date such person became an interested stockholder. The
restrictions of Section 203 do not apply to any stockholder as to which, prior
to the time it became an interested stockholder, the board of directors of the
corporation approved the transaction which resulted in the stockholder becoming
an interested stockholder. Since the SMS Board approved Sodexho's initial
acquisition of Shares in 1998 and has approved the Merger Agreement, Sodexho
and the Purchaser do not believe that the restrictions of Section 203 would
apply to the Merger. In addition, Sodexho and the Purchaser believe that the
restrictions of Section 203 are inapplicable to the Merger because Sodexho has
been an interested stockholder of SMS for more than three years.
A number of other states have adopted laws which purport, to varying
degrees, to apply to attempts to acquire corporations that are incorporated in,
or which have substantial assets, stockholders, principal executive offices or
principal places of business or whose business operations otherwise have
substantial economic effects in, such states. SMS, directly or through
subsidiaries, conducts business in a number of states throughout the United
States, some of which have enacted such laws. Except as described herein, we do
not know whether any of these laws will, by their terms, apply to the Offer or
any merger or other business combination between us or any of our affiliates
and SMS and we have not complied with any such laws. To the extent that certain
provisions of these laws purport to apply to the Offer or any such merger or
other business combination, we believe that there are reasonable bases for
contesting such laws.
In 1982, in Edgar v. MITE Corp., the Supreme Court of the United States
invalidated on constitutional grounds the Illinois Business Takeover Statute
which, as a matter of state securities law, made takeovers of corporations
meeting certain requirements more difficult. However, in 1987 in CTS Corp. v.
Dynamics Corp. of America, the Supreme Court held that the State of Indiana
could, as a matter of corporate law, constitutionally disqualify a potential
acquiror from voting shares of a target corporation without the prior approval
of the remaining stockholders where, among other things, the corporation is
incorporated, and has a substantial number of stockholders, in the state.
Subsequently, in TLX Acquisition Corp. v. Telex Corp., a Federal District Court
in Oklahoma ruled that the Oklahoma statutes were unconstitutional insofar as
they apply to corporations incorporated outside Oklahoma in that they would
subject such corporations to inconsistent regulations. Similarly, in Tyson
Foods, Inc. v. McReynolds, a Federal District Court in Tennessee ruled that
four Tennessee takeover statutes were unconstitutional as applied to
corporations incorporated outside Tennessee. This decision
53
was affirmed by the United States Court of Appeals for the Sixth Circuit. In
December 1988, a Federal District Court in Florida held in Grand Metropolitan
PLC v. Butterworth, that the provisions of the Florida Affiliated Transactions
Act and the Florida Control Share Acquisition Act were unconstitutional as
applied to corporations incorporated outside of Florida.
If any government official or third party should seek to apply any state
takeover law to the Offer or any merger or other business combination between
us or any of our affiliates and SMS, we will take such action as then appears
desirable, which action may include challenging the applicability or validity
of such statute in appropriate court proceedings. In the event it is asserted
that one or more state takeover statutes is applicable to the Offer or any such
merger or other business combination and an appropriate court does not
determine that it is inapplicable or invalid as applied to the Offer or any
such merger or other business combination, we might be required to file certain
information with, or to receive approvals from, the relevant state authorities
or holders of Shares, and we might be unable to accept for payment or pay for
Shares tendered pursuant to the Offer, or be delayed in continuing or
consummating the Offer or any such merger or other business combination. In
such case, we may not be obligated to accept for payment or pay for any
tendered Shares. See "The Offer--Conditions of the Offer."
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
and the rules that have been promulgated thereunder by the Federal Trade
Commission ("FTC"), certain acquisition transactions may not be consummated
unless certain information has been furnished to the Antitrust Division of the
Department of Justice (the "Antitrust Division") and the FTC, and certain
waiting period requirements have been satisfied. This information was furnished
to the Antitrust Division on March 7, 2001 and the waiting period requirements
were satisfied on April 6, 2001.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as our acquisition of Shares pursuant
to the Offer. At any time before or after the consummation of any such
transactions, the Antitrust Division or the FTC could take such action under
the antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the purchase of Shares pursuant to the Offer or
seeking divestiture of the Shares so acquired or divestiture of Sodexho's or
SMS's substantial assets. Private parties (including individual states) may
also bring legal actions under the antitrust laws. We do not believe that the
consummation of the Offer will result in a violation of any applicable
antitrust laws. However, there can be no assurance that a challenge to the
Offer on antitrust grounds will not be made, or if such a challenge is made,
what the result will be. See "The Offer--Conditions of the Offer" for certain
conditions to the Offer, including conditions with respect to litigation and
certain governmental actions.
Litigation. Following Sodexho's January 25, 2001 announcement that it had
made a proposal to acquire the outstanding Shares of the company, nine separate
lawsuits were filed in the Delaware Court of Chancery on behalf of a purported
class of SMS stockholders, excluding Sodexho and the other defendants. The
actions, which were styled Feldman v. Shaw, et al., C.A. No. 18640; Bieler v.
Shaw, et al., C.A. No. 18641; McMullen v. Shaw, et al., C.A. No. 18642; Alessi
v. Shaw, et al., C.A. No. 18644; Piven v. Shaw, et al., C.A. No. 18645;
Goldberg v. Shaw, et al., C.A. No. 18650; Remmen v. Shaw, et al., C.A. No.
18651; Berg v. Shaw, et al., C.A. No. 18653; and Burt v. Shaw, et al., C.A. No.
18661, were subsequently consolidated by order of the court under the caption
In re Sodexho Marriott Shareholders Litigation, Cons. C.A. No. 18640 (the
"Action"). That order designates the complaint in the Feldman action to be the
operative complaint in the Action. That complaint names as defendants SMS, the
members of the SMS Board and Sodexho, and generally alleges that the $27.00 per
Share offer announced by Sodexho on January 25, 2001 would provide inadequate
value to SMS stockholders, that Sodexho improperly used its position as a large
stockholder of SMS in making that proposal and that the members of the SMS
Board were beholden to Sodexho and could not impartially evaluate the proposal.
That complaint seeks preliminary and permanent injunctive relief against the
transaction proposed by Sodexho, monetary damages in an unspecified amount and
plaintiffs' costs and attorneys' fees.
Prior to SMS and Sodexho entering into the Merger Agreement, the parties to
the Action reached an agreement in principle to settle the Action based on the
facts (1) that plaintiffs' counsel and their financial
54
advisor had conveyed plaintiffs' views about the adequacy of Sodexho's earlier
proposal to the advisors to the Special Committee and that those views had been
taken into consideration by the members of the Special Committee in reaching
their determination to recommend to the full SMS Board that the board approve
the Merger Agreement, (2) that Sodexho was aware of the allegations made in the
complaints in the Action and took into account the desirability of addressing
those claims in determining to increase the per Share consideration to be paid
to SMS's stockholders from $27.00 to $32.00 per Share, and (3) that the $32.00
per Share consideration provided in the Merger Agreement was within the range
of fairness for such shares in the view of plaintiffs' financial advisor. The
proposed settlement is subject to a number of conditions, including, among
other things, that plaintiffs' counsel conclude, after completion of
appropriate discovery, that the proposed settlement is fair and reasonable to
members of the putative class, and approval by the Delaware Court of Chancery
of the settlement. Subject to final court approval of the settlement,
plaintiffs' counsel intend to apply to the Court for an award of their fees and
expenses. Defendants have agreed not to oppose such an application up to an
aggregate amount of $725,000, as may be awarded by the Court.
Provisions for Unaffiliated Security Holders. In connection with the Offer
and the Merger, none of Sodexho, Purchaser or SMS has granted to unaffiliated
security holders access to their corporate files or arranged for counsel or
appraisal services at the expense of Sodexho, Purchaser or SMS.
15. Fees and Expenses. Goldman Sachs International is acting as Sodexho's
financial advisor and Goldman, Sachs & Co. is acting as Dealer Manager in
connection with the Offer and the Merger. Sodexho has agreed to pay Goldman
Sachs International as compensation for its services as financial advisor
(including the services of Goldman, Sachs & Co. as Dealer Manager) a fee of
$7,100,000, of which $250,000 has been paid, with the balance due upon the
closing of the Offer. Sodexho has also agreed to reimburse Goldman Sachs for
certain reasonable out-of-pocket expenses incurred in connection with the Offer
and the Merger (including the fees and disbursements of outside counsel) and to
indemnify Goldman Sachs against certain liabilities, including certain
liabilities under the federal securities laws.
Sodexho has retained MacKenzie Partners, Inc. to act as the Information
Agent and EquiServe Trust Company, N.A. to act as the Depositary in connection
with the Offer. The Information Agent may contact holders of Shares by mail,
telephone, telex, telegraph and personal interviews and may request brokers,
dealers, banks, trust companies and other nominees to forward materials
relating to the Offer to beneficial owners. The Information Agent and the
Depositary each will receive reasonable and customary compensation for their
respective services, will be reimbursed for certain reasonable out-of-pocket
expenses and will be indemnified against certain liabilities in connection
therewith, including certain liabilities under the federal securities laws.
None of Sodexho, Purchaser or SMS will pay any fees or commissions to any
broker or dealer or any other person (other than the Dealer Manager, the
Information Agent and the Depository) for soliciting tenders of Shares pursuant
to the Offer. Brokers, dealers, commercial banks and trust companies will, upon
request, be reimbursed by us for reasonable and necessary costs and expenses
incurred by them in forwarding materials to their customers.
Fees and Expenses to Be Paid by Sodexho or the Purchaser:
Financial Advisor/Dealer Manager........................... $ 7,250,000
Legal...................................................... 1,950,000
Communications/Printing.................................... 250,000
Filing..................................................... 496,000
Depositary................................................. 430,000
Information Agent (including mailing)...................... 132,500
Miscellaneous.............................................. 300,000
-----------
Total.................................................... $10,808,500
===========
55
Fees and Expenses to Be Paid by SMS:
Financial Advisor............................................ $8,600,000
Legal........................................................ 900,000
Miscellaneous................................................ 250,000
----------
Total...................................................... $9,750,000
==========
The fees payable by SMS to UBS Warburg are described under Item 5 in
SMS's Solicitation/ Recommendation Statement on Schedule 14 D-9 referenced
below.
16. Miscellaneous. The Offer is not being made to, nor will tenders be
accepted from or on behalf of, holders of Shares in any jurisdiction in which
the making of the Offer or acceptance thereof would not be in compliance with
the laws of such jurisdiction. However, we may, in our discretion, take such
action as we may deem necessary to make the Offer in any such jurisdiction and
extend the Offer to holders of Shares in such jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of the Purchaser or Sodexho not contained in this
Offer to Purchase or in the Letter of Transmittal and, if given or made, such
information or representation must not be relied upon as having been
authorized.
We have filed with the SEC a Tender Offer Statement on Schedule TO, together
with exhibits, pursuant to Rule 14d-3 of the General Rules and Regulations
under the Exchange Act, furnishing certain additional information with respect
to the Offer which includes information required by Schedule 13E-3. In
addition, SMS has filed a Solicitation/Recommendation Statement on Schedule
14D-9, together with all exhibits thereto, pursuant to Rule 14d-9 of the
Exchange Act Rules setting forth its recommendation with respect to the Offer
and the reasons for such recommendations and furnishing certain additional
related information and has also filed a related Rule 13e-3 Transaction
Statement on Schedule 13E-3. Such Schedules and any amendments thereto,
including exhibits, may be examined and copies may be obtained from the offices
of the SEC in the manner set forth in "The Offer--Certain Information
Concerning the Purchaser and Sodexho--Available Information" of this Offer to
Purchase (except that such information will not be available at the regional
offices of the SEC).
SMS Acquisition Corp.
May 17, 2001
56
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF SODEXHO,
THE PURCHASER AND BELLON S.A.
1. DIRECTORS AND EXECUTIVE OFFICERS OF SODEXHO
The following table sets forth (1) the name, business address and present
principal occupation or employment, (2) material occupations, positions,
offices or employments and business addresses thereof for the past five years
and (3) information as to beneficial ownership of Shares of each director and
executive officer of Sodexho. The principal place of business of Sodexho and,
unless otherwise indicated below, the business address of each director and
officer, is care of Sodexho Alliance, S.A., 3, avenue Newton, 78180 Montigny-
le-Bretonneux, France. Sodexho's telephone number is 011-331-3085-7500. Unless
otherwise indicated, each occupation set forth opposite an individual's name
refers to employment with Sodexho and each individual has served in his or her
current position for at least the past five years. None of the directors and
officers of Sodexho listed below has, during the past five years, (1) been
convicted in a criminal proceeding or (2) been a party to any judicial or
administrative proceeding that resulted in a judgment, decree or final order
enjoining the person from future violations of, or prohibiting activities
subject to, federal or state securities laws, or a finding of any violation of
federal or state securities laws. Unless otherwise indicated, all directors and
officers listed below are citizens of France. Other than Pierre Bellon, who may
be deemed to beneficially own approximately 47.1% of the outstanding Shares, no
director or officer of Sodexho beneficially owns more than 1% of the
outstanding Shares.
Current Principal Occupation or Beneficial
Employment and Ownership
Name and Address Five-Year Employment History of Shares
---------------- -------------------------------- -------------
Directors
Pierre Bellon................ Mr. Bellon founded Sodexho in 29,949,926(1)
1966. He currently serves as
Chairman and Chief Executive
Officer of Sodexho. Since 1988
Mr. Bellon has served as
Chairman and Chief Executive
Officer of Bellon, S.A.
Remi Baudin.................. Mr. Baudin currently serves as
Vice Chairman of Sodexho. Mr.
Baudin is also President of
FERCO, the European food
services confederation, which he
founded in 1988.
Astrid Bellon................ Ms. Bellon has served as a
Member of the Management Board
of Bellon, S.A. since 1996.
Bernard Bellon............... In 1988 Mr. Bellon founded
Le Derby 570, Finadvance S.A., a venture
Avenue du Club Hippique, capital company, and has served
13090 Aix-en-Provence, as its Chairman since its
France founding.
Francois-Xavier Bellon....... Mr. Bellon has served as the
Sodexho Mexico, Chief Operating Officer of
Anatole France Sodexho Mexico since 2000, and
#319--Colonia Polanco, has been a member of the
CP 11550 Mexico DF Management Board of Bellon, S.A.
since 1996.
Sophie Clamens............... Ms. Clamens serves as a
Corporate Finance Director of
Sodexho, and has been a member
of the Management Board of
Bellon, S.A. since 1996.
I-1
Current Principal Occupation or Beneficial
Employment and Ownership
Name and Address Five-Year Employment History of Shares
---------------- ------------------------------------- ----------
Patrice Douce.............. Mr. Douce has been with Sodexho since
Sodexho International, 1972 when he created and managed the
PO Box 17132, Remote Site Management Business. From
Dubai UAE 1990 until his retirement in 1998 he
served as Chief Operating Officer of
Sodexho. After his retirement, Mr.
Douce has continued to serve as a
director of Sodexho.
Paul Jeanbart.............. Mr. Jeanbart is the Chief Executive
28, Bd du Pont d'Arve, Officer of the Rolaco Group, a
CH 1205 Geneva, company he co-founded in 1967. Mr.
Switzerland Jeanbart also serves as Chief
Executive Officer of Rolaco Holding,
S.A. Mr. Jeanbart is a citizen of
Canada.
Francois Perigot........... Mr. Perigot has been the President of
31, Avenue Pierre 1 de the Franco-Dutch Chamber of Commerce
Serbie, 75116 Paris, since 1996 and President of MEDEF
France International since 1997. Prior to
that Mr. Perigot served as Chairman
of Compagnie du Platre from 1986
through 1998, and Vice Chairman, and
later Chairman, of UNICE, the
European union of employer and
industry confederations, from 1988
through 1998.
Edouard de Royere.......... Mr. de Royere serves as President
c/o L'Air Liquide, Emeritus and Director of L'Air
75, Quai d'Orsay, Liquide. Mr. de Royere has served as
75007 Paris, France a director and Honorary Chairman of
L'Air Liquide since 1997, and served
as its Chairman and Chief Executive
Officer from 1985 until his
retirement in 1995.
Nathalie Szabo............. Ms. Szabo serves as the Chief
Operating Officer of Sodexho Prestige
France, and has been a member of the
Management Board of Bellon, S.A.
since 1996.
Executive Officers
(Who Are Not Directors)
Bernard Carton............. Mr. Carton serves as the Senior Vice 10,100
President and Chief Financial Officer
of Sodexho.
Raphael Dubrule............ Mr. Dubrule serves as the Corporate
Secretary and General Counsel of
Sodexho.
Albert George.............. Mr. George serves as President of
Sodexho. Mr. George has been with
Sodexho for over thirty years. Prior
to his recent appointment as
President, Mr. George served as Chief
Operating Officer of the Services
Vouchers and Cards business.
- --------
Note:
(1) Includes 29,949,925 shares beneficially owned by Sodexho Alliance, S.A. Mr.
Bellon, along with members of his family, beneficially owns an approximate
54.9 percent economic interest (representing a 70.8 percent voting
interest) in Bellon, S.A. Bellon, S.A. is the beneficial owner of
approximately 40.2 percent of Sodexho. Except to the extent of their
pecuniary interest in such shares, Bellon S.A. and Mr. Bellon disclaim
beneficial ownership of such shares.
I-2
2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER
The following table sets forth (1) the name, business address and present
principal occupation or employment, (2) material occupations, positions,
offices or employments and business addresses thereof for the past five years
and (3) information as to beneficial ownership of Shares of each director and
executive officer of the Purchaser. The principal place of business of the
Purchaser and, unless otherwise indicated below, the business address of each
director and officer, is care of Sodexho Alliance, S.A., 3, avenue Newton,
78180 Montigny-le-Bretonneux, France. The Purchaser's telephone number is 011-
331-3085-7500. Unless otherwise indicated, each individual has served in his or
her current position for at least the past five years. None of the directors
and officers of the Purchaser listed below has, during the past five years, (1)
been convicted in a criminal proceeding or (2) been a party to any judicial or
administrative proceeding that resulted in a judgment, decree or final order
enjoining the person from future violations of, or prohibiting activities
subject to, federal or state securities laws, or a finding of any violation of
federal or state securities laws. Unless otherwise indicated all directors and
officers listed below are citizens of France.
Current Principal Occupation or Employment Beneficial
and Ownership
Name and Address Five-Year Employment History of Shares
---------------- -------------------------------------------- ----------
Bernard Carton...... Director of the Purchaser. Mr. Carton serves 10,100
as the Senior Vice President and Chief
Financial Officer of Sodexho.
Denis Robin......... Director and President of the Purchaser. Mr.
Robin serves as the Director of Group
Corporate Finance and Development of
Sodexho.
Sian Herbert-Jones.. Director and Secretary of the Purchaser. Ms.
Herbert-Jones serves as the Director of
Finance and Treasury of Sodexho, and is a
citizen of the United Kingdom.
3. DIRECTORS AND EXECUTIVE OFFICERS OF BELLON S.A.
The following table sets forth (1) the name, business address and present
principal occupation or employment, (2) material occupations, positions,
offices or employments and business addresses thereof for the past five years
and (3) information as to beneficial ownership of Shares of each director and
executive officer of Bellon, S.A. The principal place of business of Bellon
S.A. and, unless otherwise indicated below or previously indicated above, the
business address of each director and officer, is care of Bellon, S.A., 5 Place
de la Joliette, 13002 Marseille, France. Bellon S.A.'s telephone number is 011-
334-91-90-84-72. None of the directors and officers of Bellon S.A. listed below
has, during the past five years, (1) been convicted in a criminal proceeding or
(2) been a party to any judicial or administrative proceeding that resulted in
a judgment, decree or final order enjoining the person from future violations
of, or prohibiting activities subject to, federal or state securities laws, or
a finding of any violation of federal or state securities laws. Unless
otherwise indicated all directors and officers listed below are citizens of
France.
Current Principal Occupation or Beneficial
Employment and Ownership
Name and Address Five-Year Employment History of Shares
---------------- ---------------------------------------- ----------
Supervisory Board
Remi Baudin...... See above under "Directors and Executive
Officers of Sodexho."
Danielle Bellon.. Member, Bellon S.A. Supervisory Board
Bernard Bellon... See above under "Directors and Executive
Officers of Sodexho."
Bernard Carton... See above under "Directors and Executive 10,100
Officers of Sodexho."
I-3
Current Principal Occupation or Beneficial
Employment and Ownership
Name and Address Five-Year Employment History of Shares
---------------- ---------------------------------------- ----------
Management Board
Pierre Bellon........... See above under "Directors and Executive 29,949,926
Officers of Sodexho."
Astrid Bellon........... See above under "Directors and Executive
Officers of Sodexho."
Francois-Xavier Bellon.. See above under "Directors and Executive
Officers of Sodexho."
Sophie Clamens.......... See above under "Directors and Executive
Officers of Sodexho."
Nathalie Szabo.......... See above under "Directors and Executive
Officers of Sodexho."
I-4
ANNEX A -- AGREEMENT AND PLAN OF MERGER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
dated as of
May 1, 2001
among
SODEXHO MARRIOTT SERVICES, INC.
SODEXHO ALLIANCE, S.A.
and
SMS ACQUISITION CORP.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
----------------
Page
----
ARTICLE 1
Definitions
Section 1.01. Definitions............................................... A-1
ARTICLE 2
The Offer
Section 2.01. The Offer................................................. A-3
Section 2.02. Company Action............................................ A-4
Section 2.03. Directors................................................. A-5
ARTICLE 3
The Merger
Section 3.01. The Merger................................................ A-6
Section 3.02. Conversion of Shares...................................... A-6
Section 3.03. Surrender and Payment..................................... A-6
Section 3.04. Dissenting Shares......................................... A-7
Section 3.05. Stock Based Awards........................................ A-7
Section 3.06. Adjustments............................................... A-9
Section 3.07. Withholding Rights........................................ A-9
Section 3.08. Lost Certificates......................................... A-9
ARTICLE 4
The Surviving Corporation
Section 4.01. Certificate of Incorporation.............................. A-10
Section 4.02. Bylaws.................................................... A-10
Section 4.03. Directors and Officers.................................... A-10
ARTICLE 5
Representations and Warranties of the Company
Section 5.01. Corporate Existence and Power............................. A-10
Section 5.02. Corporate Authorization................................... A-10
Section 5.03. Governmental Authorization................................ A-10
Section 5.04. Non-contravention......................................... A-11
Section 5.05. Capitalization............................................ A-11
Section 5.06. Material Subsidiaries..................................... A-11
Section 5.07. SEC Filings............................................... A-12
Section 5.08. Financial Statements...................................... A-12
Section 5.09. Disclosure Documents...................................... A-12
Section 5.10. Absence of Certain Changes................................ A-13
Section 5.11. Litigation................................................ A-14
Section 5.12. Finders' Fees............................................. A-14
Section 5.13. Taxes..................................................... A-14
Section 5.14. Employee Benefit Plans.................................... A-15
Section 5.15. Antitakeover Statutes and Rights Agreement................ A-16
i
Page
----
ARTICLE 6
Representations and Warranties of Parent
Section 6.01. Corporate Existence and Power.......................... A-16
Section 6.02. Corporate Authorization................................ A-16
Section 6.03. Governmental Authorization............................. A-16
Section 6.04. Non-contravention...................................... A-16
Section 6.05. Disclosure Documents................................... A-17
Section 6.06. Finders' Fees.......................................... A-17
Section 6.07. Tax Sharing Agreement Matters.......................... A-17
ARTICLE 7
Covenants of the Company
Section 7.01. Conduct of the Company................................. A-17
Section 7.02. Stockholder Meeting; Proxy Material.................... A-18
Section 7.03. Access to Information.................................. A-18
Section 7.04. No Solicitation; Other Offers.......................... A-18
Section 7.05. Tax Matters............................................ A-20
ARTICLE 8
Covenants of Parent
Section 8.01. Obligations of Merger Subsidiary....................... A-20
Section 8.02. Voting of Shares....................................... A-20
Section 8.03. Director and Officer Liability......................... A-20
Section 8.04. Other Indemnification.................................. A-21
ARTICLE 9
Covenants of Parent and the Company
Section 9.01. Commercially Reasonable Efforts........................ A-21
Section 9.02. Certain Filings........................................ A-21
Section 9.03. Public Announcements................................... A-21
Section 9.04. Further Assurances..................................... A-21
Section 9.05. Merger Without Meeting of Stockholders................. A-21
Section 9.06. Notices of Certain Events.............................. A-22
ARTICLE 10
Conditions to the Merger
Section 10.01. Conditions to Obligations of Each Party................ A-22
Section 10.02. Conditions to the Obligations of Parent and Merger
Subsidiary............................................. A-22
ARTICLE 11
Termination
Section 11.01. Termination............................................ A-22
Section 11.02. Effect of Termination.................................. A-23
ii
Page
----
ARTICLE 12
Miscellaneous
Section 12.01. Notices.................................................. A-24
Section 12.02. Non-Survival of Representations and Warranties........... A-24
Section 12.03. Amendments; No Waivers................................... A-24
Section 12.04. Expenses................................................. A-25
Section 12.05. Successors and Assigns................................... A-25
Section 12.06. Governing Law............................................ A-25
Section 12.07. Jurisdiction............................................. A-25
Section 12.08. WAIVER OF JURY TRIAL..................................... A-26
Section 12.09. Counterparts; Effectiveness; Benefit..................... A-26
Section 12.10. Entire Agreement......................................... A-26
Section 12.11. Captions................................................. A-26
Section 12.12. Severability............................................. A-26
Section 12.13. Specific Performance..................................... A-26
iii
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of May 1, 2001, among Sodexho
Marriott Services, Inc., a Delaware corporation (the "Company"), Sodexho
Alliance, S.A., a societe anonyme organized under the laws of the Republic of
France ("Parent"), and SMS Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Subsidiary").
The parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.01. Definitions. (a) The following terms, as used herein, have
the following meanings:
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by or under common control with such
Person.
"Agreement" means this Agreement and Plan of Merger, as it may be amended
from time to time.
"Business Day" means a day other than Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"Code" means the Internal Revenue Code of 1986.
"Company 10-K" means the Company's annual report on Form 10-K for the
fiscal year ended September 1, 2000.
"Deferred Share" means a deferred share (whether vested or unvested)
under any Deferred Share Agreement between the Company and an employee or
former employee of the Company or any of its Subsidiaries.
"Delaware Law" means the General Corporation Law of the State of
Delaware.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA Affiliate" of any entity means any other entity that, together
with such entity, would be treated as a single employer under Section 414 of
the Code.
"Excluded Arrangement" means any employment letter or agreement setting
forth the terms of employment or separation from employment for any non-
officer employee of the Company or any of its Subsidiaries which does not
address the grant, terms or treatment of equity based compensation provided to
such employee by the Company or any of its Material Subsidiaries.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
"Lien" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse claim of any
kind in respect of such property or asset. For purposes of this Agreement, a
Person shall be deemed to own subject to a Lien, any property or asset that it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.
"Material Adverse Effect" means, with respect to any Person, a material
adverse effect on the condition (financial or otherwise), business, assets or
results of operations of such Person and its Subsidiaries, taken as a whole.
"Material Subsidiary" means any entity listed or required to be listed in
an exhibit to the Company 10-K pursuant to Item 601 of Regulation S-K
promulgated by the SEC, except as set forth in Schedule 1.01.
"Moratorium Period" means the period from the Effective Time through the
Registration Date.
"1933 Act" means the Securities Act of 1933.
"1934 Act" means the Securities Exchange Act of 1934.
"Person" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Plans" means the Sodexho Marriott Services, Inc. 1993 Comprehensive
Stock Incentive Plan and the Sodexho Marriott Services, Inc. 1998
Comprehensive Stock Incentive Plan, and "Plan" means either of the foregoing.
"Registration Date" means the earliest date upon which both (i) a
Registration Statement on Form 20-F with respect to Parent's ordinary shares
has been declared effective under the 1934 Act and (ii) a Registration
Statement on Form S-8 with respect to Parent's ordinary shares underlying the
options issued pursuant to Section 3.05(b) has been declared effective under
the 1933 Act.
"Restricted Share" means a Share which is subject to forfeiture granted
under any of the Plans.
"Restricted Stock Units" means restricted stock units, granted under the
Sodexho Marriott Services, Inc. 1998 Comprehensive Stock Incentive Plan, which
result in the issuance of Shares upon vesting.
"Rights" means the preferred stock purchase rights issued pursuant to the
Rights Agreement.
"Rights Agreement" means the Rights Agreement dated as of October 8, 1993
between the Company and The Bank of New York, as Rights Agent, as amended by
Amendment No. 1 thereto dated as of September 30, 1997 and Amendment No. 2
thereto dated as of March 27, 1998.
"SEC" means the Securities and Exchange Commission.
"Shares" means the shares of common stock, $1.00 par value, of the
Company.
"Subsidiary" means, with respect to any Person, any entity of which
securities or other ownership interests having ordinary voting power to elect
a majority of the board of directors or other persons performing similar
functions are at any time directly or indirectly owned by such Person.
"Tax Sharing Agreement" means the Tax Sharing and Indemnification
Agreement dated as of March 27, 1998 by and among the Company, New Marriott
MI, Inc. (later renamed Marriott International, Inc.) and Parent.
Any reference in this Agreement to a statute shall be to such statute, as
amended from time to time, and to the rules and regulations promulgated
thereunder.
A-2
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
Acquisition Proposal................................................. 7.04
Certificates......................................................... 3.03
Company Disclosure Documents......................................... 5.09
Company Disclosure Schedule.......................................... Art. 5
Company ESPP......................................................... 3.05
Company Proxy Statement.............................................. 5.09
Company SEC Documents................................................ 5.07
Company Securities................................................... 5.05
Company Subsidiary Securities........................................ 5.06
Company Stockholder Meeting.......................................... 7.02
Confidentiality Agreement............................................ 7.03
Effective Time....................................................... 3.01
Employee Plans....................................................... 5.14
Exchange Agent....................................................... 3.03
GAAP................................................................. 5.08
Indemnified Person................................................... 8.03
Merger............................................................... 3.01
Merger Consideration................................................. 3.02
Minimum Condition.................................................... 2.01
Multiemployer Plan................................................... 5.14
Offer................................................................ 2.01
Offer Documents...................................................... 2.01
Option............................................................... 3.05
Option Cash-Out Amount............................................... 3.05
Schedule TO.......................................................... 2.01
Schedule 14D-9....................................................... 2.02
Special Committee.................................................... 2.02
Superior Proposal.................................................... 7.04
Surviving Corporation................................................ 3.01
Tax Return........................................................... 5.13
Tax.................................................................. 5.13
Taxing Authority..................................................... 5.13
Vested Options....................................................... 3.05
ARTICLE 2
The Offer
Section 2.01. The Offer. (a) Provided that nothing shall have occurred
that, had the Offer referred to below been commenced, would give rise to a
right to terminate the Offer pursuant to any of the conditions set forth in
Annex I hereto, as promptly as practicable (but no later than twenty days after
the date hereof), Merger Subsidiary shall commence an offer (the "Offer") to
purchase any and all of the outstanding Shares, together with the associated
Rights, at a price of $32.00 per Share, net to the seller in cash. The initial
expiration date of the Offer shall be twenty Business Days from the date the
Offer is commenced. The Offer shall be subject to the condition that there
shall be validly tendered in accordance with the terms of the Offer, prior to
the expiration date of the Offer and not withdrawn, a number of Shares that,
together with the Shares then owned by Parent or any of its Subsidiaries,
represents at least a majority of the Shares outstanding on a fully-diluted
basis (the "Minimum Condition") and to the other conditions set forth in Annex
I hereto. Merger Subsidiary expressly reserves the right to waive any of the
conditions to the Offer and to make any
A-3
change in the terms of or conditions to the Offer, provided that no change or
waiver may be made, without the prior written consent of the Company, that
changes the form of consideration to be paid, decreases the price per Share or
the number of Shares sought in the Offer or imposes conditions to the Offer in
addition to those set forth in Annex I. Notwithstanding the foregoing, without
the consent of the Company, Merger Subsidiary shall have the right to extend
the Offer (i) from time to time if, at the scheduled or extended expiration
date of the Offer, any of the conditions to the Offer shall not have been
satisfied or waived, until such conditions are satisfied or waived, (ii) for
any period required by any rule, regulation, interpretation or position of the
SEC or the staff thereof applicable to the Offer or any period required by
applicable law, (iii) on one or more occasions for an aggregate period of not
more than 10 Business Days beyond the latest expiration date that would
otherwise be permitted under clause (i) or (ii) of this sentence, if, on such
expiration date, the number of Shares tendered (and not withdrawn) pursuant to
the Offer, together with the Shares then owned by Parent or any of its
Subsidiaries, represents less than 90% of the outstanding Shares on a fully-
diluted basis and (iv) pursuant to a "subsequent offering period" under Rule
14d-11 of the 1934 Act. Subject to the foregoing and upon the terms and subject
to the conditions of the Offer, Merger Subsidiary shall, and Parent shall cause
it to, accept for payment and pay for, promptly after the expiration of the
Offer, all Shares validly tendered and not withdrawn pursuant to the Offer.
(b) As soon as practicable on the date of commencement of the Offer,
Parent and Merger Subsidiary shall file with the SEC a Tender Offer Statement
on Schedule TO (the "Schedule TO") with respect to the Offer (such Schedule TO
and such documents included therein, including a Rule 13e-3 Transaction
Statement on Schedule 13E-3, pursuant to which the Offer will be made, together
with any supplements or amendments thereto, the "Offer Documents"). Parent,
Merger Subsidiary and the Company each agrees promptly to correct any
information provided by it for use in the Offer Documents if and to the extent
that such information shall have become false or misleading in any material
respect. Parent and Merger Subsidiary agree to take all steps necessary to
cause the Schedule TO as so corrected to be filed with the SEC and the other
Offer Documents as so corrected to be disseminated to holders of Shares, in
each case as and to the extent required by applicable federal securities laws.
The Company and its counsel shall be given a reasonable opportunity to review
and comment on the Offer Documents prior to their being filed with the SEC or
disseminated to the holders of Shares. Parent shall provide the Company with a
copy of any comments received from the SEC on the Offer Documents.
Section 2.02. Company Action. (a) The Company hereby consents to the Offer
and represents that its Board of Directors, at a meeting duly called and held
and acting on the unanimous recommendation of a special committee of the Board
of Directors of the Company composed entirely of non-management independent
directors (the "Special Committee"), has (i) determined that this Agreement and
the transactions contemplated hereby, including the Offer and the Merger, are
advisable and are fair to and in the best interests of the Company's
stockholders (other than Parent and its Affiliates), (ii) approved this
Agreement and the transactions contemplated hereby, including the Offer and the
Merger, in accordance with the requirements of the Delaware Law and (iii)
subject to Section 7.04(c), resolved to recommend acceptance of the Offer and
adoption of this Agreement by its stockholders. The Company further represents
that UBS Warburg LLC has delivered to the Special Committee its written opinion
that the consideration to be paid in the Offer and the Merger is fair to the
holders of Shares (other than Parent and its Affiliates) from a financial point
of view. The Company has been advised that all of its directors who own Shares
intend either to tender their Shares pursuant to the Offer or to vote in favor
of the Merger. The Company will promptly furnish Parent with a list of its
stockholders, mailing labels and any available listing or computer file
containing the names and addresses of all record holders of Shares and lists of
securities positions of Shares held in stock depositories, in each case true
and correct as of the most recent practicable date, and, subject to Section
7.04(c), will provide to Parent such additional information (including updated
lists of stockholders, mailing labels and lists of securities positions) and
such other assistance as Parent may reasonably request in connection with the
Offer.
(b) As soon as practicable on the day that the Offer is commenced, the
Company shall file with the SEC and disseminate to holders of Shares, in each
case as and to the extent required by applicable federal securities laws, a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with any
amendments
A-4
or supplements thereto, the "Schedule 14D-9") that, subject to Section 7.04(c),
shall reflect the recommendations of the Company's Board of Directors referred
to above. The Company, Parent and Merger Subsidiary each agrees promptly to
correct any information provided by it for use in the Schedule 14D-9 if and to
the extent that it shall have become false or misleading in any material
respect. The Company agrees to take all steps necessary to cause the Schedule
14D-9 as so corrected to be filed with the SEC and to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. Parent and its counsel shall be given a reasonable
opportunity to review and comment on the Schedule 14D-9 prior to its being
filed with the SEC. The Company shall provide Parent with a copy of any
comments received from the SEC on the Schedule 14D-9.
Section 2.03. Directors. (a) Effective upon the acceptance for payment of
any Shares pursuant to the Offer, Parent shall be entitled to designate the
number of directors, rounded up to the next whole number, on the Company's
Board of Directors that equals the product of (i) the total number of directors
on the Company's Board of Directors (giving effect to the election of any
additional directors pursuant to this Section) and (ii) the percentage that the
number of Shares beneficially owned by Parent and/or Merger Subsidiary
(including Shares accepted for payment) bears to the total number of Shares
outstanding, and the Company shall take all reasonable action necessary to
cause Parent's designees to be elected or appointed to the Company's Board of
Directors, including increasing the number of directors, and seeking and
accepting resignations of incumbent directors. At such time, subject to
applicable law and the rules and regulations of the New York Stock Exchange,
the Company will also use all reasonable efforts to cause individuals
designated by Parent to constitute the number of members, rounded up to the
next whole number, on (i) each committee of the Board other than the Audit
Committee and the Special Committee or any committee of the Board established
to take action under this Agreement and (ii) each board of directors of each
Material Subsidiary of the Company (and each committee thereof) that represents
the same percentage as such individuals represent on the Board of Directors of
the Company. Notwithstanding the foregoing, the Company shall use all
reasonable efforts to ensure that at least two of the members of the Board of
Directors and such committees as of the date hereof who are not employees of
the Company shall remain members of the Board of Directors and such committees
until the Effective Time.
(b) The Company's obligations to appoint Parent's designees to the Board
of Directors shall be subject to Section 14(f) of the 1934 Act and Rule 14f-1
promulgated thereunder. The Company shall promptly take all actions, and shall
include in the Schedule 14D-9 such information with respect to the Company and
its officers and directors, as Section 14(f) and Rule 14f-1 require in order to
fulfill its obligations under this Section. Parent shall supply to the Company
in writing and be solely responsible for any information with respect to itself
and its nominees, officers, directors and affiliates required by Section 14(f)
and Rule 14f-1.
(c) Following the election or appointment of Parent's designees pursuant
to Section 2.03(a) and until the Effective Time, the approval of a majority of
the directors of the Company present and voting at a meeting at which a quorum
exists (including the concurrence of a majority of the directors who were not
designated by Parent) shall be required to authorize any termination of this
Agreement by the Company, any amendment of this Agreement requiring action by
the Board of Directors, any extension of time for performance of any obligation
or action hereunder by Parent or Merger Subsidiary and any waiver of compliance
with any of the agreements or conditions contained herein for the benefit of
the Company. Parent shall cause a sufficient number of its designees pursuant
to Section 2.03(a) to attend any meeting at which an action may be taken to
terminate or amend this Agreement, extend the time for performance of any
obligation or action hereunder by Parent or Merger Subsidiary, waive compliance
with any of the agreements or conditions contained herein for the benefit of
the Company, or take any action to enforce the Company's rights under this
Agreement, so that a quorum is present at such meeting for the time necessary
to take such action.
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ARTICLE 3
The Merger
Section 3.01. The Merger. (a) At the Effective Time, Merger Subsidiary
shall be merged (the "Merger") with and into the Company in accordance with
Delaware Law, whereupon the separate existence of Merger Subsidiary shall
cease, and the Company shall be the surviving corporation (the "Surviving
Corporation").
(b) As soon as practicable (but no later than three Business Days) after
satisfaction or, to the extent permitted hereunder, waiver of all conditions to
the Merger, the Company (or, if applicable, Merger Subsidiary) will file a
certificate of merger (or, if applicable, a certificate of ownership and
merger) with the Delaware Secretary of State and make all other filings or
recordings required by Delaware Law in connection with the Merger. The Merger
shall become effective at such time (the "Effective Time") as the certificate
of merger (or, if applicable, the certificate of ownership and merger) is duly
filed with the Delaware Secretary of State or at such later time as is
specified in such certificate.
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, powers, privileges and franchises and be subject to all
of the obligations, liabilities, restrictions and disabilities of the Company
and Merger Subsidiary, all as provided under Delaware Law.
Section 3.02. Conversion of Shares. At the Effective Time:
(a) except as otherwise provided in Section 3.02(b), Section 3.04 or
Section 3.05, each Share outstanding immediately prior to the Effective Time,
together with the associated Right, shall be converted into the right to
receive $32.00 in cash or any higher price paid for each Share in the Offer,
without interest (the "Merger Consideration");
(b) each Share held by the Company as treasury stock (other than Shares in
an Employee Plan of the Company) or owned by Parent or any of its Subsidiaries
immediately prior to the Effective Time shall be canceled, and no payment shall
be made with respect thereto; and
(c) each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and become one
share of common stock of the Surviving Corporation with the same rights, powers
and privileges as the shares so converted and shall constitute the only
outstanding shares of capital stock of the Surviving Corporation.
Section 3.03. Surrender and Payment. (a) Prior to the Effective Time,
Parent shall appoint an agent (the "Exchange Agent") for the purpose of
exchanging certificates representing Shares (the "Certificates") for the Merger
Consideration. Parent will, or will cause Merger Subsidiary to, provide the
Exchange Agent with immediately available funds sufficient for the payment of
the aggregate Merger Consideration payable in respect of the Shares pursuant to
this Agreement. Promptly after the Effective Time, Parent will send, or will
cause the Exchange Agent to send, to each holder of Shares at the Effective
Time a letter of transmittal and instructions (which shall specify that the
delivery shall be effected, and risk of loss and title shall pass, only upon
proper delivery of the Certificates to the Exchange Agent) for use in such
exchange.
(b) Each holder of Shares that have been converted into the right to
receive the Merger Consideration will be entitled to receive, upon surrender to
the Exchange Agent of a Certificate, together with a properly completed letter
of transmittal, the Merger Consideration payable for each Share represented by
such Certificate. Until so surrendered, each such Certificate shall represent
after the Effective Time for all purposes only the right to receive such Merger
Consideration.
(c) If any portion of the Merger Consideration is to be paid to a Person
other than the Person in whose name the surrendered Certificate is registered,
it shall be a condition to such payment that the Certificate
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so surrendered shall be properly endorsed or otherwise be in proper form for
transfer and that the Person requesting such payment shall pay to the Exchange
Agent any transfer or other taxes required as a result of such payment to a
Person other than the registered holder of such Certificate or establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(d) After the Effective Time, there shall be no further registration of
transfers of Shares. If, after the Effective Time, Certificates are presented
to the Surviving Corporation, they shall be canceled and exchanged for the
Merger Consideration provided for, and in accordance with the procedures set
forth, in this Article 3.
(e) Any portion of the Merger Consideration provided to the Exchange Agent
pursuant to Section 3.03(a) (and any interest or other income earned thereon)
that remains unclaimed by the holders of Shares six months after the Effective
Time shall be returned to Parent, upon demand, and any such holder who has not
exchanged Shares for the Merger Consideration in accordance with this Section
3.03 prior to that time shall thereafter look only to Parent for payment of the
Merger Consideration in respect of such Shares without any interest thereon.
Notwithstanding the foregoing, Parent shall not be liable to any holder of
Shares for any amount paid to a public official pursuant to applicable
abandoned property, escheat or similar laws. Any amounts remaining unclaimed by
holders of Shares two years after the Effective Time (or such earlier date
immediately prior to such time when the amounts would otherwise escheat to or
become property of any governmental authority) shall become, to the extent
permitted by applicable law, the property of Parent free and clear of any
claims or interest of any Person previously entitled thereto.
(f) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to Section 3.03(a) to pay for Shares for which appraisal rights
have been perfected shall be returned to Parent, upon demand.
Section 3.04. Dissenting Shares. Notwithstanding Section 3.02, Shares
outstanding immediately prior to the Effective Time and held by a holder who
has not voted in favor of the Merger or consented thereto in writing and who
has demanded appraisal for such Shares in accordance with Delaware Law shall
not be converted into a right to receive the Merger Consideration, unless such
holder fails to perfect, withdraws or otherwise loses its right to appraisal.
If, after the Effective Time, such holder fails to perfect, withdraws or loses
its right to appraisal, such Shares shall be treated as if they had been
converted as of the Effective Time into a right to receive the Merger
Consideration. The Company shall give Parent prompt notice of any demands
received by the Company for appraisal of Shares, and Parent shall have the
right to participate in all negotiations and proceedings with respect to such
demands. Except with the prior written consent of Parent, the Company shall not
make any payment with respect to, or settle or offer to settle, any such
demands.
Section 3.05. Stock Based Awards. (a) At or immediately prior to the
Effective Time, except as set forth in Section 3.05(e), each stock option to
purchase Shares outstanding under any employee stock option or compensation
plan or arrangement of the Company (each an "Option") which is vested
immediately prior to the Effective Time (the "Vested Options"), shall be
canceled, and the Company shall pay each holder of any such option at or
promptly after the Effective Time for each such option an amount in cash
determined by multiplying (i) the excess, if any, of the Merger Consideration
per Share over the applicable exercise price of such option (the "Option Cash-
Out Amount") by (ii) the number of Shares such holder could have purchased had
such holder exercised such option in full immediately prior to the Effective
Time.
(b) At or immediately prior to the Effective Time, except as set forth in
Section 3.05(e), each Option other than Vested Options shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive, and become exchangeable for, options to purchase
ordinary shares of Parent or American Depositary Shares representing ordinary
shares of Parent, the number and exercise price of such options to be
determined in accordance with the methodology set forth in Section 424 of the
Code and Financial Accounting Standards Board Interpretation No. 44, and the
other terms of such options to be substantially similar to their existing
terms, provided that
(i) no such option shall be exercisable until the conclusion of the
Moratorium Period,
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(ii) if the Moratorium Period has not concluded by March 31, 2002, any
options that have become vested between the Effective Time and March 31,
2002 will be canceled on March 31, 2002 in exchange for a payment equal to
the Option Cash-Out Amount in respect of the number of Shares such holder
could have purchased prior to the Effective Time as a result of such
vesting plus interest on such amount calculated in arrears from the date of
the Effective Time through March 31, 2002 at a rate of 6% per annum, such
payment to be made by the Company to the holder of such option on March 31,
2002, and any options that vest following March 31, 2002 through the
conclusion of the Moratorium Period shall be canceled on the date such
options become vested in exchange for a payment equal to the Option Cash-
Out Amount in respect of the number of Shares such holder could have
purchased prior to the Effective Time as a result of such vesting plus
interest on such amount calculated in arrears from the date of the
Effective Time through the date of such payment at a rate of 6% per annum,
such payment to be made by the Company to the holder of such option on the
vesting date, and
(iii) any such option granted to an employee of the Company who
separates from the Company or who dies during the Moratorium Period shall
become exercisable upon the conclusion of the Moratorium Period (unless
such options have been canceled in accordance with clause (ii) of this
Section 3.05(b)) to the extent that such option would have become
exercisable during such employee's employment with the Company but for the
delay in the ability to exercise such option as a result of clause (i) of
this Section 3.05(b), and shall remain exercisable for three months (or one
year, in the case of an employee death) following the date such option
becomes exercisable.
(c) At or immediately prior to the Effective Time, each Restricted Stock
Unit shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into the right to receive, and become
exchangeable for, a similar award with respect to ordinary shares of Parent or
American Depositary Shares representing ordinary shares of Parent, the terms
of such awards to be substantially similar to their existing terms, provided
that
(i) such awards shall be adjusted to the extent necessary to preserve
the existing value thereof,
(ii) no such award shall vest until the conclusion of the Moratorium
Period,
(iii) (A) if the Moratorium Period has not concluded by December 15,
2001, each award that would have become vested on December 15, 2001, in the
absence of the Moratorium Period (without giving effect to any accelerated
vesting as a result of death), will be canceled in exchange for a payment
equal to the Merger Consideration in respect of the number of Shares
originally deliverable pursuant to the vesting of such award, such payment
to be made by the Company to the holder of such award (or his or her
estate, as applicable) on December 15, 2001, (B) if the Moratorium Period
has not concluded by March 31, 2002, any award that would have become
vested, in the absence of the Moratorium Period, as a result of the death
of the holder thereof between the Effective Time and March 31, 2002 (other
than awards described in preceding clause (A)) will be canceled on March
31, 2002 in exchange for a payment equal to the Merger Consideration in
respect of the number of Shares originally deliverable pursuant to the
vesting of such award plus interest on such amount calculated in arrears
from the date of the Effective Time through the date of such payment, such
payment to be made to the estate of the holder of the award on March 31,
2002, and (C) any award that would have vested, in the absence of the
Moratorium Period, following December 15, 2001 through the conclusion of
the Moratorium Period (in accordance with its vesting schedule or as a
result of death) shall be canceled on the date such award would have become
vested for a payment equal to the Merger Consideration in respect of the
number of Shares originally deliverable pursuant to the vesting of such
award, plus interest on such amount calculated in arrears from the date of
the Effective Time through the date of such payment at a rate of 6% per
annum, such payment to be made by the Company to the holder of such award,
or his or her estate, as applicable, on the later of March 31, 2002 and the
vesting date, and
(iv) any such award granted to an employee of the Company who
separates from the Company after December 15, 2001 but during the
Moratorium Period (if not canceled in accordance with clause (iii) of this
Section 3.05(c)) shall vest upon the conclusion of the Moratorium Period,
to the same extent that
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such similar award would have vested had such an employee separated from
the Company immediately following the conclusion of the Moratorium Period.
(d) Unless otherwise agreed by Parent and the Company, at the Effective
Time, each Deferred Share and Restricted Share outstanding immediately prior to
the Effective Time shall be canceled in exchange for the right to receive the
Merger Consideration, the payment thereof to be made at the Effective Time.
(e) Prior to the Effective Time, each outstanding option under the Sodexho
Marriott Services, Inc. Employee Stock Purchase Plan (the "Company ESPP") shall
be exercised in accordance with Section 12.04(c) of the Company ESPP, and each
Share purchased pursuant to such exercise shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the
right to receive the Merger Consideration. The Company agrees that it shall
terminate the Company ESPP immediately following the aforesaid purchase of
Shares thereunder.
(f) The Company and Parent shall take any actions necessary to give effect
to the transactions contemplated by the provisions of this Section 3.05.
(g) Parent will use commercially reasonable efforts to cause the
Registration Date to occur as soon as reasonably practicable.
(h) The Company shall be permitted to establish a deferred compensation
program allowing deferral of receipt of the cash payments to be made to
employees of the Company under this Section 3.05, with interest accruing in
respect of such deferred payments at a rate no greater than the rate currently
applicable to deferred compensation obligations under the Sodexho Marriott
Services, Inc. Executive Deferred Compensation Plan.
(i) Prior to the Effective Time, the Company shall provide to Parent
detailed information, as of the date immediately prior to the Effective Time,
with respect to the number of Shares subject to outstanding Options and the
exercise prices of such Options, the number of Shares subject to Options which
are exercisable immediately prior to the Effective Time and the exercise prices
of such Options, the number of Shares subject to Restricted Stock Units, the
number of Shares subject to Deferred Shares and the number of Restricted
Shares.
Section 3.06. Adjustments. If, during the period between the date of this
Agreement and the Effective Time, any change in the outstanding Shares shall
occur, including by reason of any reclassification, recapitalization, stock
split or combination, exchange or readjustment of Shares, or stock dividend
thereon with a record date during such period, the cash payable pursuant to the
Offer, the Merger Consideration and any other amounts payable pursuant to this
Agreement shall be appropriately adjusted.
Section 3.07. Withholding Rights. Each of the Surviving Corporation and
Parent shall be entitled to deduct and withhold from the consideration
otherwise payable to any Person pursuant to this Article 3 such amounts as it
is required to deduct and withhold with respect to the making of such payment
under any provision of federal, state, local or foreign tax law. If the
Surviving Corporation or Parent, as the case may be, so withholds amounts, such
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the Shares in respect of which the Surviving Corporation or
Parent, as the case may be, made such deduction and withholding.
Section 3.08. 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
the Surviving Corporation, the posting by such Person of a bond, in such
reasonable amount as the Surviving Corporation may direct, as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will pay, in exchange for such lost, stolen or destroyed
Certificate, the Merger Consideration to be paid in respect of the Shares
represented by such Certificate, as contemplated by this Article 3.
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ARTICLE 4
The Surviving Corporation
Section 4.01. Certificate of Incorporation. The certificate of
incorporation of the Company in effect at the Effective Time shall be the
certificate of incorporation of the Surviving Corporation until amended in
accordance with applicable law.
Section 4.02. Bylaws. The bylaws of the Surviving Corporation in effect at
the Effective Time shall be amended to conform to the bylaws of Merger
Subsidiary as in effect immediately prior to the Effective Time, until further
amended in accordance with applicable law.
Section 4.03. Directors and Officers. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
applicable law, (i) the directors of Merger Subsidiary at the Effective Time
shall be the directors of the Surviving Corporation and (ii) the officers of
the Company at the Effective Time shall be the officers of the Surviving
Corporation.
ARTICLE 5
Representations and Warranties of the Company
Except as set forth in the corresponding sections or subsection of the
disclosure schedule delivered by the Company to Parent on or prior to the date
hereof (the "Company Disclosure Schedule") or in the Company SEC Documents, the
Company represents and warrants to Parent that:
Section 5.01. Corporate Existence and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all corporate powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted, except for those licenses, authorizations, permits,
consents and approvals the absence of which would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company. The Company is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where such qualification is
necessary, except for those jurisdictions where failure to be so qualified
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company. The Company has heretofore delivered to
Parent true and complete copies of the certificate of incorporation and bylaws
of the Company as currently in effect.
Section 5.02. Corporate Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby are within the Company's
corporate powers and, except for the affirmative vote of the holders of a
majority of the outstanding Shares in connection with the consummation of the
Merger (if required by law), have been duly authorized by all necessary
corporate action on the part of the Company. The affirmative vote of the
holders of a majority of the outstanding Shares (if required by law) is the
only vote of the holders of any of the Company's capital stock necessary in
connection with the consummation of the Merger. This Agreement constitutes a
valid and binding agreement of the Company.
Section 5.03. Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby require no action by or in
respect of, or filing with, any governmental body, agency, official or
authority, domestic, foreign or supranational, other than (i) the filing of a
certificate of merger (or, a certificate of ownership and merger, as
applicable) with respect to the Merger with the Delaware Secretary of State and
appropriate documents with the relevant authorities of other states in which
the Company is qualified to do business, (ii) compliance with the requirements
of the HSR Act (under which the applicable waiting period expired prior to the
date hereof), (iii) compliance with any applicable requirements of the 1933
Act, the 1934
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Act and any other applicable securities or takeover laws, whether state or
foreign, and (iv) any actions or filings the absence of which would not be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company or materially impair the ability of the Company
to consummate the transactions contemplated by this Agreement.
Section 5.04. Non-contravention. The execution, delivery and performance
by the Company of this Agreement and the consummation of the transactions
contemplated hereby do not and will not (i) contravene, conflict with, or
result in any violation or breach of any provision of the certificate of
incorporation or bylaws of the Company, (ii) assuming compliance with the
matters referred to in Section 5.03, contravene, conflict with, or result in a
violation or breach of any provision of any applicable law, statute, ordinance,
rule, regulation, judgment, injunction, order or decree, (iii) require any
consent or other action by any Person under, constitute a default, or an event
that, with or without notice or lapse of time or both, could become a default,
under, or cause or permit the termination, cancellation, acceleration or other
change of any right or obligation or the loss of any benefit to which the
Company or any of its Subsidiaries is entitled under any provision of any
agreement or other instrument binding upon the Company or any of its
Subsidiaries or any license, franchise, permit, certificate, approval or other
similar authorization affecting, or relating in any way to, the assets or
business of the Company and its Subsidiaries or (iv) result in the creation or
imposition of any Lien on any asset of the Company or any of its Subsidiaries,
except, in the case of clauses (ii), (iii) and (iv), for such matters as would
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company or materially impair the ability of the
Company to consummate the actions contemplated by this Agreement.
Section 5.05. Capitalization. (a) The authorized capital stock of the
Company consists of 300,000,000 Shares and 1,000,000 shares of preferred stock,
without par value, of which 300,000 shares are designated as Series A Junior
Participating Preferred Stock. As of April 27, 2001 there were outstanding (i)
63,641,911 Shares (excluding Deferred Shares and Restricted Shares), (ii) no
shares of preferred stock, (iii) Options to purchase an aggregate of 6,608,590
Shares (of which Options to purchase an aggregate of 2,879,254 Shares were
exercisable), (iv) 27,417 Restricted Shares, (v) Deferred Shares with respect
to 162,207 Shares (of which 120,324 Shares are vested) and (vi) Restricted
Stock Units with respect to 356,904 Shares. Under the Company ESPP, a maximum
of 600,000 Shares can be allocated in any year, and the agent for the Company
ESPP is required to make a corresponding purchase of Shares on the open market
in respect of any such allocation. All shares of capital stock of the Company
outstanding as of the date hereof have been duly authorized and validly issued
and are fully paid and nonassessable. All Shares issuable upon exercise of
outstanding employee stock options have been duly authorized and, when issued
in accordance with the terms thereof, will be validly issued and will be fully
paid and nonassessable.
(b) Except as set forth in this Section 5.05 and for changes since April
27, 2001 resulting from the exercise of employee stock options outstanding on
such date, there are no outstanding (i) shares of capital stock or voting
securities of the Company, (ii) securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company or
(iii) options or other rights to acquire from the Company or other obligation
of the Company to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company (the items in clauses (i), (ii) and (iii) being referred to
collectively as the "Company Securities"). Except as contemplated by Section
3.05, there are no outstanding obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any of the Company
Securities.
(c) Except as set forth in this Section 5.05, none of the Shares is owned
by any Subsidiary of the Company.
Section 5.06. Material Subsidiaries. (a) Each Material Subsidiary of the
Company is a business entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, has all business
entity powers and all governmental licenses, authorizations, permits, consents
and approvals required to carry on its business as now conducted, except for
those licenses, authorizations, permits, consents
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and approvals the absence of which would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
Each such Material Subsidiary is duly qualified to do business as a foreign
business entity and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. All Material Subsidiaries
of the Company and their respective jurisdictions of organization are
identified in the Company 10-K.
(b) All of the outstanding capital stock of, or other voting securities or
ownership interests in, each Material Subsidiary of the Company, is owned by
the Company, directly or indirectly, free and clear of any Lien and free of any
other limitation or restriction (including any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other voting
securities or ownership interests). There are no outstanding (i) securities of
the Company or any of its Material Subsidiaries convertible into or
exchangeable for shares of capital stock or other voting securities or
ownership interests in any Material Subsidiary of the Company or (ii) options
or other rights to acquire from the Company or any of its Material
Subsidiaries, or other obligation of the Company or any of its Material
Subsidiaries to issue, any capital stock or other voting securities or
ownership interests in, or any securities convertible into or exchangeable for
any capital stock or other voting securities or ownership interests in, any
Material Subsidiary of the Company (the items in clauses (i) and (ii) being
referred to collectively as the "Company Subsidiary Securities"). There are no
outstanding obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any of the Company Subsidiary
Securities.
Section 5.07. SEC Filings. (a) The Company has made available to Parent
(i) the Company's annual reports on Form 10-K for its fiscal years ended
September 3, 1999 and September 1, 2000, (ii) its quarterly reports on Form 10-
Q for its fiscal quarters ended December 1, 2000 and March 2, 2001, (iii) its
proxy or information statements relating to meetings of, or actions taken
without a meeting by, the stockholders of the Company held since September 1,
2000 and (iv) all of its other reports, statements, schedules and registration
statements filed with the SEC since September 1, 2000 (the documents referred
to in this Section 5.07(a), collectively, the "Company SEC Documents").
(b) As of its filing date, each Company SEC Document complied as to form
in all material respects with the applicable requirements of the 1934 Act.
(c) As of its filing date (or, if amended or superseded by a filing prior
to the date hereof, on the date of such filing), each Company SEC Document
filed pursuant to the 1934 Act did not, and each such Company SEC Document
filed subsequent to the date hereof will not, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading.
(d) No Company SEC Document is a registration statement filed pursuant to
the 1933 Act.
Section 5.08. Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of the
Company included in the Company SEC Documents fairly present in all material
respects, in conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis (except as may be indicated in the notes
thereto), the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and their consolidated
results of operations and cash flows for the periods then ended (subject to
normal year-end adjustments in the case of any unaudited interim financial
statements).
Section 5.09. Disclosure Documents. (a) Each document required to be filed
by the Company with the SEC or required to be distributed or otherwise
disseminated to the Company's stockholders in connection with the transactions
contemplated by this Agreement (the "Company Disclosure Documents"), including
the Schedule 14D-9, the proxy or information statement of the Company (the
"Company Proxy Statement"), if any, to be filed with the SEC in connection with
the Merger, and any amendments or
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supplements thereto, when filed, distributed or disseminated, as applicable,
will comply as to form in all material respects with the applicable
requirements of the 1934 Act.
(b) (i) The Company Proxy Statement, as supplemented or amended, if
applicable, at the time such Company Proxy Statement or any amendment or
supplement thereto is first mailed to stockholders of the Company and at the
time such stockholders vote on adoption of this Agreement, and (ii) any Company
Disclosure Document (other than the Company Proxy Statement), at the time of
the filing of such Company Disclosure Document or any supplement or amendment
thereto and at the time of any distribution or dissemination thereof, will not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. The
representations and warranties contained in this Section 5.09(b) will not apply
to statements or omissions included in the Company Disclosure Documents based
upon information furnished to the Company by Parent specifically for use
therein.
(c) The information with respect to the Company or any of its Subsidiaries
that the Company furnishes to Parent specifically for use in the Offer
Documents, at the time of the filing thereof, at the time of any distribution
or dissemination thereof and at the time of the consummation of the Offer, will
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
Section 5.10. Absence of Certain Changes. Since March 2, 2001, the
business of the Company and its Subsidiaries has been conducted in the ordinary
course consistent with past practices and there has not been:
(a) to the knowledge of the Company's Chief Executive Officer, Chief
Financial Officer, President of Corporate Services, President of Education
Services or President of Health Care Services, any event, occurrence,
development or state of circumstances or facts that has had or would reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect on the Company;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company or any
repurchase, redemption or other acquisition by the Company or any of its
Material Subsidiaries of any outstanding shares of capital stock or other
securities of, or other ownership interests in, the Company or any of its
Material Subsidiaries;
(c) any amendment of any material term of any outstanding security of the
Company or any of its Material Subsidiaries;
(d) any incurrence, assumption or guarantee by the Company or any of its
Subsidiaries of any indebtedness for borrowed money other than in the ordinary
course of business and in amounts and on terms consistent with past practices;
(e) any creation or other incurrence by the Company or any of its
Subsidiaries of any Lien on any material asset other than in the ordinary
course of business consistent with past practices;
(f) any making of any material loan, advance or capital contributions to
or investment in any Person other than loans, advances or capital contributions
to or investments in its wholly-owned Subsidiaries or advances to customers
made in the ordinary course of business consistent with past practices;
(g) any damage, destruction or other casualty loss (whether or not covered
by insurance) affecting the business or assets of the Company or any of its
Subsidiaries that has had or would reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company;
(h) any transaction or commitment made, or any contract or agreement
entered into, by the Company or any of its Subsidiaries relating to its assets
or business (including the acquisition or disposition of any assets)
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or any relinquishment by the Company or any of its Subsidiaries of any contract
or other right, in either case, material to the Company and its Subsidiaries,
taken as a whole, other than transactions and commitments in the ordinary
course of business consistent with past practices and those contemplated by
this Agreement;
(i) any change in any method of accounting, method of tax accounting or
accounting principles or practice by the Company or any of its Material
Subsidiaries, except for any such change required by reason of a concurrent
change in GAAP or Regulation S-X under the 1934 Act;
(j) any (i) grant of any severance or termination pay to (or amendment to
any existing arrangement with) any director or officer of the Company or any of
its Material Subsidiaries, (ii) increase in benefits payable under any existing
severance or termination pay policies or employment agreements, (iii) any
entering into any employment, deferred compensation or other similar agreement
(or any amendment to any such existing agreement) with any director, officer or
employee who reports directly to an officer of the Company or any of its
Material Subsidiaries, (iv) establishment, adoption or amendment (except as
required by applicable law) of any collective bargaining, bonus, profit-
sharing, thrift, pension, retirement, deferred compensation, compensation,
stock option, restricted stock or other benefit plan or arrangement covering
any director, officer or employee who reports directly to an officer of the
Company or any of its Material Subsidiaries or is otherwise applicable
generally to any related group of employees of the Company or any of its
Material Subsidiaries, or (v) increase in compensation, bonus or other benefits
payable to any director, officer or employee of the Company or any of its
Material Subsidiaries other than in the ordinary course of business consistent
with past practice; or
(k) any material Tax election made or changed, any annual tax accounting
period changed, any method of tax accounting adopted or changed, any material
amended Tax Returns or claims for material Tax refunds filed, any material
closing agreement entered into, any material Tax claim, audit or assessment
settled, or any right to claim a material Tax refund, offset or other reduction
in Tax liability surrendered.
Section 5.11. Litigation. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company, threatened, against the
Company, any of its Subsidiaries, any present or former officer, director or
employee of the Company or any of its Subsidiaries or any other Person for whom
the Company or any of such Subsidiary may be liable or any of their respective
properties before any court or arbitrator or before or by any governmental
body, agency or official, domestic, foreign or supranational, that in any
manner challenges or seeks to prevent, enjoin, alter or materially delay the
Offer or the Merger or any of the other transactions contemplated hereby.
Section 5.12. Finders' Fees. Except for UBS Warburg LLC, a copy of whose
engagement agreement has been provided to Parent, there is no investment
banker, broker, finder or other intermediary that has been retained by or is
authorized to act on behalf of the Company or any of its Subsidiaries who might
be entitled to any fee or commission from the Company or any of its Affiliates
in connection with the transactions contemplated by this Agreement.
Section 5.13. Taxes. (a) The Company and each of its Subsidiaries has paid
(or, to the Company's knowledge, has had paid on its behalf) or has withheld
and remitted to the appropriate Taxing Authority, or, where payment is not yet
due, has established (or has had established on its behalf and for its sole
benefit and recourse) in accordance with GAAP an adequate accrual for all
material Taxes through the end of the last period for which the Company and its
Subsidiaries ordinarily record items on their respective books.
(b) There is no material claim, audit, action, suit, proceeding or
investigation now pending or, to the knowledge of the Company, threatened
against or with respect to Company or its Subsidiaries in respect of any Tax or
Tax Asset for which the Company has not made an adequate accrual in accordance
with GAAP.
(c) "Tax" means (i) any tax, governmental fee or other like assessment or
charge of any kind whatsoever (including, but not limited to, withholding on
amounts paid to or by any Person), together with any
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interest, penalty, addition to tax or additional amount imposed by any
governmental authority (a "Taxing Authority") responsible for the imposition of
any such tax (domestic or foreign). "Tax Return" shall mean any report, return,
document, declaration or other information or filing required to be supplied to
any Taxing Authority with respect to Taxes, including information returns, any
documents with respect to or accompanying payments of estimated Taxes, or with
respect to or accompanying requests for the extension of time in which to file
any such report, return, document, declaration or other information.
Section 5.14. Employee Benefit Plans. (a) Within 20 days following the
date hereof, the Company will deliver to Parent a correct and complete list
identifying each material "employee benefit plan", as defined in Section 3(3)
of ERISA, each employment, severance, benefit or similar contract, plan,
arrangement or policy and each other plan or arrangement (written or oral)
providing for compensation, bonuses, profit-sharing, stock option or other
stock related rights or other forms of incentive or deferred compensation which
is maintained, administered or contributed to by the Company or any Affiliate
of the Company and covers any employee or former employee of the Company or any
of its Subsidiaries, or with respect to which the Company or any of its
Subsidiaries has any liability other than the Excluded Arrangements. Such plans
(including the Excluded Arrangements) are referred to collectively herein as
the "Employee Plans". Notwithstanding the foregoing, the Company will provide
to Parent within 20 days of the date hereof a description of the range of
severance for employees who may receive benefits under any of the Excluded
Arrangements, an estimate of the number of individuals participating in such
Excluded Arrangements and an estimate of the maximum payments that may be made
under all of the Excluded Arrangements.
(b) Neither the Company nor any ERISA Affiliate nor any predecessor
thereof sponsors, maintains or contributes to, or has in the past six years
sponsored, maintained or contributed to, any employee plan subject to Title IV
of ERISA. Neither the Company nor any of its ERISA Affiliates nor any
predecessor thereof has failed to make any material contribution or payment to
any plan subject to Title IV including any multiemployer plan ("Multiemployer
Plan"), as defined in Section 3(37) of ERISA, which in either case has resulted
or could result in the imposition of a material Lien or the posting of a
material bond or other material security under ERISA or the Code. Neither the
Company nor any of its ERISA Affiliates has incurred any material withdrawal
liability within the meaning of Sections 4201 and 4204 of ERISA to any
Multiemployer Plan.
(c) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the period
since its adoption. Each Employee Plan has been maintained in substantial
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations, including but not limited to ERISA and
the Code, which are applicable to such Employee Plan.
(d) The consummation of the transactions contemplated by this Agreement
will not (either alone or together with any other event) entitle any employee,
former employee or independent contractor of the Company or any of its
Subsidiaries to severance pay or other payment, bonus, retirement, job security
or similar benefit or enhanced such benefit or accelerate the time of payment
or vesting or trigger any payment of funding (through a grantor trust or
otherwise) of compensation or benefits under, increase the amount payable or
trigger any other material obligation pursuant to, any Employee Plan or
otherwise. There is no contract, plan or arrangement (written or otherwise)
covering any employee or former employee of the Company or any of its
Subsidiaries that, individually or collectively, could give rise to the payment
of any amount that would not be deductible pursuant to the terms of Section
280G or 162(m) of the Code.
(e) The Company and the Subsidiaries maintain policies and practices that
are designed to ensure that the Company and its Subsidiaries are in compliance
with all currently applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and laws, and are not
engaged in any unfair labor practice and, to the knowledge of the Company, the
Company and its Subsidiaries are in substantial compliance with such laws.
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Section 5.15. Antitakeover Statutes and Rights Agreement. (a) The Company
has taken all action necessary to exempt the Offer, the Merger, this Agreement
and the transactions contemplated hereby from the restrictions of Section 203
of Delaware Law, and, accordingly, none of the restrictions of such Section nor
those of any other antitakeover or similar statute or regulation apply or
purport to apply to any such transactions. No other "control share
acquisition," "fair price," "moratorium" or other antitakeover laws or
regulations enacted under U.S. state or federal laws apply to this Agreement or
any of the transactions contemplated hereby.
(b) The Company has taken all action necessary to render the Rights issued
pursuant to the terms of the Rights Agreement inapplicable to the Offer, the
Merger, this Agreement and the transactions contemplated hereby.
ARTICLE 6
Representations and Warranties of Parent
Parent represents and warrants to the Company that:
Section 6.01. Corporate Existence and Power. Each of Parent and Merger
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
corporate powers and all governmental licenses, authorizations, permits,
consents and approvals required to carry on its business as now conducted,
except for those licenses, authorizations, permits, consents and approvals the
absence of which would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Parent. Since the date of its
incorporation, Merger Subsidiary has not engaged in any activities other than
in connection with or as contemplated by this Agreement or in connection with
arranging any financing required to consummate the transactions contemplated
hereby.
Section 6.02. Corporate Authorization. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby are within the corporate powers of Parent and Merger Subsidiary and have
been duly authorized by all necessary corporate action. This Agreement
constitutes a valid and binding agreement of each of Parent and Merger
Subsidiary.
Section 6.03. Governmental Authorization. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby require no action by or in respect of, or filing with, any governmental
body, agency, official or authority, domestic, foreign or supranational, other
than (i) the filing of a certificate of merger (or a certificate of ownership
and merger, as applicable) with respect to the Merger with the Delaware
Secretary of State and appropriate documents with the relevant authorities of
other states in which the Company is qualified to do business, (ii) compliance
with the requirements of the HSR Act (under which the applicable waiting period
expired prior to the date hereof), (iii) compliance with any applicable
requirements of the 1933 Act, the 1934 Act and any other applicable securities
or takeover laws, whether state or foreign, and (iv) any actions or filings the
absence of which would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Parent or materially impair the
ability of Parent and Merger Subsidiary to consummate the transactions
contemplated by this Agreement.
Section 6.04. Non-contravention. The execution, delivery and performance
by Parent and Merger Subsidiary of this Agreement and the consummation by
Parent and Merger Subsidiary of the transactions contemplated hereby do not and
will not (i) contravene, conflict with, or result in any violation or breach of
any provision of the organizational documents of Parent or Merger Subsidiary,
(ii) assuming compliance with the matters referred to in Section 6.03,
contravene, conflict with, or result in any violation or breach of any
provision of any law, rule, regulation, judgment, injunction, order or decree
or (iii) require any consent or other action by any Person under, constitute a
default, or an event that, with or without notice or lapse of time or
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both, could become a default, under, or cause or permit the termination,
cancellation, acceleration or other change of any right or obligation or the
loss of any benefit to which Parent or Merger Subsidiary is entitled under any
provision of any agreement or other instrument binding upon Parent or Merger
Subsidiary, except, in the case of clauses (ii) and (iii), for such matters as
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent or materially impair the ability of Parent
and Merger Subsidiary to consummate the transactions contemplated by this
Agreement.
Section 6.05. Disclosure Documents. (a) The information with respect to
Parent and any of its Subsidiaries that Parent furnishes to the Company in
writing specifically for use in any Company Disclosure Document will not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of
the circumstances under which they were made, not misleading (i) in the case
of the Company Proxy Statement, as supplemented or amended, if applicable, at
the time such Company Proxy Statement or any amendment or supplement thereto
is first mailed to stockholders of the Company and at the time such
stockholders vote on adoption of this Agreement, and (ii) in the case of any
Company Disclosure Document other than the Company Proxy Statement, at the
time of the filing of such Company Disclosure Document or any supplement or
amendment thereto and at the time of any distribution or dissemination
thereof.
(b) The Offer Documents, when filed, distributed or disseminated, as
applicable, will comply as to form in all material respects with the
applicable requirements of the 1934 Act and, at the time of the filing
thereof, at the time of any distribution or dissemination thereof and at the
time of consummation of the Offer, will not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading, provided that this representation and warranty will
not apply to statements or omissions included in the Offer Documents based
upon information furnished to Parent or Merger Subsidiary by the Company
specifically for use therein.
Section 6.06. Finders' Fees. Except for Goldman Sachs International,
whose fees will be paid by Parent, there is no investment banker, broker,
finder or other intermediary that has been retained by or is authorized to act
on behalf of Parent who might be entitled to any fee or commission from the
Company or any of its Affiliates upon consummation of the transactions
contemplated by this Agreement.
Section 6.07. Tax Sharing Agreement Matters. (a) The representations made
by Parent in the Tax Sharing Agreement were true when made.
(b) Parent is in compliance with its covenants and obligations under the
Tax Sharing Agreement.
ARTICLE 7
Covenants of the Company
The Company agrees that:
Section 7.01. Conduct of the Company. From the date hereof until the
Effective Time, the Company and its Subsidiaries shall conduct their business
in the ordinary course consistent with past practice and shall use
commercially reasonable efforts to preserve intact their business
organizations and relationships with third parties and to keep available the
services of their present officers and employees. Without limiting the
generality of the foregoing, except with the prior written consent of Parent
or as expressly contemplated by this Agreement, from the date hereof until the
Effective Time:
(a) except as may be required to comply with its obligations under
Section 2.03, the Company will not adopt or propose any change to its
certificate of incorporation or bylaws;
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(b) the Company will not, and will not permit any of its Subsidiaries to,
merge or consolidate with any other Person or acquire a material amount of
stock or assets of any other Person;
(c) the Company will not, and will not permit any of its Subsidiaries to,
sell, lease, license or otherwise dispose of any material subsidiary or
material amount of assets, securities or property except (i) pursuant to
existing contracts or commitments and (ii) in the ordinary course consistent
with past practice;
(d) the Company will not, and will not permit any of its Subsidiaries to,
(i) take any action that would make any representation and warranty of the
Company hereunder inaccurate in any respect at, or as of any time prior to, the
Effective Time or (ii) omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any respect at any such
time; and
(e) the Company will not, and will not permit any of its Subsidiaries to,
agree or commit to do any of the foregoing.
Section 7.02. Stockholder Meeting; Proxy Material. The Company shall cause
a meeting of its stockholders (the "Company Stockholder Meeting") to be duly
called and held as soon as reasonably practicable after consummation of the
Offer for the purpose of voting on the adoption of this Agreement, unless
Delaware Law does not require a vote of stockholders of the Company for
consummation of the Merger. Subject to Section 7.04(c), the Board of Directors
of the Company shall recommend adoption of this Agreement by the Company's
stockholders. In connection with such meeting, the Company will (i) promptly
prepare and file with the SEC, use all reasonable efforts to have cleared by
the SEC and thereafter mail to its stockholders as promptly as practicable the
Company Proxy Statement and all other proxy materials for such meeting, (ii)
use all reasonable efforts to obtain the necessary approvals by its
stockholders of this Agreement and the transactions contemplated hereby and
(iii) otherwise comply with all legal requirements applicable to such meeting.
Section 7.03. Access to Information. From the date hereof until the
Effective Time and subject to applicable law and, as applicable, the
Confidentiality Agreement dated as of April 5, 2001 between the Company and
Parent (the "Confidentiality Agreement") and Section 5.13 of the Stockholder
Agreement dated as of March 27, 1998 between the Company and Parent, the
Company shall (i) give Parent, its counsel, financial advisors, auditors and
other authorized representatives full access to the offices, properties, books
and records of the Company and the Subsidiaries, (ii) furnish to Parent, its
counsel, financial advisors, auditors and other authorized representatives such
financial and operating data and other information as such Persons may
reasonably request and (iii) instruct the employees, counsel, financial
advisors, auditors and other authorized representatives of the Company and its
Subsidiaries to cooperate with Parent in its investigation of the Company and
its Subsidiaries. Any investigation pursuant to this Section shall be conducted
in such manner as not to interfere unreasonably with the conduct of the
business of the Company and its Subsidiaries. No information or knowledge
obtained by Parent in any investigation pursuant to this Section shall affect
or be deemed to modify any representation or warranty made by the Company
hereunder.
Section 7.04. No Solicitation; Other Offers. (a) The Company and its
Subsidiaries will not, and the Company will cause the officers, directors and
employees of the Company and its Subsidiaries not to, and the Company will not
knowingly permit the investment bankers, attorneys, consultants and other
agents or advisors of the Company and its Subsidiaries to, directly or
indirectly, (i) take any action to solicit, initiate or knowingly facilitate or
encourage the submission of any Acquisition Proposal (including by amending, or
granting any waiver under, the Rights Agreement), (ii) engage in discussions or
negotiations with, or disclose any nonpublic information relating to the
Company or any of its Subsidiaries or afford access to the properties, books or
records of the Company or any of its Subsidiaries to, any Person who is
considering making, or has made, an Acquisition Proposal, or (iii) grant any
waiver or release under any standstill or similar agreement with respect to any
class of equity securities of the Company. The Company will notify Parent
promptly (but in no event later than 24 hours) after receipt by the Company (or
any of its advisors) of any Acquisition Proposal, any indication that any
Person is considering making an Acquisition Proposal or any request for
nonpublic
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information relating to the Company or any of its Subsidiaries or for access to
the properties, books or records of the Company or any of its Subsidiaries by
any Person who is considering making, or has made, an Acquisition Proposal. The
Company shall provide such notice orally and in writing and shall identify the
Person making, and the terms and conditions of, any such Acquisition Proposal,
indication or request. The Company shall keep Parent fully informed, on a
current basis, of the status and details of any such Acquisition Proposal,
indication or request. The Company and its Subsidiaries shall, and the Company
shall cause the officers, directors, employees, agents and advisors of the
Company and its Subsidiaries to, cease immediately and cause to be terminated
all activities, discussions and negotiations, if any, with any Persons
conducted prior to the date hereof with respect to any Acquisition Proposal.
Nothing contained in this Agreement shall prevent the Board of Directors of the
Company from complying with Rule 14d-9 or Rule 14e-2 under the 1934 Act with
respect to any Acquisition Proposal.
(b) Notwithstanding the foregoing, the Company may engage in discussions
or negotiations with, and furnish nonpublic information or access to, any
Person in response to an unsolicited Acquisition Proposal by such Person if (i)
the Company has complied with the terms of Section 7.04(a), (ii) the Board of
Directors of the Company determines in good faith that such Acquisition
Proposal could reasonably be expected to result in a Superior Proposal and,
after consultation with outside legal counsel, that the failure to take such
action could reasonably be deemed to constitute a breach of its fiduciary
duties under applicable law, (iii) such Person executes a confidentiality
agreement with terms no less favorable to the Company than those contained in
the Confidentiality Agreement and (iv) the Company shall have delivered to
Parent three Business Days' prior written notice advising Parent that it
intends to take such action.
(c) The Board of Directors of the Company shall be permitted to withdraw,
or modify in a manner adverse to Parent, its recommendation to its stockholders
referred to in Sections 2.02 and 7.02 hereof, but only if (i) the Company has
complied with the terms of Section 7.04(a), (ii) the Company has received an
unsolicited Acquisition Proposal which the Board of Directors determines in
good faith constitutes a Superior Proposal, (iii) the Board of Directors of the
Company determines in good faith, after consultation with outside legal
counsel, that the failure to take such action could reasonably be deemed to
constitute a breach of its fiduciary duties under applicable law and (iv) the
Company shall have delivered to Parent three Business Days' prior written
notice advising Parent that it intends to take such action.
(d) For purposes of this Agreement:
"Acquisition Proposal" means any offer or proposal for, or any indication
of interest in, any (i) direct or indirect acquisition or purchase of a
business or assets that constitute 20% or more of the net revenues, net income
or assets of the Company and its Subsidiaries, taken as a whole, (ii) direct or
indirect acquisition or purchase of 20% or more of any class of equity
securities of the Company or any of its Subsidiaries whose business constitutes
20% or more of the net revenues, net income or assets of the Company and its
Subsidiaries, taken as a whole, (iii) tender offer or exchange offer that if
consummated would result in any person beneficially owning 20% or more of any
class of equity securities of the Company or any of its Subsidiaries whose
business constitutes 20% or more the net revenues, net income or assets of the
Company and its Subsidiaries, taken as a whole, or (iv) merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company or any of its Subsidiaries whose business
constitutes 20% or more of the net revenue, net income or assets of the Company
and its Subsidiaries, taken as a whole, other than the transactions
contemplated by this Agreement.
"Superior Proposal" means any bona fide Acquisition Proposal for or in
respect of more than 50% of the outstanding Shares on terms that the Board of
Directors of the Company determines in its good faith judgment (after
consultation with a financial advisor of nationally recognized reputation,
taking into account all the terms and conditions of the Acquisition Proposal)
are more favorable to the Company's stockholders than the transactions
contemplated by this Agreement and is reasonably capable of being consummated.
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Section 7.05. Tax Matters. Except in the ordinary course or as required by
applicable law, neither the Company nor any of its Subsidiaries shall make or
change any Tax election, change any annual tax accounting period, adopt or
change any method of tax accounting, file any amended Tax Returns or claims for
Tax refunds, enter into any closing agreement, surrender any Tax claim, audit
or assessment, surrender any right to claim a Tax refund, offset or other
reduction in Tax liability surrendered, consent to any extension or waiver of
the limitations period applicable to any Tax claim or assessment or take any
other action, which would reasonably be expected to have the effect of
materially increasing the Tax liabilities or reducing the Tax assets of the
Company and its Material Subsidiaries (considered collectively).
ARTICLE 8
Covenants of Parent
Parent agrees that:
Section 8.01. Obligations of Merger Subsidiary. Parent will take all
action necessary to cause Merger Subsidiary to perform its obligations under
this Agreement and to consummate the Merger on the terms and conditions set
forth in this Agreement.
Section 8.02. Voting of Shares. Parent agrees to vote all Shares
beneficially owned by it or any of its Subsidiaries in favor of adoption of
this Agreement at the Company Stockholder Meeting.
Section 8.03. Director and Officer Liability. Parent shall cause the
Surviving Corporation, and the Surviving Corporation hereby agrees, to do the
following:
(a) The Surviving Corporation shall indemnify and hold harmless the
present and former officers and directors of the Company (each an "Indemnified
Person") in respect of acts or omissions occurring at or prior to the Effective
Time to the fullest extent permitted by Delaware Law or any other applicable
laws or provided under the Company's certificate of incorporation and bylaws in
effect on the date hereof, provided that such indemnification shall be subject
to any limitation imposed from time to time under applicable law.
(b) For six years after the Effective Time, the Surviving Corporation
shall provide officers' and directors' liability insurance in respect of acts
or omissions occurring prior to the Effective Time covering each such
Indemnified Person currently covered by the Company's officers' and directors'
liability insurance policy on terms with respect to coverage and amount no less
favorable than those of such policy in effect on the date hereof, provided
that, in satisfying its obligation under this Section 8.03(b), the Surviving
Corporation shall not be obligated to pay premiums in excess of 200% of the
amount per annum the Company paid in its last full fiscal year, which amount
Company has disclosed to Parent prior to the date hereof.
(c) If Parent, the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its properties
and assets to any Person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Parent or
the Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 8.03.
(d) The rights of each Indemnified Person under this Section 8.03 shall be
in addition to any rights such Person may have under the certificate of
incorporation or bylaws of the Company or any of its Subsidiaries, under
Delaware Law or any other applicable laws or under any agreement of any
Indemnified Person with the Company or any of its Subsidiaries. These rights
shall survive consummation of the Merger and are intended to benefit, and shall
be enforceable by, each Indemnified Person.
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Section 8.04. Other Indemnification. (a) Parent hereby agrees to
indemnify, defend and hold harmless the Company (until the Effective Time) and
its directors from and against any costs or expenses (including Taxes, claims
under the Tax Sharing Agreement, and lawyers' and accountants' fees), and its
directors from any damages, in each case resulting from (i) a breach by Parent
of any representation contained in Section 6.07 hereof, or (ii) the loss of
Tax-Free Status (as defined in the Tax Sharing Agreement) by reason of the
consummation of the transactions contemplated by this Agreement.
(b) If Parent or any of its successors or assigns (i) consolidates with or
merges into any other Person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger, or (ii) transfers or
conveys all or substantially all of its properties and assets to any Person,
then, and in each such case, to the extent necessary, proper provision shall be
made so that the successors and assigns of Parent shall assume the obligations
set forth in Section 8.04(a).
ARTICLE 9
Covenants of Parent and the Company
The parties hereto agree that:
Section 9.01. Commercially Reasonable Efforts. Subject to the terms and
conditions of this Agreement, Company and Parent will use all commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate the transactions contemplated by this
Agreement.
Section 9.02. Certain Filings. The Company and Parent shall cooperate with
one another (i) in connection with the preparation of the Company Disclosure
Documents and the Offer Documents, (ii) in determining whether any action by or
in respect of, or filing with, any governmental body, agency, official, or
authority is required, or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts, in connection
with the consummation of the transactions contemplated by this Agreement and
(iii) in taking such actions or making any such filings, furnishing information
required in connection therewith or with the Company Disclosure Documents or
the Offer Documents and seeking timely to obtain any such actions, consents,
approvals or waivers.
Section 9.03. Public Announcements. Parent and the Company will consult
with each other before issuing any press release or making any public statement
with respect to this Agreement or the transactions contemplated hereby and,
except as may be required by applicable law or any listing agreement with any
national securities exchange, will not issue any such press release or make any
such public statement prior to such consultation.
Section 9.04. Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Subsidiary, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under
any of the rights, properties or assets of the Company acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with,
the Merger.
Section 9.05. Merger Without Meeting of Stockholders. If Parent, Merger
Subsidiary or any other Subsidiary of Parent shall acquire at least 90% of the
outstanding Shares pursuant to the Offer or otherwise, the parties hereto
agree, at the request of Parent, to take all necessary and appropriate action
to cause the Merger to be effective as soon as practicable after the acceptance
for payment and purchase of Shares pursuant to the Offer without a meeting of
stockholders of the Company in accordance with Delaware Law.
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Section 9.06. Notices of Certain Events. Each of Parent and the Company
shall promptly notify the other of:
(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or regulatory
agency or authority in connection with the transactions contemplated by this
Agreement; and
(c) any actions, suits, claims, investigations or proceedings commenced
or, to its knowledge, threatened against, relating to or involving or otherwise
affecting the Company, Parent or any of their respective Subsidiaries that
relate to the consummation of the transactions contemplated by this Agreement.
ARTICLE 10
Conditions to the Merger
Section 10.01. Conditions to Obligations of Each Party. The obligations of
the Company, Parent and Merger Subsidiary to consummate the Merger are subject
to the satisfaction of the following conditions:
(a) if required by Delaware Law, this Agreement shall have been approved
and adopted by the stockholders of the Company in accordance with such Law;
(b) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Merger; and
(c) Merger Subsidiary shall have purchased Shares pursuant to the Offer.
Section 10.02. Conditions to the Obligations of Parent and Merger
Subsidiary. The obligations of Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following further condition: that
the Company shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time, except where such failure to perform would not have,
individually or in the aggregate, a Material Adverse Effect on the Company.
ARTICLE 11
Termination
Section 11.01. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement by the stockholders of the
Company):
(a) by mutual written agreement of the Company and Parent;
(b) by either the Company or Parent, if:
(i) the Offer has not been consummated on or before August 31, 2001,
provided that the right to terminate this Agreement pursuant to this
Section 11.01(b)(i) shall not be available to any party whose breach of any
provision of this Agreement results in the failure of the Offer to be
consummated by such time; or
(ii) there shall be any law or regulation that makes acceptance for
payment of, and payment for, the Shares pursuant to the Offer or
consummation of the Merger illegal or otherwise prohibited or any judgment,
injunction, order or decree of any court or governmental body having
competent jurisdiction enjoining Merger Subsidiary from accepting for
payment of, and paying for, the Shares pursuant to the Offer or Company or
Parent from consummating the Merger and such judgment, injunction, order or
decree shall have become final and nonappealable;
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(c) by Parent, if,
(i) the Board of Directors of the Company shall have failed to
recommend, or shall have withdrawn or modified in a manner adverse to
Parent its approval or recommendation of, this Agreement or the Offer or
the Merger or shall have approved or recommended an Acquisition Proposal,
or
(ii) the Company shall have entered into, or publicly announced its
intention to enter into, a definitive agreement or an agreement in
principle with respect to an Acquisition Proposal, or
(iii) Parent has terminated the Offer because of a failure of any of
the conditions set forth in Annex I hereto;
(d) by the Company, if, prior to the acceptance for payment of the Shares
under the Offer,
(i) (A) the Board of Directors of the Company authorizes the Company,
subject to complying with the terms of this Agreement, to enter into a
written agreement concerning a Superior Proposal, (B) the Company shall
have complied with Section 7.04, (C) the Company shall have given Parent a
prior written notice of its intention to terminate the Agreement, attaching
a description of all material terms and conditions of the Superior Proposal
to such notice, (D) Parent does not make, within three Business Days after
receipt of such notice, an offer which the Board of Directors of the
Company determines, in good faith after consultation with its financial
advisors, is at least as favorable to the stockholders of the Company as
the Superior Proposal, it being understood that the Company shall not enter
into any such written agreement during such three Business Day period, and
(E) the Company prior to such termination pursuant to this clause (d)(i)
pays to Parent in immediately available funds the fee required to be paid
pursuant to Section 12.04(b). The Company agrees to notify Parent promptly
if its intention to enter into a written agreement referred to in its
notification shall change at any time after giving such notification; or
(ii) Merger Subsidiary shall have breached its obligation to commence
the Offer as set forth in the first sentence of Section 2.01(a); or
(iii) Merger Subsidiary shall have terminated the Offer in breach of
its obligations under this Agreement, provided that the Company is not then
in breach of its obligations under this Agreement; or
(iv) after the expiration date of the Offer (as such date may be
extended pursuant to Section 2.01(a)), Merger Subsidiary shall have failed
to accept for payment or pay for Shares validly tendered and not withdrawn
pursuant to the Offer, provided that all conditions to the Offer set forth
in Annex I shall have been satisfied or waived.
The party desiring to terminate this Agreement pursuant to this Section
11.01 (other than pursuant to Section 11.01(a)) shall give notice of such
termination to the other party.
Section 11.02. Effect of Termination. If this Agreement is terminated
pursuant to Section 11.01, this Agreement shall become void and of no effect
with no liability on the part of any party (or any stockholder, director,
officer, employee, agent, consultant or representative of such party) to the
other party hereto, provided that, if such termination shall result from the
willful (i) failure of either party to fulfill a condition to the performance
of the obligations of the other party or (ii) failure of either party to
perform a covenant hereof, such party shall be fully liable for any and all
liabilities and damages incurred or suffered by the other party as a result of
such failure. The provisions of Sections 12.02, 12.04, 12.06, 12.07 and 12.08
shall survive any termination hereof pursuant to Section 11.01.
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ARTICLE 12
Miscellaneous
Section 12.01. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission) and
shall be given,
if to Parent or Merger Subsidiary, to:
Sodexho Alliance, S.A.
3, Avenue Newton
78180 Montigny-le-Bretonneux, France
Attention: Bernard Carton
Fax: 011-33-1-30-85-50-88
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Paul R. Kingsley, Esq.
Fax: (212) 450-3800
if to the Company, to:
Sodexho Marriott Services, Inc.
9801 Washingtonian Boulevard
Gaithersburg, MD 20878
Attention: Robert A. Stern, Esq.
Fax: (301) 987-4499
with a copy to:
Shaw Pittman
2300 N Street, N.W.
Washington, D.C. 20037
Attention: Thomas H. McCormick, Esq.
Fax: (202) 663-8007
or such other address or facsimile number as such party may hereafter
specify for the purpose by notice to the other parties hereto. All such
notices, requests and other communications shall be deemed received on the date
of receipt by the recipient thereof if received prior to 5 p.m. in the place of
receipt and such day is a Business Day in the place of receipt. Otherwise, any
such notice, request or communication shall be deemed not to have been received
until the next succeeding Business Day in the place of receipt.
Section 12.02. Non-Survival of Representations and Warranties. The
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time or the
termination of this Agreement.
Section 12.03. Amendments; No Waivers. (a) Any provision of this Agreement
may be amended or waived prior to the Effective Time if, but only if, such
amendment or waiver is in writing and is signed, in the case of an amendment,
by each party to this Agreement or, in the case of a waiver, by each party
against whom the waiver is to be effective, provided that, after the adoption
of this Agreement by the stockholders of the Company and without their further
approval, no such amendment or waiver shall reduce the amount or change the
kind of consideration to be received in exchange for the Shares.
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(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 12.04. Expenses. (a) Except as otherwise provided in this Section,
all costs and expenses incurred in connection with this Agreement shall be paid
by the party incurring such cost or expense.
(b) If:
(i) the Company shall terminate this Agreement pursuant to Section
11.01(d)(i);
(ii) Parent shall terminate this Agreement pursuant to Section
11.01(c)(i) or 11.01(c)(ii); or
(iii) (w) the Offer shall not have been consummated solely by reason
of the failure to satisfy the Minimum Condition, (x) either the Company or
Parent shall terminate this Agreement pursuant to Section 11.01(b)(i), (y)
prior to expiration or termination of the Offer, an Acquisition Proposal is
made by any Person and (z) the Company enters into a definitive agreement
within twelve months after termination of this Agreement in respect of any
Acquisition Proposal and the transaction contemplated thereby is
consummated;
then in any case as described in clause (i), (ii) or (iii), the Company
shall pay to Parent an amount equal to $20 million by wire transfer of
immediately available funds not later than (x) the date of termination of this
Agreement in the case of clause (i), (y) three Business Days following the
termination of this Agreement in the case of clause (ii) or (z) the date of the
closing of the transaction contemplated by the definitive agreement, in the
case of clause (iii).
(c) If Parent shall terminate this Agreement pursuant to Section
11.01(c)(iii) in the circumstances set forth in clause (ii)(D) or (ii)(E) of
Annex I hereto, the Company shall pay to Parent (by wire transfer of
immediately available funds not later than the date of termination of this
Agreement) an amount equal to Parent's reasonable out-of-pocket expenses (not
to exceed $15 million) incurred in connection with this Agreement and the
transactions contemplated hereby.
(d) If the Company shall terminate this Agreement pursuant to Sections
11.01(d)(ii), 11.01(d)(iii) or 11.01(d)(iv), Parent shall pay to the Company
(by wire transfer of immediately available funds not later than the date of
termination of this Agreement) an amount equal to the Company's reasonable out-
of-pocket expenses (not to exceed $4 million) incurred in connection with this
Agreement and the transactions contemplated hereby.
Section 12.05. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto, except that Parent or Merger
Subsidiary may transfer or assign, in whole or from time to time in part, to
one or more of its Affiliates, the right to purchase all or a portion of the
Shares pursuant to the Offer, but no such transfer or assignment will relieve
Parent or Merger Subsidiary of its obligations under the Offer or prejudice the
rights of tendering stockholders to receive payment for Shares validly tendered
and accepted for payment pursuant to the Offer.
Section 12.06. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of Delaware, without regard
to the conflicts of law rules of such state.
Section 12.07. Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby may be
brought in any federal court located in the State of Delaware or any Delaware
state court, and each of the parties hereby consents to the jurisdiction of
such courts (and of the appropriate appellate courts
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therefrom) in any such suit, action or proceeding and irrevocably waives, to
the fullest extent permitted by law, any objection that it may now or hereafter
have to the laying of the venue of any such suit, action or proceeding in any
such court or that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient form. Process in any such suit,
action or proceeding may be served on any party anywhere in the world, whether
within or without the jurisdiction of any such court. Without limiting the
foregoing, each party agrees that service of process on such party as provided
in Section 12.01 shall be deemed effective service of process on such party.
Section 12.08. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 12.09. Counterparts; Effectiveness; Benefit. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
Except as provided in Section 8.03, no provision of this Agreement is intended
to confer any rights, benefits, remedies, obligations, or liabilities hereunder
upon any Person other than the parties hereto and their respective successors
and assigns.
Section 12.10. Entire Agreement. This Agreement and the Confidentiality
Agreement constitute the entire agreement between the parties with respect to
the subject matter of this Agreement and supersedes all prior agreements and
understandings, both oral and written, between the parties with respect to the
subject matter of this Agreement.
Section 12.11. Captions. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof.
Section 12.12. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
a determination, 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 an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent
possible.
Section 12.13. Specific Performance. The parties hereto agree that
irreparable damage would occur if any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
or to enforce specifically the performance of the terms and provisions hereof
in any federal court located in the State of Delaware or any Delaware state
court, in addition to any other remedy to which they are entitled at law or in
equity.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
SODEXHO MARRIOTT SERVICES, INC.
/s/ Michel Landel
By: _________________________________
Name: Michel Landel
Title: President and Chief Executive
Officer
SODEXHO ALLIANCE, S.A.
/s/ Pierre Bellon
By: _________________________________
Name: Pierre Bellon
Title: Chairman and Chief Executive
Officer
SMS ACQUISITION CORP.
/s/ Denis Robin
By: _________________________________
Name: Denis Robin
Title: President
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ANNEX I
Notwithstanding any other provision of the Offer, Merger Subsidiary shall
not be required to accept for payment or pay for any Shares, and may terminate
the Offer, if
(i) at the expiration date of the Offer (as such date may be extended
pursuant to Section 2.01(a) of the Merger Agreement), the Minimum Condition
shall not have been satisfied; or
(ii) at any time on or after May 1, 2001 and prior to the expiration date
of the Offer (as such date may be extended pursuant to Section 2.01(a) of the
Merger Agreement), any of the following conditions exists:
(A) there shall be instituted or pending any action or proceeding by
any governmental authority (domestic, foreign or supranational) before any
court or governmental authority or agency (domestic, foreign or
supranational), (1) challenging or seeking to make illegal, to delay
materially or otherwise to restrain or prohibit the making of the Offer,
the acceptance for payment of or payment for some or all of the Shares
pursuant to the Offer or the consummation of the Merger, or seeking to
obtain material damages in connection with the Offer or the Merger, (2)
seeking to restrain or prohibit the ownership or operation by Parent or its
Affiliates of all or any portion of the business of the Company and its
Subsidiaries, or of Parent and its Subsidiaries, or to compel Parent or any
of its Affiliates to dispose of or hold separate all or any portion of the
business or assets of the Company and its Subsidiaries or of Parent and its
Subsidiaries, (3) seeking to impose limitations on the ability of Parent,
Merger Subsidiary or any of their Affiliates effectively to exercise full
rights of ownership of the Shares, including the right to vote any Shares
on any matters properly presented to the Company's stockholders, (4)
seeking to require divestiture by Parent, Merger Subsidiary or any of their
Affiliates of any Shares, or (5) that otherwise would reasonably be
expected to have a Material Adverse Effect on the Company or Parent, or
(B) there shall have been any action taken, or any statute, rule,
regulation, injunction, order or decree proposed, enacted, enforced,
promulgated, issued or deemed applicable to the Offer or the Merger, by any
court or governmental authority or agency (domestic, foreign or
supranational) that would reasonably be expected, directly or indirectly,
to result in any of the consequences referred to in clauses (1) through (5)
of paragraph (A) above, or
(C) there shall have been any event, occurrence, development or state
of circumstances or facts that has had or would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company, or
(D) the Company shall have breached or failed to perform in all
material respects any of its obligations under the Merger Agreement, except
where such breach or failure to perform would not have, individually or in
the aggregate, a Material Adverse Effect on the Company, or
(E) any of the representations and warranties of the Company contained
in the Merger Agreement (without giving effect to any qualifications
contained therein as to "materiality" or "Material Adverse Effect") shall
not be true and correct in all respects when made or at any time prior to
the consummation of the Offer as if made at and as of such time, except
where such failure to be true or correct would not have, individually or in
the aggregate, a Material Adverse Effect on the Company, or
(F) the Merger Agreement shall have been terminated in accordance with
its terms, or
(G) the Board of Directors of the Company shall have failed to
recommend, or shall have withdrawn or modified in a manner adverse to
Parent its approval or recommendation of, the Merger Agreement or the Offer
or the Merger or shall have approved or recommended an Acquisition
Proposal, or
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(H) the Company shall have entered into, or publicly announced its
intention to enter into, a definitive agreement or an agreement in
principle with respect to an Acquisition Proposal.
The foregoing conditions are for the sole benefit of Parent and Merger
Subsidiary and may, subject to the terms of the Merger Agreement, be waived by
Parent and Merger Subsidiary in whole or in part at any time and from time to
time in their discretion. The failure by Parent or Merger Subsidiary at any
time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right, the waiver of any such right with respect to particular facts
and circumstances shall not be deemed a waiver with respect to any other facts
and circumstances, and each such right shall be deemed an ongoing right that
may be asserted at any time and from time to time prior to consummation of the
Offer.
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ANNEX B
(UBS Warburg Logo)
May 1, 2001
Special Committee of the Board of Directors
Sodexho Marriott Services, Inc.
9801 Washingtonian Boulevard
Gaithersburg, MD 20878
Members of the Special Committee:
We understand that Sodexho Marriott Services, Inc., a Delaware corporation
(the "Company"), is considering a transaction whereby SMS Acquisition Corp.
("Merger Subsidiary"), a Delaware corporation controlled by Sodexho Alliance
S.A. ("Sodexho Alliance"), will tender for the outstanding shares of common
stock, par value $1.00 per share (the "Common Stock"), of the Company not
currently owned by Sodexho Alliance or its affiliates. Pursuant to the terms of
the proposed Agreement and Plan of Merger dated May 1, 2001 (the "Merger
Agreement"), Merger Subsidiary will commence a cash tender offer (the "Offer")
to acquire all of the outstanding shares of Common Stock (other than shares
held by Sodexho Alliance or its Affiliates (as such term is defined in the
Merger Agreement)) for a cash payment in the amount of $32.00 per share (the
"Consideration"). Pursuant to the Merger Agreement, the Offer will be followed
by a merger of the Merger Subsidiary with and into the Company (the "Merger"
and, together with the Offer, the "Transaction") in which the remaining shares
of Common Stock not tendered in the Offer (other than shares held by Sodexho
Alliance or its Affiliates) will convert into the right to receive the
Consideration. The terms and conditions of the Transaction are more fully set
forth in the Merger Agreement.
You have requested our opinion as to the fairness from a financial point of
view to the holders of the shares of Common Stock (other than Sodexho Alliance
and its Affiliates) of the Consideration to be received by such holders in the
Transaction.
UBS Warburg LLC ("UBSW") has acted as financial advisor to the Special
Committee of the Board of Directors of the Company in connection with the
Transaction. UBSW will receive a fee from the Company in connection with the
rendering of this opinion and upon the consummation of the Transaction. In the
ordinary course of business, UBSW, its successors and affiliates may trade or
have traded securities of the Company and/or Sodexho Alliance for their own
accounts and the accounts of their customers and, accordingly, may at any time
hold a long or short position in such securities.
This letter does not constitute a recommendation to any shareholder of the
Company as to whether such shareholder should tender its shares of Common Stock
in the Offer or how such shareholder should vote with respect to the Merger. At
your direction, we have not been asked to, nor do we, offer any opinion as to
the material terms of the Merger Agreement or the form of the Transaction
contemplated thereby. In rendering this opinion, we have assumed, with your
consent, that the final executed form of the Merger Agreement does not differ
in any material respect from the drafts that we have examined, and that the
Company, Sodexho Alliance and Merger Subsidiary will comply with all the
material terms of the Merger Agreement. We have not been authorized to and have
not solicited indications of interest from any party with respect to a business
combination with the Company.
In arriving at our opinion, we have, among other things: (i) reviewed
certain publicly available business and historical financial information
relating to the Company, (ii) reviewed the reported prices and trading activity
for the Common Stock of the Company, (iii) reviewed certain internal financial
information and other
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(UBS Warburg Logo)
data relating to the business and financial prospects of the Company, including
estimates and financial forecasts prepared by management of the Company, that
were provided to us by the Company and not publicly available, (iv) conducted
discussions with members of the senior management of the Company concerning the
business and financial prospects of the Company, (v) reviewed publicly
available financial and stock market data with respect to certain other
companies in lines of business we believe to be generally comparable to those
of the Company, (vi) compared the financial terms of the Transaction with the
publicly available financial terms of certain other transactions which we
believe to be generally relevant, (vii) reviewed drafts of the Merger
Agreement, and (viii) conducted such other financial studies, analyses, and
investigations, and considered such other information as we deemed necessary or
appropriate.
In connection with our review, at your direction, we have not assumed any
responsibility for independent verification of any of the information reviewed
by us for the purpose of this opinion and have, with your consent, relied on
such information being complete and accurate in all material respects. In
addition, at your direction, we have not made any independent evaluation or
appraisal of any of the assets or liabilities (contingent or otherwise) of the
Company, nor have we been furnished with any such evaluation or appraisal. In
addition, at your direction, we have assumed that the financial projections
internally prepared by Sodexho Marriott Services were reasonably prepared on
bases reflecting the best currently available estimates and good faith
judgments of the management of Sodexho Marriott Services as to the future
performance of Sodexho Marriott Services. Our opinion is necessarily based on
economic, monetary, market and other conditions as in effect on, and the
information made available to us as of, the date hereof.
This letter has been prepared for the information of the Special Committee
of the Board of Directors in connection with its consideration of the proposed
Transaction.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Consideration to be received by the holders of shares of
Common Stock (other than Sodexho Alliance and its Affiliates) in the
Transaction is fair from a financial point of view to such holders.
Very truly yours,
UBS Warburg LLC
B-2
ANNEX C--GENERAL CORPORATION LAW OF DELAWARE
SECTION 262 APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to (S)228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and
the words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions
thereof, solely of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to (S)251 (other than a merger effected pursuant to (S)251(g)
of this title), (S)252, (S)254, (S)257, (S)258, (S)263 or (S)264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of (S)251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to (S)251,
(S)252, (S)254, (S)257, (S)258, (S)263 and (S)264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S)253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsection (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholder's shares shall deliver
to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholder,s shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such stockholder's shares. A proxy or vote against
the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall
notify each stockholder of each constituent corporation who has complied
with this subsection and has not voted in favor of or consented to the
merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to (S)228 or
(S)253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
C-2
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10
days after such stockholder's written request for such a statement is received
by the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted such stockholder's certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder is not
entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of
C-3
uncertificated stock forthwith, and the case of holders of shares represented
by certificates upon the surrender to the corporation of the certificates
representing such stock. The Court's decree may be enforced as other decrees in
the Court of Chancery may be enforced, whether such surviving or resulting
corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger or consolidation
as provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
C-4
The Letter of Transmittal and certificates for Shares and any other required
documents should be sent to the Depositary at one of the addresses set forth
below:
The Depositary for the Offer is:
EQUISERVE TRUST COMPANY, N.A.
By Mail: By Overnight Courier: By Hand:
EquiServe Trust Company, N.A. EquiServe Trust Company, N.A. EquiServe Trust Company, N.A.
P.O. Box 842010 40 Campanelli Drive c/o Securities Transfer & Reporting
Boston, MA Braintree, MA Services, Inc.
02284-2010 02184 100 William Street--Galleria
Attn: Corporate Actions New York, NY
10038
If you have questions or need additional copies of this Offer to Purchase
and the Letter of Transmittal, you can call the Information Agent or the Dealer
Manager at their respective addresses and telephone numbers set forth below.
You may also contact your broker, dealer, commercial bank, trust company or
other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
[MACKENZIE PARTNERS, INC. LOGO APPEARS HERE]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
Call Toll-Free (800) 322-2885
Email: proxy@mackenziepartners.com
The Dealer Manager for the Offer is:
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
(212) 902-1000 (Call Collect)
or
Call Toll-Free: (800) 323-5678