Exhibit 2.1
CONFORMED COPY
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AGREEMENT AND PLAN OF MERGER
Dated as of June 1, 2001
By and Among
VIVENDI UNIVERSAL,
SORAYA MERGER INC.
And
HOUGHTON MIFFLIN COMPANY
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TABLE OF CONTENTS
Page
ARTICLE I
The Offer and the Merger
SECTION 1.01. The Offer..................................................2
SECTION 1.02. Target Actions.............................................4
SECTION 1.03. The Merger.................................................5
SECTION 1.04. Closing....................................................5
SECTION 1.05. Effective Time.............................................5
SECTION 1.06. Effects of the Merger......................................6
SECTION 1.07. Articles of Organization and By-laws.......................6
SECTION 1.08. Board of Directors and Officers............................6
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock................................... 7
(a) Capital Stock of Sub................................. 7
(b) Cancelation of Treasury Stock and
Parent-Owned Stock............................... 7
(c) Conversion of Target Common Stock.................... 7
(d) Dissenting Shares.................................... 7
SECTION 2.02. Exchange of Certificates.................................. 8
(a) Paying Agent.........................................8
(b) Exchange Procedures..................................8
(c) No Further Ownership Rights in
Target Common Stock..............................9
(d) No Liability.........................................9
(e) Lost Certificates...................................10
(f) Withholding Rights..................................10
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of Target..................10
(a) Organization, Standing and
Corporate Power..................................11
(b) Subsidiaries.........................................11
(c) Capital Structure....................................11
(d) Authority; Noncontravention..........................13
(e) SEC Documents; Undisclosed Liabilities...............15
(f) Information Supplied.................................16
(g) Absence of Certain Changes or Events.................17
(h) Litigation...........................................18
(i) Compliance with Applicable Laws......................19
(j) Absence of Changes in Benefit Plans..................20
(k) ERISA Compliance; Excess Parachute
Payments.........................................21
(l) Taxes................................................26
(m) Voting Requirements..................................28
(n) State Takeover Statutes..............................28
(o) Brokers..............................................28
(p) Opinion of Financial Advisor.........................29
(q) Intellectual Property................................29
(r) Contracts............................................30
(s) State Adoption Contracts.............................31
(t) Rights Agreement.....................................32
SECTION 3.02. Representations and Warranties of Parent
and Sub..............................................32
(a) Organization, Standing and
Corporate Power..................................32
(b) Authority; Noncontravention..........................32
(c) Information Supplied.................................34
(d) Interim Operations of Sub............................34
(e) Capital Resources....................................34
ARTICLE IV
Covenants Relating to Conduct of Business
SECTION 4.01. Conduct of Business.......................................35
(a) Conduct of Business by Target........................35
(b) Advice of Changes....................................38
(c) Certain Tax Matters..................................39
SECTION 4.02. No Solicitation by Target.................................39
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of the Proxy Statement;
Target Stockholders Meeting.............................42
SECTION 5.02. Access to Information; Confidentiality....................43
SECTION 5.03. Reasonable Efforts........................................44
SECTION 5.04. Stock Options.............................................45
SECTION 5.05. Employee Matters..........................................46
SECTION 5.06. Indemnification, Exculpation and Insurance................47
SECTION 5.07. Fees and Expenses.........................................49
SECTION 5.08. Public Announcements......................................50
SECTION 5.09. Litigation................................................51
SECTION 5.10. U.S. Corporate Headquarters...............................51
SECTION 5.11. Target Name...............................................51
SECTION 5.12. Resignation of Directors..................................51
SECTION 5.13. Rights Agreement..........................................51
SECTION 5.14. Directors.................................................51
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligation To
Effect the Merger.......................................53
(a) Stockholder Approval.................................53
(b) HSR Act..............................................53
(c) No Restraints........................................53
(d) Purchase of Shares in the Offer......................53
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01. Termination...............................................54
SECTION 7.02. Effect of Termination.....................................56
SECTION 7.03. Amendment.................................................56
SECTION 7.04. Extension; Waiver.........................................56
SECTION 7.05. Procedure for Termination, Amendment,
Extension or Waiver.....................................57
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and
Warranties..............................................57
SECTION 8.02. Notices...................................................57
SECTION 8.03. Definitions...............................................59
SECTION 8.04. Interpretation............................................60
SECTION 8.05. Counterparts..............................................61
SECTION 8.06. Entire Agreement;
No Third-Party Beneficiaries............................61
SECTION 8.07. Governing Law.............................................61
SECTION 8.08. Assignment................................................61
SECTION 8.09. Enforcement...............................................61
SECTION 8.10. Severability..............................................62
Exhibit A - Conditions of the Offer........................A-1
Annex I - Index of Defined Terms.........................A-3
AGREEMENT AND PLAN OF MERGER (this
"Agreement") dated as of June 1, 2001, among
VIVENDI UNIVERSAL, a societe anonyme organized
under the laws of France ("Parent"), SORAYA
MERGER INC., a Massachusetts corporation and a
wholly owned subsidiary of Parent ("Sub"), and
HOUGHTON MIFFLIN COMPANY, a Massachusetts
corporation ("Target").
WHEREAS the respective Boards of Directors of Parent, Sub
and Target have approved, and the Boards of Directors of Sub and Target
have declared advisable the acquisition of Target by Parent upon the terms
and subject to the conditions set forth in this Agreement;
WHEREAS, in furtherance of such acquisition, Parent
proposes to cause Sub to make a tender offer (as it may be amended from
time to time as permitted under this Agreement, the "Offer") to purchase
all the outstanding shares of common stock, par value $1.00 per share, of
Target (together with the associated Rights) ("Target Common Stock"), at a
price per share of Target Common Stock of $60.00, net to the seller in cash
without interest, upon the terms and subject to the conditions set forth in
this Agreement;
WHEREAS, the respective Boards of Directors of Parent,
Sub and Target have approved, and the Boards of Directors of Sub and Target
have declared advisable the merger of Sub with and into Target (the
"Merger"), upon the terms and subject to the conditions set forth in this
Agreement, whereby each issued and outstanding share of Target Common
Stock, other than shares owned by Parent, Sub or Target, and other than
Dissenting Shares, will be converted into the right to receive the price
per share paid pursuant to the Offer;
WHEREAS the respective Boards of Directors of Parent, Sub
and Target have each determined that the Offer, the Merger and the other
transactions contemplated hereby are consistent with, and in furtherance
of, their respective business strategies and goals; and
WHEREAS Parent, Sub and Target desire to make certain
representations, warranties, covenants and agreements in connection with
the Offer and the Merger and also to prescribe various conditions to the
Offer and the Merger.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, the
parties agree as follows:
ARTICLE I
The Offer and the Merger
SECTION 1.01. The Offer. (a) Subject to the conditions of
this Agreement, as promptly as practicable but in no event later than five
business days after the date of the public announcement of this Agreement,
Sub shall, and Parent shall cause Sub to, commence the Offer within the
meaning of the applicable rules and regulations of the Securities and
Exchange Commission (the "SEC"). The obligations of Sub to, and of Parent
to cause Sub to, commence the Offer and accept for payment, and pay for,
any shares of Target Common Stock tendered pursuant to the Offer are
subject to the conditions set forth in Exhibit A. Sub expressly reserves
the right to waive any condition to the Offer or amend or modify the terms
of the Offer, except that, without the consent of Target, Sub shall not (i)
reduce the number of shares of Target Common Stock subject to the Offer,
(ii) reduce the price per share of Target Common Stock to be paid pursuant
to the Offer, (iii) waive the Minimum Tender Condition, add to the
conditions set forth in Exhibit A or modify any condition set forth in
Exhibit A in any manner adverse to the holders of Target Common Stock, (iv)
except as provided in the next sentence, extend the Offer, (v) change the
form of consideration payable in the Offer or (vi) otherwise amend the
Offer in any manner adverse to the holders of Target Common Stock.
Notwithstanding the foregoing, Sub may, without the consent of Target, (A)
extend the Offer, if at the scheduled expiration date of the Offer any of
the conditions to Sub's obligation to purchase shares of Target Common
Stock are not satisfied, until such time as such conditions are satisfied
or waived, (B) extend the Offer for any period required by any rule,
regulation, interpretation or position of the SEC or the staff thereof
applicable to the Offer and (C) extend the Offer for any reason on one or
more occasions for a period of not more than five business days beyond the
latest expiration date that would otherwise be permitted under clause (A)
or (B) of this sentence. Parent and Sub agree that if all of the conditions
to the Offer are not satisfied on any scheduled expiration date of the
Offer then, provided that all such conditions are reasonably capable of
being satisfied, Sub shall extend the Offer from time to time until such
conditions are satisfied or waived, provided that Sub shall not be required
to extend the Offer beyond the Outside Date. On the terms and subject to
the conditions of the Offer and this Agreement, Sub shall, and Parent shall
cause Sub to, pay for all shares of Target Common Stock validly tendered
and not withdrawn pursuant to the Offer that Sub becomes obligated to
purchase pursuant to the Offer as soon as practicable after the expiration
of the Offer.
(b) On the date of commencement of the Offer, Parent and
Sub shall file with the SEC a Tender Offer Statement on Schedule TO with
respect to the Offer, which shall contain an offer to purchase and a
related letter of transmittal and summary advertisement (such Schedule TO
and the documents included therein pursuant to which the Offer will be
made, together with any supplements or amendments thereto, the "Offer
Documents"). Parent and Sub agree that the Offer Documents shall comply as
to form in all material respects with the Securities Exchange Act of 1934
(the "Exchange Act"), and the rules and regulations promulgated thereunder
and the Offer Documents, on the date first published, sent or given to
Target's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation or warranty is made by Parent or Sub with respect to
information supplied by Target or any of its stockholders specifically for
inclusion or incorporation by reference in the Offer Documents. Each of
Parent, Sub and Target shall promptly 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,
and each of Parent and Sub shall take all steps necessary to amend or
supplement the Offer Documents and to cause the Offer Documents as so
amended or supplemented to be filed with the SEC and the Offer Documents as
so amended or supplemented to be disseminated to Target's stockholders, in
each case as and to the extent required by applicable Federal securities
laws. Target and its counsel shall be given reasonable opportunity to
review and comment upon the Offer Documents prior to their filing with the
SEC or dissemination to the stockholders of Target. Parent and Sub shall
provide Target and its counsel in writing with any comments Parent, Sub or
their counsel may receive from the SEC or its staff with respect to the
Offer Documents promptly after the receipt of such comments.
(c) Parent shall provide or cause to be provided to Sub
on a timely basis the funds necessary to purchase any shares of Target
Common Stock that Sub becomes obligated to purchase pursuant to the Offer.
SECTION 1.02. Target Actions. (a) Target hereby approves
of and consents to the Offer, the Merger and the other transactions
contemplated by this Agreement.
(b) On the date the Offer Documents are filed with the
SEC, Target shall file with the SEC a Solicitation/Recommendation Statement
on Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as
amended or supplemented from time to time, the "Schedule 14D-9") describing
the recommendation of the Board of Directors of Target to Target's
Stockholders that they accept the Offer, tender their shares pursuant to
the Offer and approve this Agreement and shall mail the Schedule 14D-9 to
the holders of Target Common Stock. The Schedule 14D-9 shall comply as to
form in all material respects with the requirements of the Exchange Act and
the rules and regulations promulgated thereunder and, on the date filed
with the SEC and on the date first published, sent or given to Target's
stockholders, shall not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation
or warranty is made by Target with respect to information supplied by
Parent or Sub specifically for inclusion in the Schedule 14D-9. Each of
Target, Parent and Sub shall promptly correct any information provided by
it for use in the Schedule 14D-9 if and to the extent that such information
shall have become false or misleading in any material respect, and Target
shall take all steps necessary to amend or supplement the Schedule 14D-9
and to cause the Schedule 14D-9 as so amended or supplemented to be filed
with the SEC and disseminated to Target's stockholders, in each case as and
to the extent required by applicable Federal securities laws. Parent and
its counsel shall be given reasonable opportunity to review and comment
upon the Schedule 14D-9 prior to its filing with the SEC or dissemination
to stockholders of Target. Target shall provide Parent and its counsel in
writing with any comments Target or its counsel may receive from the SEC or
its staff with respect to the Schedule 14D-9 promptly after the receipt of
such comments.
(c) In connection with the Offer and the Merger, Target
shall cause its transfer agent to furnish Sub promptly with mailing labels
containing the names and addresses of the record holders of Target Common
Stock as of a recent date and of those persons becoming record holders
subsequent to such date, together with copies of all lists of stockholders,
security position listings and computer files and all other information in
Target's possession or control regarding the beneficial owners of Target
Common Stock, and shall furnish to Sub such information and assistance
(including updated lists of stockholders, security position listings and
computer files) as Parent may reasonably request in communicating the Offer
to Target's stockholders. Subject to the requirements of applicable law,
and except for such steps as are necessary to disseminate the Offer
Documents and any other documents necessary to consummate the Offer, the
Merger and the other transactions contemplated by this Agreement, Parent
and Sub shall hold in confidence the information contained in any such
labels, listings and files, shall use such information only in connection
with the Offer and the Merger and, if this Agreement shall be terminated,
shall, upon request, deliver to Target all copies of such information then
in their possession.
SECTION 1.03. The Merger. Upon the terms and subject to
the conditions set forth in this Agreement, and in accordance with the
Massachusetts Business Corporation Law (the "MBCL"), Sub shall be merged
with and into Target at the Effective Time. Following the Effective Time,
Target shall be the surviving corporation (the "Surviving Corporation") and
shall succeed to and assume all the rights and obligations of Sub in
accordance with the MBCL and the purpose of the Surviving Corporation shall
be as set forth in Article 2 of its articles of organization.
SECTION 1.04. Closing. The closing of the Merger (the
"Closing") will take place at 10:00 a.m. on a date to be specified by the
parties (the "Closing Date"), which shall be no later than the second
business day after satisfaction or waiver of the conditions set forth in
Article VI (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the satisfaction or waiver of
those conditions), unless another time or date is agreed to by the parties
hereto. The Closing will be held at such location in the City of New York
as is agreed to by the parties hereto.
SECTION 1.05. Effective Time. Subject to the provisions
of this Agreement, as soon as practicable on or after the Closing Date, the
parties shall file articles of merger or other appropriate documents (in
any such case, the "Articles of Merger") executed in accordance with the
relevant provisions of the MBCL and shall make all other filings or
recordings required under the MBCL. The Merger shall become effective at
such time as the Articles of Merger is duly filed with the Secretary of the
Commonwealth of the Commonwealth of Massachusetts, or at such subsequent
date or time as Parent and Target shall agree and specify in the Articles
of Merger (the time the Merger becomes effective being hereinafter referred
to as the "Effective Time").
SECTION 1.06. Effects of the Merger. The Merger shall
have the effects set forth in Section 80 of the MBCL.
SECTION 1.07. Articles of Organization and By-laws. (a)
The restated articles of organization of Target, as in effect immediately
prior to the Effective Time, shall be amended as of the Effective Time so
that Section 3 of such restated articles of organization reads in its
entirety as follows: "The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 1,000 shares of
common stock, par value $1.00 per share.", and, as so amended, such
restated articles of organization shall be the articles of organization of
the Surviving Corporation until thereafter changed or amended as provided
therein or by applicable law. The purpose of the Surviving Corporation
shall be as set forth in the restated articles of organization of Target.
(b) The by-laws of Target, as in effect immediately prior
to the Effective Time, shall be the by- laws of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable
law; provided that the by-laws of the Surviving Corporation shall be
amended as of the Effective Time in order to eliminate the requirement that
the Board of Directors of the Surviving Corporation be classified.
SECTION 1.08. Board of Directors and Officers. (a) The
directors of Sub immediately prior to the Effective Time shall be the
directors of the Surviving Corporation until the earlier of their
resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
(b) The officers of Target immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, until
the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock. As of the
Effective Time, by virtue of the Merger and without any action on the part
of the holder of any shares of Target Common Stock or any shares of capital
stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding
share of capital stock of Sub shall be converted into one fully
paid and nonassessable share of common stock, par value $1.00 per
share, of the Surviving Corporation.
(b) Cancelation of Treasury Stock and Parent- Owned
Stock. Each share of Target Common Stock that is owned by Target,
Sub or Parent shall automatically be canceled and shall cease to
exist, and no consideration shall be delivered or deliverable in
exchange therefor.
(c) Conversion of Target Common Stock. Each issued and
outstanding share of Target Common Stock (other than shares to be
canceled in accordance with Section 2.01(b) and the Dissenting
Shares) shall be converted into the right to receive in cash,
without interest, the price per share paid in the Offer (the
"Merger Consideration"). As of the Effective Time, all such shares
of Target Common Stock shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and each
holder of a certificate representing any such shares of Target
Common Stock shall cease to have any rights with respect thereto,
except the right to receive the Merger Consideration to be issued
in consideration therefor upon surrender of such certificate in
accordance with Section 2.02, without interest.
(d) Dissenting Shares. (i) Notwithstanding anything in
this Agreement to the contrary and unless otherwise provided by
applicable law, shares of Target Common Stock that are issued and
outstanding immediately prior to the Effective Time and that are
owned by stockholders who have properly perfected their rights of
appraisal in accordance with the provisions of Sections 86 through
98 of the MBCL (the "Dissenting Shares") shall not be converted
into the right to receive the Merger Consideration, unless and
until such stockholders shall have failed to perfect or shall
have effectively withdrawn or lost their right of payment
under applicable law, but, instead, the holders thereof
shall be entitled to payment of the appraised value of such
Dissenting Shares in accordance with the provisions of the MBCL.
If any such holder shall have failed to perfect or shall have
effectively withdrawn or lost such right of appraisal, each share
of Target Common Stock held by such stockholder shall thereupon be
deemed to have been converted into the right to receive and become
exchangeable for, at the Effective Time, the Merger Consideration
in the manner provided in Section 2.01(c).
(ii) Target shall give Parent (A) prompt notice of any
objections filed pursuant to the MBCL received by Target,
withdrawals of such objections and any other instruments served in
connection with such objections pursuant to the MBCL and received
by Target and (B) the opportunity to direct all negotiations and
proceedings with respect to objections under the MBCL consistent
with the obligations of Target thereunder. Target shall not,
except with the prior written consent of Parent, (x) make any
payment with respect to any such objection, (y) offer to settle or
settle any such objection or (z) waive any failure to timely
deliver a written objection in accordance with the MBCL.
SECTION 2.02. Exchange of Certificates. (a) Paying Agent.
As of the Effective Time, Parent shall enter into an agreement with such
bank or trust company in the United States as may be designated by Parent
(the "Paying Agent"), which shall provide that Parent shall from time to
time after the Effective Time, cause the Surviving Corporation to make
available to the Paying Agent funds in amounts and at the times necessary
for the payment of the Merger Consideration pursuant to Section 2.01(c)
upon surrender of certificates representing shares of Target Common Stock,
it being understood that any and all interest earned on funds made
available to the Paying Agent pursuant to this Agreement shall be turned
over to Parent.
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, the Paying Agent shall mail to each
holder of record of a certificate or certificates which immediately prior
to the Effective Time represented outstanding shares of Target Common Stock
(the "Certificates") whose shares were converted into the right to receive
the Merger Consideration pursuant to Section 2.01, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and shall be in such form and have such
other provisions as Parent and Target may reasonably specify) and (ii)
instructions for use in surrendering the Certificates in exchange for the
Merger Consideration. Upon surrender of a Certificate for cancelation to
the Paying Agent, together with such letter of transmittal, duly executed,
and such other documents as may reasonably be required by the Paying Agent,
the holder of such Certificate shall receive in exchange therefor the
amount of cash into which the shares formerly represented by such
Certificate shall have been converted pursuant to Section 2.01(c), and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Target Common Stock which is not registered in the
transfer records of Target, payment may be made to a person other than the
person in whose name the Certificate so surrendered is registered if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such issuance shall pay any transfer or
other taxes required by reason of the payment to a person other than the
registered holder of such Certificate or establish to the satisfaction of
Parent that such tax has been paid or is not applicable. Until surrendered
as contemplated by this Section 2.02(b), each Certificate shall be deemed
at any time after the Effective Time to represent only the right to receive
the Merger Consideration to be issued in consideration therefor upon
surrender of such Certificate in accordance with this Section 2.02. No
interest shall be paid or will accrue on the cash payable to holders of
Certificates pursuant to the provisions of this Article II.
(c) No Further Ownership Rights in Target Common Stock.
All cash paid upon the surrender of Certificates in accordance with the
terms of this Article II shall be deemed to have been paid in full
satisfaction of all rights pertaining to the shares of Target Common Stock
theretofore represented by such Certificates, subject, however, to the
Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have
been declared or made by Target on such shares of Target Common Stock which
remain unpaid at the Effective Time, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Target Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Paying Agent
for any reason, they shall be canceled and exchanged as provided in this
Article II, except as otherwise provided by law.
(d) No Liability. None of Parent, Sub, Target or the
Paying Agent shall be liable to any person in respect of any cash delivered
to a public official pursuant to any applicable abandoned property, escheat
or similar law. If any Certificate shall not have been surrendered prior to
one year after the Effective Time (or immediately prior to such date on
which any amounts payable pursuant to this Article II would otherwise
escheat to or become the property of any Governmental Entity), any such
amounts shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or
interest of any person previously entitled thereto.
(e) Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed and,
if required by Parent, the posting by such person of a bond in such
reasonable amount as Parent may direct as indemnity against any claim that
may be made against it with respect to such Certificate, the Paying Agent
shall issue in exchange for such lost, stolen or destroyed Certificate the
applicable Merger Consideration with respect thereto pursuant to this
Agreement.
(f) Withholding Rights. Parent, Sub or the Paying Agent
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Target Common
Stock such amounts as Parent, Sub or the Paying Agent is required to deduct
and withhold with respect to the making of such payment under the Internal
Revenue Code of 1986, as amended (the "Code"), or any provision of state,
local or foreign tax law. To the extent that amounts are so withheld and
paid over to the appropriate taxing authority by Parent, Sub or the Paying
Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Target Common
Stock in respect of which such deduction and withholding was made by
Parent, Sub or the Paying Agent.
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of Target.
Except as disclosed in the Target Filed SEC Documents or as set forth on
the disclosure schedule (each section of which qualifies the
correspondingly numbered representation and warranty to the extent
specified therein and such other representations and warranties to the
extent a matter in such section is disclosed in such a way as to make its
relevance to the information called for by such other representation and
warranty readily apparent) delivered by Target to Parent prior to the
execution of this Agreement (the "Target Disclosure Schedule"), Target
represents and warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. Each of
Target and its subsidiaries is a corporation or other legal entity
duly organized, validly existing and in good standing (with
respect to jurisdictions which recognize such concept) under the
laws of the jurisdiction in which it is organized and has the
requisite corporate or other power, as the case may be, and
authority to carry on its business as now being conducted, except
where the failure to be so organized, existing and in good
standing or to have such power and authority is not reasonably
likely to have a material adverse effect on Target. Each of Target
and its subsidiaries is duly qualified or licensed to do business
and is in good standing (with respect to jurisdictions which
recognize such concept) in each jurisdiction in which the nature
of its business or the ownership, leasing, licensing, exploitation
or operation of its assets makes such qualification or licensing
necessary, except for those jurisdictions where the failure to be
so qualified or licensed or to be in good standing, individually
or in the aggregate, is not reasonably likely to have a material
adverse effect on Target. Target has made available to Parent
prior to the execution of this Agreement complete and correct
copies of its restated articles of organization and by-laws, as
amended to the date of this Agreement.
(b) Subsidiaries. Section 3.01(b) of the Target
Disclosure Schedule sets forth a true and complete list of each of
Target's subsidiaries. All the outstanding shares of capital stock
of, or other equity interests in, each subsidiary of Target have
been validly issued, are fully paid and nonassessable and are
owned directly or indirectly by Target, free and clear of all
pledges, claims, liens, charges, encumbrances, mortgages and
security interests of any kind or nature whatsoever (collectively,
"Liens") and free of any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other ownership
interests except restrictions under applicable law.
(c) Capital Structure. The authorized capital stock of
Target consists of 70,000,000 shares of Target Common Stock and
500,000 shares of preferred stock, par value $1.00 per share, of
Target ("Target Authorized Preferred Stock"). As of April 30,
2001, (i) 28,877,784 shares of Target Common Stock were issued and
outstanding; (ii) 3,085,609 shares of Target Common Stock were
held by Target in its treasury; (iii) no shares of Target
Authorized Preferred Stock were issued and outstanding; (iv)
1,824,322 shares of Target Common Stock were subject to
outstanding stock options (collectively, "Target Stock Options")
granted under the Target Stock Plans (as defined below); and (v)
5,000 shares of Series A Junior Participating Preferred Stock were
reserved for issuance in connection with the rights (the "Rights")
to purchase shares of Series A Junior Participating Preferred
Stock issued pursuant to the Renewed Rights Agreement dated as of
July 30, 1997 (the "Rights Agreement") between Target and
BankBoston, N.A. Except as set forth above and except for shares
of Target Common Stock issued upon the exercise of stock options
referenced above subsequent to the close of business on April 30,
2001 and prior to the date of this Agreement, as of the date of
this Agreement, no shares of capital stock or other voting
securities of Target were issued, reserved for issuance or
outstanding. There are no outstanding stock appreciation rights
("SARs") or rights (other than the Target Stock Options,
restricted shares and restricted units) to receive shares of
Target Common Stock on a deferred basis or other rights linked to
the value of shares of Target Common Stock granted under the stock
plans listed in Section 3.01(c) of the Target Disclosure Schedule
(such plans, collectively, the "Target Stock Plans"). Outstanding
Target Stock Options, are evidenced by stock option agreements and
restricted stock purchase agreements in forms provided to Parent
prior to the date of this Agreement, and no stock option agreement
or restricted stock purchase agreement contains terms that are
inconsistent with such forms. No bonds, debentures, notes or other
indebtedness of Target having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote) on
any matters on which stockholders of Target or any of its
subsidiaries may vote are issued or outstanding or subject to
issuance. All outstanding shares of capital stock of Target are,
and all shares which may be issued will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and will
be delivered free and clear of all Liens (other than Liens created
by or imposed upon the holders thereof) and not subject to
preemptive rights. Except as set forth in this Section 3.01(c)
(including pursuant to the conversion or exercise of the
securities referred to above), (x) there are not issued, reserved
for issuance or outstanding (A) any shares of capital stock or
other voting securities of Target or any of its subsidiaries
(other than shares of capital stock or other voting securities of
such subsidiaries that are directly or indirectly owned by
Target), (B) any securities of Target or any of its subsidiaries
convertible into or exchangeable or exercisable for shares of
capital stock or other voting securities of, or other ownership
interests in, Target or any of its subsidiaries or (C) any
warrants, calls, options or other rights to acquire from Target or
any of its subsidiaries, and no obligation of Target or any of its
subsidiaries to issue, any capital stock or other voting
securities of, or other ownership interests in, or any securities
convertible into or exchangeable or exercisable for any capital
stock or other voting securities of, or other ownership interests
in, Target or any of its subsidiaries and (y) there are not any
outstanding obligations of Target or any of its subsidiaries to
repurchase, redeem or otherwise acquire any such securities or to
issue, deliver or sell, or cause to be issued, delivered or sold,
any such securities. Target is not a party to any voting agreement
with respect to the voting of any such securities. Other than the
capital stock of, or other equity interests in, its subsidiaries,
Target does not directly or indirectly beneficially own any
securities or other beneficial ownership interests in any other
entity.
(d) Authority; Noncontravention. Target has all requisite
corporate power and authority to enter into this Agreement and,
subject to the Target Stockholder Approval, to consummate the
transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Target and the consummation by
Target of the transactions contemplated by this Agreement have
been duly authorized by all necessary corporate action on the part
of Target, subject, in the case of the Merger, to the Target
Stockholder Approval. This Agreement has been duly executed and
delivered by Target and, assuming the due authorization, execution
and delivery by each of the other parties thereto, constitutes a
legal, valid and binding obligation of Target, enforceable against
Target in accordance with its terms. The execution and delivery of
this Agreement does not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions
of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of amendment,
renegotiation, termination, cancelation or acceleration of any
obligation or to the loss of a benefit under or to the increase of
obligations under, or result in the creation of any Lien upon any
of the properties or assets owned by, or licensed to, or leased by
Target or any of its subsidiaries under, (i) the restated articles
of organization or by-laws of Target or the comparable
organizational documents of any of its subsidiaries, (ii) any loan
or credit agreement, note, bond, mortgage, indenture, lease or
other contract, agreement, obligation, commitment, arrangement,
understanding, instrument, permit, concession, franchise, license
or similar authorization (each, a "Contract") applicable to Target
or any of its subsidiaries or their respective properties or
assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, (A) any judgment,
order or decree or (B) any statute, treaty, convention, directive,
law, ordinance, rule, regulation, order or restriction, in each
case applicable to Target or any of its subsidiaries or their
respective owned, licensed or leased properties or assets, other
than, in the case of clauses (ii) and (iii), any such conflicts,
violations, defaults, rights, losses or Liens that, individually
and in the aggregate, are not reasonably likely to (x) have a
material adverse effect on Target, (y) impair the ability of
Target to perform its obligations under this Agreement or (z)
prevent or materially delay the consummation of the transactions
contemplated by this Agreement. No consent, approval, order or
authorization of, action by or in respect of, or registration,
recordation, declaration or filing with, any Federal, state, local
or foreign government, any court, administrative, regulatory or
other governmental agency, commission or authority or any
non-governmental self-regulatory agency, commission or authority
(each a "Governmental Entity") is required by or with respect to
Target or any of its subsidiaries in connection with the execution
and delivery of this Agreement by Target or the consummation by
Target of the transactions contemplated by this Agreement, except
for (1) the filing of a premerger notification and report form by
Target under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and any applicable filings and
approvals under similar foreign antitrust or competition laws and
regulations ("Foreign Antitrust Laws"); (2) the filing with the
SEC of (A) the Schedule 14D-9, (B) a proxy statement or
information statement relating to the Target Stockholders Meeting
(such proxy statement or information statement, as amended or
supplemented from time to time, the "Proxy Statement"), and (C)
such reports under Section 13(a), 13(d), 14(f), 15(d) or 16(a) of
the Exchange Act, as may be required in connection with this
Agreement and the transactions contemplated by this Agreement; (3)
the filing of the Articles of Merger with the Secretary of the
Commonwealth of the Commonwealth of Massachusetts and appropriate
documents with the relevant authorities of other states in which
Target is qualified to do business; and (4) such other consents,
approvals, orders, authorizations, registrations, recordations,
declarations and filings the failure of which to be made or
obtained, individually or in the aggregate, is not reasonably
likely to (x) have a material adverse effect on Target, (y) impair
the ability of Target to perform its obligations under this
Agreement or (z) prevent or materially delay the consummation of
the transactions contemplated by this Agreement.
(e) SEC Documents; Undisclosed Liabilities. Target has
filed all required reports, schedules, forms, statements and other
documents (including exhibits and all other information
incorporated therein) with the SEC since January 1, 2000 the
"Target SEC Documents"). As of their respective dates, the Target
SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933 (the "Securities Act")
or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such
Target SEC Documents, and none of the Target SEC Documents when
filed contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except
to the extent that information contained in any Target SEC
Document has been revised or superseded by a later filed Target
SEC Document, none of the Target SEC Documents contains any untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of Target
included in the Target SEC Documents comply as to form, as of
their respective dates of filing with the SEC, in all material
respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto (the
"Accounting Rules"), have been prepared in accordance with
generally accepted accounting principles ("GAAP") (except, in the
case of unaudited statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial
position of Target and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal recurring year-end audit
adjustments). Except (i) as disclosed in the most recent financial
statements contained in the Target Filed SEC Documents or in the
notes thereto or (ii) for liabilities incurred in connection with
this Agreement or the transactions contemplated hereby, neither
Target nor any of its subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent
or otherwise) required by GAAP to be set forth on a consolidated
balance sheet of Target and its consolidated subsidiaries or in
the notes thereto, which, individually or in the aggregate, are
reasonably likely to have a material adverse effect on Target.
(f) Information Supplied. None of the information
supplied or to be supplied by Target specifically for inclusion or
incorporation by reference in (i) the Offer Documents or the
Schedule 14D-9 or any information statement to be filed by Target
in connection with the Offer pursuant to Rule 14f-1 under the
Exchange Act (the "Information Statement") will, at the time it is
filed with the SEC or first published, sent or given to Target's
stockholders, or at the time of any amendment or supplement
thereof, or (ii) the Proxy Statement will, at the time it is filed
with the SEC, sent or given to Target's stockholders, at the time
of the Target Stockholders Meeting, or at the time of any
amendment or supplement thereof, in each case, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
are made, not misleading. The Schedule 14D-9, the Information
Statement and the Proxy Statement will comply as to form in all
material respects with the requirements of the Exchange Act and
the rules and regulations thereunder. No representation or
warranty is made by Target with respect to statements made or
incorporated by reference therein based on information supplied by
Parent specifically for inclusion or incorporation by reference in
the Offer Documents, the Schedule 14D-9, the Information Statement
or the Proxy Statement.
(g) Absence of Certain Changes or Events. Except for
liabilities incurred in connection with this Agreement or the
transactions contemplated hereby and except as disclosed in the
Target SEC Documents filed and publicly available prior to the
date of this Agreement (as amended to the date of this Agreement,
the "Target Filed SEC Documents"), since March 31, 2001, Target
and its subsidiaries have conducted their business only in the
ordinary course, and since such date there has not been (1) any
material adverse change in Target, (2) any declaration, setting
aside or payment of any dividend or other distribution (whether in
cash, stock or property) with respect to any of Target's capital
stock, except for, subject to Section 4.01(a)(i), regular
dividends of not more than $0.135 per share payable once each
calendar quarter to Target's stockholders, (3) any purchase,
redemption or other acquisition of any shares of capital stock or
any other securities of Target or any of its subsidiaries or any
options, warrants, calls or rights to acquire such shares or other
securities, (4) any split, combination or reclassification of any
of Target's capital stock or any issuance or the authorization of
any issuance of any other securities in respect of, in lieu of or
in substitution for shares of Target's capital stock, (5) (A) any
granting by Target or any of its subsidiaries to any current or
former director, consultant, executive officer, developer, author,
publisher, editor, illustrator or other employee or independent
contractor of Target or its subsidiaries of any increase in
compensation, bonus, royalties, commissions or other benefits,
except for normal increases in cash compensation, bonus or other
benefits in the ordinary course of business consistent with past
practice or as was required under any employment agreements,
developer agreements, author agreements, illustrator agreements,
publisher agreements or consulting or independent contractor
agreements in effect as of the date of the most recent audited
financial statements included in the Target Filed SEC Documents,
(B) any granting by Target or any of its subsidiaries to any such
current or former director, consultant, executive officer,
developer, author, publisher, editor, illustrator or employee of
any increase in severance or termination pay, (C) any entry by
Target or any of its subsidiaries into, or any amendments of, any
Target Benefit Agreement, (D) any amendment to, or modification
of, any Target Stock Option or (E) any adoption of, or amendment
to, a Target Benefit Plan, (6) except insofar as may have been
required by a change in GAAP, any change in accounting methods,
principles or practices by Target or any of its subsidiaries
materially affecting their respective assets, liabilities or
businesses, (7) any tax election that individually or in the
aggregate would reasonably be expected to adversely affect in any
material respect the tax liability or tax attributes of Target or
any of its subsidiaries, (8) any settlement or compromise of any
material income tax liability, (9) any revaluation by Target or
any of its subsidiaries of any of the material assets of Target or
any of its subsidiaries, (10) the entering into, modification,
termination, nonrenewal or assignment of any rights or delegation
of any obligations under any state or local adoption agreement,
licensing agreement, illustrator agreement, development agreement,
author agreement, publishing agreement, distribution agreement or
any other agreement with regard to the acquisition, licensing in
or disposition or licensing out of any material Intellectual
Property Rights or rights thereto other than in the ordinary
course of business consistent with past practice or not in the
ordinary course of business and not consistent with past practice
where it will be reasonably likely, individually or in the
aggregate, to have a material adverse effect on Target or (11) any
lapse, reversion, termination or expiration of any Intellectual
Property Rights or agreement or understanding, including any
copyright, license, joint venture agreement, distribution
agreement, publishing agreement, author agreement, work-for-hire
agreement or development agreement to which Target or any of its
subsidiaries is a party, except where such lapse, reversion,
termination or expiration, individually and in the aggregate, is
not reasonably likely to have a material adverse effect on Target.
(h) Litigation. There is no suit, action, proceeding,
arbitration or written claim pending or, to the knowledge of
Target or any of its subsidiaries, threatened against or affecting
Target or any of its subsidiaries that, individually or in the
aggregate, is reasonably likely to have a material adverse effect
on Target, nor is there any judgment, decree, injunction, rule or
order of any Governmental Entity or arbitrator outstanding against
Target or any of its subsidiaries having, or which is reasonably
likely to have, individually or in the aggregate, a material
adverse effect on Target; provided that for purposes of this
Section 3.01(h), any such suit, action, proceeding, arbitration,
claim, judgment, decree, injunction, rule or order arising after
the date of this Agreement shall not be deemed to have a material
adverse effect on Target if, and to the extent, such suit, action,
proceeding, arbitration, claim, judgment, decree, injunction, rule
or order (or any relevant part thereof) is based on this Agreement
or the transactions contemplated hereby.
(i) Compliance with Applicable Laws. (i) Target and its
subsidiaries hold all permits, licenses, variances, exemptions,
orders, registrations and approvals of all Governmental Entities
(the "Target Permits") that are required for them to own, lease,
license, exploit or operate their assets and to carry on their
businesses, except where the failure to hold any such Target
Permit, individually and in the aggregate, is not reasonably
likely to have a material adverse effect on Target. Target and its
subsidiaries are in compliance with the terms of the Target
Permits and all applicable treaties, conventions, directives,
statutes, laws, ordinances, rules, regulations, orders and
restrictions, except where the failure to so comply, individually
and in the aggregate, is not reasonably likely to have a material
adverse effect on Target. No action, demand, requirement or
investigation by any Governmental Entity and no suit, action or
proceeding by any person, in each case with respect to Target or
any of its subsidiaries or any of their respective properties, is
pending or, to the knowledge of Target, threatened other than, in
each case, those the outcome of which, individually and in the
aggregate, are not (i) reasonably likely to have a material
adverse effect on Target or Target's state adoption contracts in
the State of California, the State of Florida or the State of
Texas or (ii) reasonably likely to impair the ability of Target to
perform its obligations under this Agreement or to prevent or
delay the consummation of any of the transactions contemplated by
this Agreement.
(ii) There have been no Releases of any Hazardous
Materials at, on or under any facility or property currently or
formerly owned, leased, or operated by Target or any of its
subsidiaries that, individually or in the aggregate, are
reasonably likely to have a material adverse effect on Target.
Neither Target nor any of its subsidiaries is the subject of any
pending or, to Target's knowledge, threatened investigation or
proceeding under Environmental Law relating in any manner to the
off-site treatment, storage or disposal of any Hazardous Materials
generated at any facility or property currently or formerly owned,
leased or operated by Target or any of its subsidiaries that,
individually or in the aggregate, is reasonably likely to have a
material adverse effect on Target. Neither Target nor any of its
subsidiaries has assumed or otherwise agreed to be responsible for
any liabilities arising under Environmental Law which,
individually or in the aggregate, are reasonably likely to have a
material adverse effect on Target. The term "Environmental Law"
means any and all applicable laws or regulations or other
requirements of any Governmental Entity concerning the protection
of human health or the environment. The term "Hazardous Materials"
means all explosive or regulated radioactive materials, hazardous
or toxic substances, wastes or chemicals, petroleum (including
crude oil or any fraction thereof), and all other materials or
chemicals regulated under any Environmental Law. The term
"Release" means any spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching, emanation or
migration in, into, onto, or through the environment.
(j) Absence of Changes in Benefit Plans. Since the date
of the most recent audited financial statements included in the
Target Filed SEC Documents, except for the adoption by Target of
the 2001 Stock Compensation Plan set forth in the proxy statement
for the 2001 annual meeting of Target's stockholders, there has
not been any adoption or amendment in any material respect by
Target or any of its subsidiaries of any collective bargaining
agreement or any material bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, thrift,
savings, stock bonus, restricted stock, cafeteria, paid time off,
perquisite, fringe benefit, vacation, severance, disability, death
benefit, hospitalization, medical, welfare benefit or other plan
or arrangement maintained, contributed to or required to be
maintained or contributed to by Target, any of its subsidiaries,
or any other person or entity that, together with Target, is
treated as a single employer under Section 414(b), (c), (m) or (o)
of the Code (a "Commonly Controlled Entity") providing benefits to
any current or former employee, officer, consultant or director of
Target or any of its subsidiaries (collectively, the "Target
Benefit Plans"), or any change in any actuarial or other
assumption used to calculate funding obligations with respect to
any Target Pension Plans, or any change in the manner in which
contributions to any Target Pension Plans are made or the basis on
which such contributions are determined. Except as disclosed in
the Target Filed SEC Documents, there are no (1) employment,
consulting, deferred compensation, indemnification, severance or
termination agreements or arrangements between Target or any of
its subsidiaries and any current or former employee, officer,
consultant or director of Target or any of its subsidiaries or (2)
agreements between Target or any of its subsidiaries and any
current or former employee, editor, author, developer, independent
contractor, officer, consultant or director of Target or any of
its subsidiaries, the benefits of which agreements (described in
this clause (2)) are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving
Target of a nature contemplated by this Agreement (collectively,
the "Target Benefit Agreements"), except for such agreements that,
individually and in the aggregate, would not reasonably be likely
to have a material adverse effect on Target.
(k) ERISA Compliance; Excess Parachute Payments. (i)
Section 3.01(k) of the Target Disclosure Schedule contains a list
of each Target Benefit Plan that is an "employee pension benefit
plan" (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) (sometimes
referred to herein as "Target Pension Plans"), "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA) and all other
Target Benefit Plans and Target Benefit Agreements. Target has
delivered (or will deliver as soon as practicable following the
date hereof) to Parent true, complete and correct copies of (a)
each Target Benefit Plan and Target Benefit Agreement (or, in the
case of any unwritten Target Benefit Plan or Target Benefit
Agreement a description thereof), (b) the two most recent annual
reports on Form 5500 filed with the Internal Revenue Service with
respect to each Target Benefit Plan (if any such report was
required), (c) the most recent summary plan description for each
Target Benefit Plan for which such summary plan description is
required (other than any summary plan description which is in the
process of being prepared in compliance with applicable law) and
(d) each trust agreement and insurance or group annuity contract
relating to any Target Benefit Plan.
(ii) Each Target Benefit Plan has been administered in
all material respects in accordance with its terms. Target, its
subsidiaries and each Target Benefit Plan are in compliance in all
material respects with the applicable provisions of ERISA and the
Code, and all other applicable laws, including laws of foreign
jurisdictions. Target is not a party to any collective bargaining
agreement. All Target Pension Plans intended to be qualified have
received favorable determination letters from the Internal Revenue
Service with respect to "TRA" (as defined in Section 1 of Rev.
Proc. 93-39), to the effect that such Target Pension Plans are
qualified and exempt from Federal income taxes under Sections
401(a) and 501(a), respectively, of the Code, and no such
determination letter has been revoked nor, to the knowledge of
Target, has revocation been threatened, nor has any event occurred
since the date of its most recent determination letter or
application therefor that would adversely affect its qualification
or materially increase its costs or require security under Section
307 of ERISA. The ▇▇ ▇▇▇▇▇ Canada Pension Plan having been
terminated with the approval of the appropriate governmental
authorities, there is currently no Target Pension Plan which is
required to have been approved by any foreign Governmental Entity.
Target has delivered to Parent a true and complete copy of the
most recent determination letter received with respect to each
Target Pension Plan. There is currently no pending application for
a determination letter. Target has also provided to Parent a
restatement of the Houghton Mifflin Retirement Plan which contains
all Target Pension Plan amendments as to which a favorable
determination letter has not yet been received. There is no
pending or, to the knowledge of Target, threatened litigation
relating to any Target Benefit Plan.
(iii) No Target Pension Plan (1) is a "multiemployer
plan" within the meaning of Section 4001(a)(3) of ERISA or (2)
had, as of the respective last annual valuation date for each such
Target Pension Plan, any "unfunded benefit liabilities" (as such
term is defined in Section 4001(a)(18) of ERISA), based on
actuarial assumptions that have been furnished to Parent, and
there has been no material adverse change in the financial
condition of any Target Pension Plan since its last such annual
valuation date. No liability under Subtitle C or D of Title IV of
ERISA has been or is expected to be incurred by Target or any of
its subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of Section 4001(a)(15)
of ERISA, currently or formerly maintained by any of them, or the
single- employer plan of any Commonly Controlled Entity. None of
Target, any of its subsidiaries, any officer of Target or any of
its subsidiaries or any of the Target Benefit Plans which are
subject to ERISA, including the Target Pension Plans, any trusts
created thereunder or any trustee or administrator thereof, has
engaged in a "prohibited transaction" (as such term is defined in
Section 406 of ERISA or Section 4975 of the Code) or any other
breach of fiduciary responsibility that could subject Target, any
of its subsidiaries or any officer of Target or any of its
subsidiaries to the tax or penalty on prohibited transactions
imposed by such Section 4975 or to any liability under Section
502(i) or 502(l) of ERISA. Although the Target Pension Plan was
converted on January 1, 1997 into the Houghton Mifflin Retirement
Plan (a cash-balance pension plan), no Target Pension Plan subject
to Title IV of ERISA or any related trust has been terminated
within the five- year period preceding the date hereof, nor has
there been any "reportable event" (as that term is defined in
Section 4043 of ERISA) for which the 30-day reporting requirement
has not been waived with respect to any Target Pension Plan during
the last five years, and no notice of a reportable event will be
required to be filed in connection with the Offer, the Merger or
the other transactions contemplated by this Agreement. All
contributions and premiums required to be made under the terms of
any Target Benefit Plan as of the date hereof have been timely
made or have been reflected on the most recent consolidated
balance sheet filed or incorporated by reference in the Target
Filed SEC Documents. Neither any Target Pension Plan nor any
single-employer plan of any Commonly Controlled Entity has an
"accumulated funding deficiency" (as such term is defined in
Section 302 of ERISA or Section 412 of the Code), whether or not
waived.
(iv) Section 3.01(k)(iv) of the Target Disclosure
Schedule discloses whether each Target Benefit Plan that is an
employee welfare benefit plan is (a) unfunded, (b) funded through
a "welfare benefit fund" (as such term is defined in Section
419(e) of the Code) or other funding mechanism or (c) insured.
Target and its subsidiaries, with respect to each Target Benefit
Plan that is a "group health plan" (as such term is defined in
Section 5000(b)(1) of the Code), comply in all material respects
with the applicable requirements of Section 4980B(f) of the Code.
Each Target Benefit Plan (including any such plan covering
retirees or other former employees) that is an employee welfare
benefit plan may be amended or terminated without material
liability to Target or any of its subsidiaries on or at any time
after the Effective Time (other than liabilities accrued as of the
time of such amendment or termination). Neither Target nor any of
its subsidiaries has any obligations for retiree health or life
insurance benefits under any Target Benefit Plan or Target Benefit
Agreement.
(v) None of the execution and delivery of this Agreement,
the consummation of the Offer, the Merger or any other transaction
contemplated by this Agreement (including as a result of any
termination of employment or engagement following the Effective
Time) will (x) entitle any employee, officer, consultant or
director of Target or any of its subsidiaries to severance or
termination pay, (y) accelerate the time of payment or vesting or
trigger any payment or 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
of the Target Benefit Plans or Target Benefit Agreements or (z)
result in any breach or violation of, or a default under, any of
the Target Benefit Plans or Target Benefit Agreements.
(vi) Other than payments or benefits that may be made or
provided to the persons listed in Section 3.01(k)(i) of the Target
Disclosure Schedule under the categories "Change-in-Control
Agreements 3X" and "Change-in-Control Agreements 2X" (the "Primary
Target Executives"), to the knowledge of Target, no amount or
other entitlement or economic benefit that could be received
(whether in cash or property or the vesting of property) as a
result of the Offer or the Merger (whether taken alone or together
with any termination, including constructive termination, of
employment on or following the Effective Time) by or for the
benefit of any employee, officer, director or consultant of Target
or any of its affiliates who is a "disqualified individual" (as
such term is defined in proposed Treasury Regulation Section
1.280G-1) under any Target Benefit Plan or Target Benefit
Agreement or otherwise should be characterized as an "excess
parachute payment" (as defined in Section 280G(b)(1) of the Code),
and, to the knowledge of Target, other than certain Primary Target
Executives, no disqualified individual is entitled to receive any
additional payment from Target or any of its subsidiaries or any
other person in the event that the excise tax under Section 4999
of the Code is imposed on such disqualified individual. Target has
provided Parent with (a) the estimated "parachute payments" (as
defined in Section 280G(b)(2) of the Code) that could be paid to
each Primary Target Executive (except those listed in Section
3.01(k)(i) of the Target Disclosure Schedule) as a result of the
Offer or the Merger (whether taken alone or together with any
termination of employment on or following the Effective Time)
under all Target Benefit Plans and Target Benefit Agreements and
(b) the "base amount" (as defined in Section 280G(b)(3) of the
Code) for each Primary Target Executive calculated as of the date
of this Agreement.
(vii) Target and its subsidiaries are in compliance with
all Federal, state, local and foreign requirements regarding
employment, except for such noncompliance that, individually and
in the aggregate, is not reasonably likely to have a material
adverse effect on Target. Neither Target nor any of its
subsidiaries is a party to any collective bargaining or other
labor union contract applicable to persons employed by Target or
any of its subsidiaries and no collective bargaining agreement is
being negotiated by Target or any of its subsidiaries. As of the
date of this Agreement, there is no labor dispute, strike or work
stoppage against Target or any of its subsidiaries pending or, to
the knowledge of Target, threatened which may interfere with the
respective business activities of Target or its subsidiaries. As
of the date of this Agreement, to the knowledge of Target, none of
Target, any of its subsidiaries or any of their respective
representatives, employees or independent contractors has
committed a material unfair labor practice in connection with the
operation of the respective businesses of Target or any of its
subsidiaries, and there is no charge or complaint against Target
or any of its subsidiaries by the National Labor Relations Board
or any comparable governmental agency pending or threatened in
writing.
(viii) All material reports, returns and similar
documents with respect to all Target Benefit Plans required to be
filed with any Governmental Entity or distributed to any Target
Benefit Plan participant have been duly and timely filed or
distributed. None of Target or any of its subsidiaries has
received notice of, and to the knowledge of Target, there are no
investigations by any Governmental Entity with respect to,
termination proceedings or other claims (except claims for
benefits payable in the normal operation of the Target Benefit
Plans), suits or proceedings against or involving any Target
Benefit Plan or asserting any rights or claims to benefits under
any Target Benefit Plan that could give rise to any liability,
and, to the knowledge of Target, there are not any facts that
could give rise to any material liability in the event of any such
investigation, claim, suit or proceeding.
(ix) Except as would not reasonably be likely,
individually and in the aggregate, to have a material adverse
effect on Target, none of Target nor any of its subsidiaries has
any material liability or obligations, including under or on
account of a Target Benefit Plan, arising out of the hiring of
persons to provide services to Target or any of its subsidiaries
and treating such persons as consultants or independent
contractors and not as employees of Target or any of its
subsidiaries.
(l) Taxes. Except to the extent that the failure of the
following to be true would not reasonably be likely, individually
and in the aggregate, to have a material adverse effect on Target:
(i) Each of Target and its subsidiaries has filed all tax returns
required to be filed by it and all such returns are complete and
correct, or requests for extensions to file such tax returns have
been timely filed, granted and have not expired. Target and each
of its subsidiaries has paid (or caused to be paid) all taxes
shown as due on such tax returns, and the most recent financial
statements contained in the Target Filed SEC Documents reflect an
adequate reserve (in addition to any reserve for deferred taxes
established to reflect timing differences between book and tax
income) of tax for all taxes payable by Target and its
subsidiaries for all taxable periods and portions thereof accrued
through the date of such financial statements.
(ii) No tax return of Target or any of its subsidiaries
is under audit or examination by any taxing authority, and no
written notice of such an audit or examination has been received
by Target or any of its subsidiaries. There is no deficiency,
refund litigation, proposed adjustment or matter in controversy
with respect to any taxes due and owing by Target or any of its
subsidiaries. Each deficiency resulting from any completed audit
or examination relating to taxes by any taxing authority has been
timely paid, except for such deficiencies being contested in good
faith and for which adequate reserves are reflected on the books
of Target. The United States Federal income tax returns of Target
and each of its subsidiaries consolidated in such tax returns have
been either examined by and settled with the IRS or closed by
virtue of the applicable statute of limitations and no requests
for waivers of the time to assess any such taxes are pending.
(iii) No liens for taxes (other than for current taxes
not yet due and payable) exist with respect to any assets or
properties of Target or any of its subsidiaries. Neither Target
nor any of its subsidiaries is bound by any agreement with respect
to taxes.
(iv) For U.S. Federal income tax purposes, neither Target
nor any of its subsidiaries will be required to include in a
taxable period ending after the Effective Time taxable income
attributable to income that accrued (for purposes of the financial
statements of Target included in the Target Filed SEC Documents)
in a prior taxable period but was not recognized for tax purposes
in any prior taxable period as a result of the installment method
of accounting, the completed contract method of accounting, the
long-term contract method of accounting, the cash method of
accounting or Section 481 of the Code or for any other reason.
(v) Neither Target nor any of its subsidiaries has
constituted either a "distributing corporation" or a "controlled
corporation" in a distribution of stock to any person that is not
a member of the affiliated group of corporations of which Target
is the common parent qualifying for tax-free treatment under
Section 355 of the Code (x) in the two years prior to the date of
this Agreement or (y) in a distribution which could otherwise
constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction
with the Offer or the Merger.
(vi) As used in this Agreement, (A) "taxes" shall include
(1) all forms of taxation, whenever created or imposed, and
whether domestic or foreign, and whether imposed by a national,
Federal, state, provincial, local or other Governmental Entity,
including all interest, penalties and additions imposed with
respect to such amounts, (2) liability for the payment of any
amounts of the type described in clause (1) as a result of being a
member of an affiliated, consolidated, combined or unitary group
and (3) liability for the payment of any amounts as a result of
being party to any tax sharing agreement or as a result of any
express or implied obligation to indemnify any other person with
respect to the payment of any amount described in clause (1) or
(2) and (B) "tax returns" shall mean all domestic or foreign
(whether national, Federal, state, provincial, local or otherwise)
returns, declarations, statements, reports, schedules, forms and
information returns relating to taxes and any amended tax return.
(m) Voting Requirements. The affirmative vote of the
holders of two-thirds of the voting power of all outstanding
shares of Target Common Stock at the Target Stockholders Meeting
to approve this Agreement (the "Target Stockholder Approval") is
the only vote of the holders of any class or series of Target's
capital stock necessary to approve this Agreement and the
transactions contemplated hereby.
(n) State Takeover Statutes. The Board of Directors of
Target has unanimously approved the terms of this Agreement and
the consummation of the Offer, the Merger and the other
transactions contemplated by this Agreement and has recommended
approval of this Agreement to Target's stockholders and such
approval and recommendation constitutes approval of this Agreement
and the Offer, the Merger and the other transactions contemplated
by this Agreement by the Board of Directors of Target under the
provisions of Mass. Gen. Laws, Chapters 110C and 110F and
represents all the action necessary to ensure that the
requirements and restrictions contained in such Mass. Gen. Laws,
Chapters 110C and 110F do not apply to Parent or Sub in connection
with the Offer, the Merger and the other transactions contemplated
by this Agreement. To the knowledge of Target, no other state
takeover statute is applicable to the Offer, the Merger or the
other transactions contemplated hereby.
(o) Brokers. No broker, investment banker, financial
advisor or other person, other than ▇.▇. ▇▇▇▇▇▇ Securities Inc.,
the fees and expenses of which will be paid by Target, is entitled
to any broker's, finder's, financial advisor's or other similar
fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of
Target. Target will, promptly after the date hereof, furnish to
Parent true and complete copies of all agreements under which any
such fees or expenses are payable and all indemnification and
other agreements related to the engagement of the persons to whom
such fees are payable.
(p) Opinion of Financial Advisor. Target has
received the written opinion of ▇.▇. ▇▇▇▇▇▇ Securities
Inc., dated the date of this Agreement, to the effect
that, as of such date, the consideration to be received
in the Offer and the Merger by Target's stockholders is
fair from a financial point of view to the stockholders
of Target, a signed copy of which opinion has been or
promptly will be delivered to Parent.
(q) Intellectual Property. (i) Target and its
subsidiaries have such ownership of or such rights by license or
otherwise in all patents and patent applications, mask works,
trademarks and service marks, trademark and service ▇▇▇▇
registrations and applications, trade names, logos, brands,
titles, copyrights (including, without limitation, in all
published and unpublished pupil books, teacher editions, ancillary
materials, supplemental materials, multimedia programs,
manipulatives, digitized content and in all compilations,
collective works and derivative works of the foregoing),
subsidiary rights, copyright registrations and applications, trade
secrets, names and likenesses, know-how, proprietary processes,
compositions of matter, formulae, designs, computer software
programs and other proprietary rights as are necessary to conduct
and permit the conduct of the business of Target and its
subsidiaries as currently conducted (collectively, the
"Intellectual Property Rights"), except where the failure to have
such ownership or right by license or otherwise, individually and
in the aggregate, is not reasonably likely to have a material
adverse effect on Target.
(ii) To the knowledge of Target, the conduct of the
business of Target and its subsidiaries as currently conducted
does not infringe upon the intellectual property rights of any
third party or violate the privacy rights of any third party or
defame any third party and there are no such present or, to the
knowledge of Target, threatened infringements or violations of the
Intellectual Property Rights by any third party, except, in either
case, for such infringements or violations which, individually and
in the aggregate, are not reasonably likely to have a material
adverse effect on Target. There are no pending or, to the
knowledge of Target, threatened proceedings, arbitrations,
actions, suits, written claims or litigation or other adverse
claims by any person which challenge the rights of Target or any
of its subsidiaries in respect of any Intellectual Property Rights
owned or licensed or used by Target or its subsidiaries or which
charge Target or any of its subsidiaries with infringement,
invasion of privacy, misappropriation of name or likeness, or
defamation, or which demand an accounting, except for such claims
which, individually and in the aggregate, are not reasonably
likely to have a material adverse effect on Target.
(iii) Neither Target nor any of its subsidiaries is a
party to or bound by any Contract (A) that contains any
non-competition covenant or exclusivity commitment that restricts,
in any material respect, the manner in which, medium in which, or
the localities in which, all or a material portion of the business
of Target and its subsidiaries, taken as a whole, is conducted,
other than agreements with Classwell Learning Group, Inc. and
Contracts entered into in the ordinary course of Target's and its
subsidiaries' respective businesses, (B) pursuant to which Target
or any of its subsidiaries has assigned, transferred, licensed or
granted to a third party any Intellectual Property Right on an
exclusive basis, other than agreements with Classwell Learning
Group, Inc. and Contracts entered into in the ordinary course of
Target's and its subsidiaries' respective businesses, or (C) that
contains any "most favored nation" pricing provision, other than
Contracts with state or local Governmental Entities for the
purchase of educational materials, except, in each case, for
Contracts the provisions of which, individually and in the
aggregate, are not reasonably likely to have a material adverse
effect on Target.
(r) Contracts. Except for Contracts filed as exhibits to
the Target Filed SEC Documents, as of the date of this Agreement,
none of Target or any of its subsidiaries is a party to or bound
by, and none of their properties or assets are bound by or subject
to, any written or oral:
(i) Contract that restricts in any material respect the
manner in which, or the localities in which, all or a material
portion of the business of Target and its subsidiaries is
conducted;
(ii) Contract under which Target or any of its
subsidiaries has (i) incurred any indebtedness for borrowed money
that is currently owing, (ii) given any guarantee in respect of
indebtedness for borrowed money, excluding intercompany
indebtedness, in each case having an aggregate principal amount in
excess of $1,000,000 or (iii) granted any pledge, mortgage or
other security interest in any property or assets of Target or any
of its subsidiaries securing indebtedness in excess of $1,000,000;
(iii) Contract in respect of any joint venture,
partnership, business alliance or similar arrangement between
Target or any of its subsidiaries and any third party involving a
material ownership interest in any such entity; or
(iv) Contract granting the other party to such Contract or a
third party "most favored nation" status that, following the
Merger, would in any way apply to Parent or any of its
subsidiaries (other than Target and its subsidiaries and their
products or services).
Each Contract of Target and its subsidiaries is in full
force and effect and is a legal, valid and binding agreement of
Target or such subsidiary and, to the knowledge of Target or such
subsidiary, of each other party thereto, enforceable against
Target or any of its subsidiaries, as the case may be, and, to the
knowledge of Target, against the other party or parties thereto,
in each case, in accordance with its terms, in each case, subject
to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws relating to or affecting the rights and remedies of
creditors generally and to general principles of equity
(regardless of whether considered in a proceeding in equity or at
law), except for such failures to be in full force and effect or
enforceable that, individually and in the aggregate, are not
reasonably likely to have a material adverse effect on Target.
Except as is not reasonably likely, individually and in the
aggregate, to have a material adverse effect on Target, each of
Target and its subsidiaries has performed or is performing all
obligations required to be performed by it under its Contracts and
is not (with or without notice or lapse of time or both) in breach
or default thereunder, and, to the knowledge of Target or such
subsidiary, no other party to any of its Contracts is (with or
without notice or lapse of time or both) in breach or default
thereunder.
(s) State Adoption Contracts. All state and local
adoption contracts between Target or any of its subsidiaries on
the one hand, and any state or local department, agency or
instrumentality on the other hand, are in full force and effect
and are legal, valid and binding agreements of Target or its
subsidiaries and, to the knowledge of Target or such subsidiaries,
of each other party thereto, enforceable against Target or its
subsidiaries, as the case may be, and, to the knowledge of Target,
against the other party or parties thereto, in each case, in
accordance with their terms, except for such failures to be legal,
valid, binding and enforceable that, individually and in the
aggregate, are not reasonably likely to have a material adverse
effect on Target. Neither Target nor any of its subsidiaries nor
any of their respective employees, independent contractors,
consultants or representatives has breached any such adoption
contract, except for such breaches that, individually and in the
aggregate, are not reasonably likely to have a material adverse
effect on Target.
(t) Rights Agreement. Target has taken all
actions necessary to ensure that (i) the Rights
Agreement and the Rights are and will be inapplicable
to Parent and its subsidiaries; (ii) neither Parent nor
any of its subsidiaries will be deemed to be an
Acquiring Person (as defined in the Rights Agreement);
and (iii) neither a Distribution Date nor a Stock Acquisition Date
(each as defined in the Rights Agreement) has occurred or will
occur and the Rights have not and will not become separable,
distributable, unredeemable or exercisable as a result of entering
into this Agreement or consummating the Offer, the Merger or the
other transactions contemplated by this Agreement.
SECTION 3.02. Representations and Warranties of
Parent and Sub. Parent and Sub represent and warrant to
Target as follows:
(a) Organization, Standing and Corporate Power. Parent is
a societe anonyme duly incorporated and validly subsisting under
the laws of France, Sub is a corporation duly organized, validly
existing and in good standing under the MBCL, and each of Parent
and Sub has the requisite corporate power and authority to carry
on its business as now being conducted, except where the failure
to be so organized and existing and in good standing or to have
such power and authority is not reasonably likely to prevent or
delay the consummation of any of the transactions contemplated by
this Agreement.
(b) Authority; Noncontravention. Each of Parent and Sub
has all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by Parent
and Sub and the consummation of the transactions contemplated by
this Agreement have been duly authorized by all necessary
corporate action on the part of Parent and Sub. This Agreement has
been duly executed and delivered by Parent and Sub and, assuming
the due authorization, execution and delivery by each of the other
parties thereto, constitute legal, valid and binding obligations
of Parent and Sub, as applicable, enforceable against each of them
in accordance with its terms. The execution and delivery of this
Agreement do not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions
of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination,
cancelation or acceleration of any obligation or loss of a benefit
under, or result in the creation of any Lien upon any of the
properties or assets of Parent or Sub under, (i) the Restated
Corporate Statutes of Parent or the articles of organization or
by-laws of Sub, (ii) any Contract applicable to Parent or Sub or
their respective properties or assets or (iii) subject to the
governmental filings and other matters referred to in the
following sentence, (A) any judgment, order or decree or (B) any
statute, treaty, convention, directive, law, ordinance, rule,
regulation, order or restriction, in each case applicable to
Parent or any of its subsidiaries or their respective owned,
licensed or leased properties or assets, other than, in the case
of clauses (ii) and (iii), any such conflicts, violations,
defaults, rights, losses or Liens that, individually and in the
aggregate, are not reasonably likely to (x) impair the ability of
Parent or Sub to perform its obligations under this Agreement or
(y) prevent or materially delay the consummation of the
transactions contemplated by this Agreement. No consent, approval,
order or authorization of, action by, or in respect of, or
registration, declaration or filing with, any Governmental Entity
is required by or with respect to Parent or Sub in connection with
the execution and delivery of this Agreement by Parent and Sub or
the consummation by Parent and Sub of the transactions
contemplated by this Agreement, except for (1) the filing of a
premerger notification and report form by Parent under the HSR Act
and any applicable filings and approvals under Foreign Antitrust
Laws; (2) the filing with the SEC of the Offer Documents and such
other reports under Section 13(a), 13(d), 15(d) or 16(a) of the
Exchange Act as may be required in connection with this Agreement
and the transactions contemplated by this Agreement; (3) the
filing of the Articles of Merger with the Secretary of the
Commonwealth of the Commonwealth of Massachusetts and appropriate
documents with the relevant authorities of other states in which
Parent is qualified to do business; and (4) such other consents,
approvals, orders, authorizations, registrations, declarations and
filings the failure of which to be made or obtained, individually
and in the aggregate, are not reasonably likely to (x) impair the
ability of Parent or Sub to perform its obligations under this
Agreement or (y) prevent or materially delay the consummation of
the transactions contemplated by this Agreement.
(c) Information Supplied. None of the information
supplied or to be supplied by Parent specifically for inclusion or
incorporation by reference in (i) the Offer Documents, the
Schedule 14D-9 or the Information Statement will, at the date it
is filed with the SEC or first published, sent or given to
Target's stockholders, or at the time of any amendment or
supplement thereof or (ii) the Proxy Statement will, at the time
it is filed with the SEC, mailed to Target's stockholders, at the
time of the Target Stockholders Meeting, or at the time of any
amendment of supplement thereof, in each case, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
are made, not misleading.
(d) Interim Operations of Sub. Sub was formed solely for
the purpose of engaging in the transactions contemplated hereby,
has engaged in no other business activities and has conducted its
operations only as contemplated hereby.
(e) Capital Resources. Parent has or, on or prior to the
Closing Date will have, sufficient cash or access to cash to
enable Parent to cause the Surviving Corporation to pay for all
shares of Target Common Stock validly tendered into and not
validly withdrawn from the Offer and to pay the Merger
Consideration.
ARTICLE IV
Covenants Relating to Conduct of Business
SECTION 4.01. Conduct of Business. (a) Conduct of
Business by Target. Except as set forth in Section 4.01(a) of the Target
Disclosure Schedule, as otherwise contemplated by this Agreement or as
consented to in writing by Parent, such consent not to be unreasonably
withheld, conditioned or delayed, during the period from the date of this
Agreement to the earliest of (A) such time as nominees of Parent shall
comprise a majority of the members of Target's Board of Directors, (B) the
termination of this Agreement in accordance with Article VII or (C) the
Effective Time, Target shall, and shall cause its subsidiaries to, carry on
their respective businesses only in the ordinary course consistent with
past practice and in compliance in all material respects with all
applicable laws and regulations and, to the extent consistent therewith,
use all reasonable efforts to preserve intact their current business
organizations, use reasonable efforts to keep available the services of
their current officers and other key employees and preserve their
relationships with those persons having business dealings with them.
Without limiting the generality of the foregoing (but subject to the above
exceptions), during the period from the date of this Agreement to the
earliest of (A) such time as nominees of Parent shall comprise a majority
of the members of Target's Board of Directors, (B) the termination of this
Agreement in accordance with Article VII or (C) the Effective Time, Target
shall not, and shall not permit any of its subsidiaries to:
(i) other than dividends and distributions (including
liquidating distributions) by a direct or indirect wholly owned
subsidiary of Target to its parent, and except for regular
dividends of not more than $0.135 per share payable each calendar
quarter to Target's stockholders (provided that no such dividend
shall be declared after the date of this Agreement unless the
purchase of shares pursuant to the Offer shall not have been
consummated by August 15, 2001), (x) declare, set aside or pay any
dividends on, or make any other distributions (whether in cash,
stock, property or otherwise) in respect of, any of its capital
stock, (y) split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its
capital stock, or (z) purchase, redeem or otherwise acquire,
directly or indirectly, any shares of capital stock of Target or
any of its subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other
securities;
(ii) issue, deliver, sell, pledge or otherwise encumber
or subject to any Lien (w) any shares of its capital stock, (x)
any other voting securities, (y) any securities convertible into,
or any rights, warrants or options to acquire, any such shares,
voting securities or convertible securities or (z) any "phantom"
stock or stock rights, SARs or stock-based performance units other
than the issuance of Target Common Stock upon the exercise of
Target Stock Options outstanding as of the date hereof in
accordance with their present terms;
(iii) amend its articles of organization, by-laws or
other comparable organizational documents;
(iv) acquire, license or agree to acquire or license (A)
by merging or consolidating with, or by purchasing or licensing
assets of, or by any other manner, any business, division or
person or any interest therein or (B) any assets other than
immaterial assets or assets acquired in the ordinary course of
Target's business operations consistent with past practice;
(v) sell, lease, license out, sell and leaseback,
mortgage or otherwise encumber or subject to any Lien (other than
any Lien imposed by law, such as a carriers', warehousemen's or
mechanics' Lien) or otherwise dispose of any of its properties or
assets (including securitizations), other than sales or licenses
out of finished goods or services in the ordinary course of
business consistent with past practice;
(vi) repurchase, prepay or incur any indebtedness for
borrowed money or guarantee any such indebtedness of another
person, issue or sell any debt securities or warrants or other
rights to acquire any debt securities of Target or any of its
subsidiaries, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any
financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing,
except for short-term borrowings incurred in the ordinary course
of business for working capital purposes (or to refund existing or
maturing indebtedness) consistent with past practice not to exceed
$300,000,000, at any time outstanding and except for intercompany
indebtedness between Target and any of its subsidiaries or between
such subsidiaries;
(vii) make any loans, advances or capital contributions
to, or investments in, any other person, other than (A) Target or
any direct or indirect wholly owned subsidiary of Target or (B)
Classwell Learning Group Inc., pursuant to existing obligations in
written agreements of which Parent's legal and financial advisors
have been provided copies (or given access) in connection with the
transactions contemplated by this Agreement;
(viii) make or agree to make any new capital
expenditures, other than capital expenditures relating to book
plate assets, or enter into any agreements providing for payments
which, individually, are in excess of $1,000,000 or, in the
aggregate, are in excess of $25,000,000;
(ix) (A) pay, discharge, settle or satisfy any material
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), or litigation (whether or
not commenced prior to the date of this Agreement) other than the
payment, discharge, settlement or satisfaction, in the ordinary
course of business consistent with past practice or in accordance
with their terms, of liabilities recognized or disclosed in the
most recent consolidated financial statements (or the notes
thereto) of Target included in the Target Filed SEC Documents or
incurred since the date of such financial statements, or (B)
subject to Section 4.02, waive the benefits of, agree to modify in
any manner, terminate, release any person from or fail to enforce
any confidentiality, standstill or similar agreement to which
Target or any of its subsidiaries is a party or of which Target or
any of its subsidiaries is a beneficiary;
(x) except as required in order to comply with law and
except for labor agreements negotiated in the ordinary course, (x)
establish, enter into, adopt or amend or terminate any Target
Benefit Plan or Target Benefit Agreement, (y) change any actuarial
or other assumption used to calculate funding obligations with
respect to any Target Pension Plan, or change the manner in which
contributions to any Target Pension Plan are made or the basis on
which such contributions are determined or (z) take any action to
accelerate any rights or benefits, or make any material
determinations not in the ordinary course of business consistent
with past practice, under any collective bargaining agreement,
Target Benefit Plan or Target Benefit Agreement;
(xi) (w) other than in the ordinary course of business
consistent with past practice (other than with respect to
executive officers), increase the compensation, bonus, royalties,
commissions, or other benefits of any current or former director,
consultant, officer developer, author, illustrator, publisher,
editor or other employee, (x) grant any current or former
director, consultant, officer, developer, author, illustrator,
publisher, editor or other employee or independent contractor any
increase in severance or termination pay, (y) amend or modify any
Target Stock Option, or (z) or pay any benefit or amount not
required by a plan or arrangement as in effect on the date of this
Agreement to any such person;
(xii) transfer or license to any person or entity or
otherwise extend, amend or modify or allow to revert, lapse or
expire any material rights to the Intellectual Property Rights of
Target and its subsidiaries other than in the ordinary course of
business consistent with past practices;
(xiii) enter into or amend any Contract of the type
listed in Section 3.01(r);
(xiv) obtain, through acquisition, lease, sublease or
otherwise, any real property for use as an office, warehouse or
similar facility of Target or any of its subsidiaries, other than
in the ordinary course of business consistent with past practice;
(xv) increase the headcount of full-time, permanent
employees of Target or its subsidiaries by an amount
inconsistent with past practice;
(xvi) except insofar as may be required by a change
in GAAP, make any changes in accounting methods,
principles or practices;
(xvii) take any action that would, or that would
reasonably be expected to, result in any condition to the Offer or
the Merger set forth in Exhibit A not being satisfied; or
(xviii) authorize, or commit, resolve or agree to
take, any of the foregoing actions.
(b) Advice of Changes. Target and Parent shall promptly
advise the other party orally and in writing to the extent it has knowledge
of (i) any representation or warranty made by it (and, in the case of
Parent, made by Sub) contained in this Agreement that is qualified as to
materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (ii) the failure by it (and, in the
case of Parent, by Sub) to comply with or satisfy in any material respect
any covenant, condition or agreement to be complied with or satisfied by it
under this Agreement and (iii) any change or event having, or which is
reasonably likely to have, a material adverse effect on such party or on
the truth of their respective representations and warranties or the ability
of the conditions set forth in Article VI or Exhibit A to be satisfied;
provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties (or
remedies with respect thereto) or the conditions to the obligations of the
parties under this Agreement.
(c) Certain Tax Matters. During the period from the date
of this Agreement to the Effective Time, Target shall not, and shall not
permit any of its subsidiaries to, make or change any material Tax election
without the written consent of Parent.
SECTION 4.02. No Solicitation by Target. (a) Target shall
not, nor shall it permit any of its subsidiaries to, nor shall it authorize
or permit any of its directors, officers or employees or any investment
banker, financial advisor, attorney, accountant or other representative
retained by it or any of its subsidiaries to, directly or indirectly
through another person, (i) solicit, initiate or encourage (including by
way of furnishing information), or take any other action to facilitate, any
inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Takeover Proposal or (ii) enter into, continue
or otherwise participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, any Takeover
Proposal; provided, however, that if, at any time prior to acceptance for
payment of shares of Target Common Stock pursuant to and subject to the
conditions of the Offer (the "Specified Date"), a majority of the members
of the Board of Directors of Target determines in good faith (after
consultation with outside counsel) that failure to do so would be
reasonably likely to result in a breach of the fiduciary duties of such
Board to Target's stockholders under applicable law, Target may, in
response to a Takeover Proposal that a majority of the members of the Board
of Directors of Target determines in good faith is or is reasonably likely
to result in a Superior Proposal and which Takeover Proposal was not
solicited by it in breach of this Section 4.02(a) or which did not
otherwise result from a breach of this Section 4.02(a), and subject to
providing prior written notice of its decision to take such action to
Parent and compliance with Section 4.02(c), (x) furnish information with
respect to Target and its subsidiaries to any person making such Takeover
Proposal pursuant to a customary confidentiality agreement (provided that
if such confidentiality agreement contains provisions that are less
restrictive than the comparable provision in, or omits restrictive
provisions, contained in the Confidentiality Agreement dated as of January
17, 2001 between Parent and Target (the "Confidentiality Agreement"), then
the Confidentiality Agreement shall be deemed amended to contain only such
less restrictive provisions or to omit such restrictive provisions as
applicable) and (y) participate in discussions or negotiations regarding
such Takeover Proposal.
For purposes of this Agreement, "Superior Proposal" means
any offer not solicited by Target in breach of this Section 4.02(a) made by
a third party to consummate a tender offer, exchange offer, merger,
consolidation or similar transaction which would result in such third party
(or its shareholders) owning, directly or indirectly, all or substantially
all of the shares of Target Common Stock then outstanding (or of the
surviving entity in a merger) or all or substantially all of the assets of
Target and its subsidiaries and otherwise on terms which a majority of the
members of the Board of Directors of Target determines in good faith (after
consultation with outside counsel and following receipt of the advice of a
financial advisor of nationally recognized reputation) (i) to be more
favorable to Target's stockholders than the Offer and the Merger (as
amended in accordance with the terms of this Agreement or as proposed to be
amended pursuant to any New Parent Proposal) after taking into account all
constituencies (including stockholders), the terms of this Agreement and
pertinent factors permitted under the MBCL, (ii) for which financing, to
the extent required, is then committed or which, in the good faith judgment
of a majority of the members of the Board of Directors of Target, is
reasonably capable of being obtained by such third party and (iii) for
which, in the good faith judgment of a majority of the members of the Board
of Directors of Target, no regulatory approvals are required, including
antitrust approvals, that could not reasonably be expected to be obtained.
For purposes of this Agreement, "Takeover Proposal" means
any inquiry, proposal or offer from any person relating to any direct or
indirect acquisition or purchase of 15% or more of the assets of Target and
its subsidiaries, taken as a whole, or 15% or more of any class or series
of equity securities of Target or any of its subsidiaries, any tender offer
or exchange offer that if consummated would result in any person
beneficially owning 15% or more of any class or series of equity securities
of Target or any of its subsidiaries, or any merger, consolidation, share
exchange, business combination, recapitalization, liquidation, dissolution
or similar transaction involving Target or any of its subsidiaries, other
than the transactions contemplated by this Agreement.
(b) Neither Target nor the Board of Directors of Target
nor any committee thereof shall (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Parent, the approval or
recommendation by such Board of Directors or such committee of the Offer,
the Merger or this Agreement, (ii) approve or recommend, or propose to
approve or recommend, any Takeover Proposal, (iii) approve or recommend, or
propose to approve or recommend, or execute or enter into, any letter of
intent, memorandum of understanding, agreement in principle, merger
agreement, acquisition agreement, option agreement, joint venture
agreement, partnership agreement or other similar agreement (each, an
"Acquisition Agreement") related to any Takeover Proposal, or (iv)(x)
redeem the Rights, (y) waive or amend any provisions of the Rights
Agreement or (z) take any action with respect to, or make any determination
under, the Rights Agreement, in any such case to permit or facilitate the
consummation of a Takeover Proposal, or propose or agree to do any of the
foregoing constituting or related to, or which is intended to or would
reasonably be expected to lead to, any Takeover Proposal. Notwithstanding
the foregoing, at any time prior to the Specified Date, in response to a
Superior Proposal which was not solicited by Target and which did not
otherwise result from a breach of Section 4.02(a), the Board of Directors
of Target may (subject to this sentence and the definition of the term
"Superior Proposal"), if a majority of the members of the Board of
Directors of Target determines in good faith (after consultation with
outside counsel) that failure to do so would be reasonably likely to result
in a breach of the fiduciary duties of such Board to Target's stockholders
under applicable law, withdraw or modify the approval or recommendation by
such Board of Directors of this Agreement, the Offer or the Merger or
terminate this Agreement (and concurrently with or after such termination,
if it so chooses, cause Target to enter into any Acquisition Agreement with
respect to any Superior Proposal), but only (x) at a time that is after the
third business day following Parent's receipt of written notice advising
Parent that the Board of Directors of Target is prepared to take such
action (during which period Target shall negotiate in good faith with
Parent and Sub concerning any New Parent Proposal), specifying the material
terms and conditions of such Superior Proposal and identifying the person
making such Superior Proposal and (y) if, at the time of such withdrawal,
modification or termination, such proposal continues to be a Superior
Proposal, taking into account any amendment of the terms of the Offer or
the Merger by Parent or any proposal by Parent to amend the terms of this
Agreement, the Offer or the Merger (a "New Parent Proposal").
(c) In addition to the obligations of Target set forth in
paragraphs (a) and (b) of this Section 4.02, Target shall promptly (and no
later than 48 hours) advise Parent orally and in writing of any request for
information or of any inquiry with respect to a Takeover Proposal, the
material terms and conditions of such request, inquiry or Takeover Proposal
and the identity of the person making such request, inquiry or Takeover
Proposal. Target will promptly keep Parent informed of the status and
details (including amendments or changes or proposed amendments or changes)
of any such request, inquiry or Takeover Proposal.
(d) Nothing contained in this Section 4.02 shall prohibit
Target from taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from
making any disclosure to Target's stockholders if, in the good faith
judgment of a majority of the members of the Board of Directors of Target,
after consultation with outside counsel, failure so to disclose would be
inconsistent with its obligations under applicable law; provided, however,
that, subject to Section 4.02(b), neither Target nor its Board of Directors
nor any committee thereof shall withdraw or modify, or propose to withdraw
or modify, its position with respect to this Agreement, the Offer or the
Merger or approve or recommend, or propose to approve or recommend, a
Takeover Proposal.
(e) Target acknowledges and agrees that in the event a
Takeover Proposal shall have been made known to Target or has been made
directly to its stockholders or any person has announced an intention
(whether or not conditional) to make a Takeover Proposal, thereafter, the
"standstill" provisions of the Confidentiality Agreement shall cease to
apply to Parent and Sub.
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of the Proxy Statement; Target
Stockholders Meeting. (a) Target and Parent shall, as promptly as
practicable following the expiration of the Offer, prepare and file with
the SEC the Proxy Statement and Target shall use all reasonable efforts to
respond as promptly as practicable to any comments of the SEC with respect
thereto and to cause the Proxy Statement to be mailed to Target's
stockholders as promptly as practicable following the expiration of the
Offer. Target shall promptly notify Parent upon the receipt of any comments
from the SEC or its staff or any request from the SEC or its staff for
amendments or supplements to the Proxy Statement and shall provide Parent
with copies of all correspondence between Target and its representatives,
on the one hand, and the SEC and its staff, on the other hand.
Notwithstanding the foregoing, prior to filing or mailing the Proxy
Statement (or any amendment or supplement thereto) or responding to any
comments of the SEC with respect thereto, Target (i) shall provide Parent
an opportunity to review and comment on such document or response, (ii)
shall include in such document or response all comments reasonably proposed
by Parent and (iii) shall not file or mail such document or respond to the
SEC prior to receiving Parent's approval, which approval shall not be
unreasonably withheld or delayed.
(b) Target shall, as soon as practicable, establish a
record date (which will be as soon as practicable following the expiration
of the Offer) for, duly call, give notice of, convene and hold a meeting of
its stockholders (the "Target Stockholders Meeting") solely for the purpose
of obtaining the Target Stockholder Approval. Subject to Section
4.02(b)(i), Target shall, through its Board of Directors, recommend to its
stockholders the approval and adoption of this Agreement, the Merger and
the other transactions contemplated hereby. Without limiting the generality
of the foregoing, Target agrees that its obligations pursuant to the first
sentence of this Section 5.01(b) shall not be affected by (i) the
commencement, public proposal, public disclosure or communication to Target
of any Takeover Proposal or (ii) the withdrawal or modification by the
Board of Directors of Target or any committee thereof of such Board of
Directors' or such committee's approval or recommendation of the Offer, the
Merger or this Agreement.
(c) Parent shall cause all shares of Target Common Stock
purchased pursuant to the Offer and all other shares of Target Common Stock
owned by Parent or any subsidiary of Parent to be voted in favor of the
approval of this Agreement.
SECTION 5.02. Access to Information; Confidentiality.
Subject to the Confidentiality Agreement, upon reasonable notice, Target
shall, and shall cause each of its subsidiaries to, afford to Parent and to
its officers, employees, accountants, counsel, financial advisors and other
representatives, reasonable access during normal business hours during the
period prior to the Effective Time to all its properties, books, contracts,
commitments, personnel and records and, during such period, Target shall,
and shall cause each of its subsidiaries to, promptly furnish or make
available to Parent (a) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of Federal or state securities laws and (b) all other
information concerning its business, properties and personnel as Parent may
reasonably request (including Target's outside accountants' work papers,
subject to the consent of such accountants). Target shall not be required
to provide access to or disclose information where such access or
disclosure would contravene any law, rule, regulation, order, decree or
agreement. No review pursuant to this Section 5.02 shall have an effect for
the purpose of determining the accuracy of any representation or warranty
given by either party hereto to the other party hereto. Parent will hold,
and will cause its officers, employees, accountants, counsel, financial
advisors and other representatives and affiliates to hold, any nonpublic
information confidential, in accordance with the terms of the
Confidentiality Agreement.
SECTION 5.03. Reasonable Efforts. (a) Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties
agrees to use reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with
the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable,
the Offer, the Merger and the other transactions contemplated by this
Agreement, including using reasonable efforts to accomplish the following:
(i) the taking of all reasonable acts necessary to cause the conditions to
Closing to be satisfied as promptly as practicable; (ii) the obtaining of
all necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and
filings (including filings with Governmental Entities, if any) and the
taking of all steps as may be necessary to obtain an approval or waiver
from, or to avoid an action or proceeding by, any Governmental Entity;
(iii) the obtaining of all necessary consents, approvals or waivers from
third parties; (iv) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement
or the consummation of the transactions contemplated hereby, including
seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed; and (v) the
execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by, and to fully carry out the
purposes of, this Agreement; provided, however, that Parent will not be
required to agree to, or proffer to, (i) divest or hold separate any of
Parent's, Target's or any of their respective subsidiaries' or affiliates'
businesses or assets (other than de minimis divestitures of immaterial
assets) or (ii) cease to conduct business or operations in any jurisdiction
in which Parent, Target or any of their respective subsidiaries conducts
business or operations as of the date of this Agreement.
(b) In connection with and without limiting the
foregoing, Target and its Board of Directors and Parent and its Board of
Directors shall (i) take all action necessary to ensure that no state
takeover statute or similar statute or regulation is or becomes applicable
to the Offer, the Merger, this Agreement or any of the other transactions
contemplated hereby and (ii) if any state takeover statute or similar
statute or regulation becomes applicable to the Offer, the Merger, this
Agreement or any other transaction contemplated hereby, take all action
necessary to ensure that the Offer, the Merger and the other transactions
contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Offer, the Merger
and the other transactions contemplated by this Agreement.
SECTION 5.04. Stock Options. (a) As soon as practicable
following the date of this Agreement, Target shall ensure that (i) each
holder (each, an "Optionee") of an outstanding Target Stock Option shall
have the right to irrevocably elect, subject to satisfaction of the
conditions set forth in Section 6.01(d), to surrender, immediately prior to
the acceptance for payment of shares of Target Common Stock pursuant to the
Offer, any outstanding and unexercised Target Stock Option then held by the
Optionee in exchange for a cash payment equal to (x) the excess, if any, of
(A) the price per share of Target Common Stock to be paid pursuant to the
Offer over (B) the exercise price per share of Target Common Stock subject
to such Target Stock Option, multiplied by (y) the number of shares of
Target Common Stock issuable pursuant to the unexercised portion of such
Target Stock Option, less any tax withholding required by the Code or any
provision of state or local law, payable not later than twenty days after
the earlier of the satisfaction of the conditions set forth in Section
6.01(d) and five days after the Effective Time, (ii) each Optionee shall
have the right to purchase, effective as of the consummation of the Merger,
subject to the consummation of the Merger and in accordance with the terms
of the relevant plan or document, all or any part of the shares of Target
Common Stock subject to any Target Stock Option held by the Optionee,
whether vested or unvested, and that each share of Target Common Stock so
purchased shall be converted, as of the Effective Time, in the right to
required the Merger Consideration, less any tax withholding received by the
Code or any provision of state or local law, and (iii) each Target Stock
Option (with respect to which an Optionee has not exercised one of the
rights set forth in this section) shall terminate and expire as of the
Effective Time.
(b) Prior to the Effective Time, Target shall take or
cause to be taken such actions as are required to cause (i) the Target
Stock Plans to terminate as of the Effective Time and (ii) the provisions
in any other Target Benefit Plan providing for the issuance, transfer or
grant of any capital stock of Target or any interest in respect of any
capital stock of Target to be deleted as of the Effective Time.
SECTION 5.05. Employee Matters. (a) Parent shall provide,
or cause to be provided, from the Effective Time through December 31, 2002,
to current employees of Target and its subsidiaries who continue employment
through the Effective Time (the "Target Employees"), taken as a whole,
employee benefits (disregarding for such purpose any Target Benefit Plans
or Target Benefit Agreements that provide for equity and/or equity-based
compensation) and annual bonus opportunities that are, in the aggregate,
substantially equivalent to the employee benefits and annual bonus
opportunities (without regard to form of payment) provided to the Target
Employees immediately prior to the Effective Time; provided, that neither
Parent nor the Surviving Corporation shall have any obligation to issue, or
adopt any plans or arrangements providing for the issuance of, shares of
capital stock, warrants, options or other rights in respect of any shares
of capital stock of any entity or any securities convertible or
exchangeable into such shares pursuant to any such plans or arrangements;
provided, further, that no plans or arrangements of Target or any of its
subsidiaries providing for such issuance shall be taken into account in
determining whether employee benefits are substantially equivalent in the
aggregate.
(b) For purposes of eligibility and vesting (but not
benefit accrual) under the employee benefit plans of Parent and its
subsidiaries providing benefits to Target Employees (the "Parent Plans"),
Parent shall credit, and shall cause the Surviving Corporation to credit,
each Target Employee with his or her years of service with Target and its
subsidiaries and any predecessor entities, to the same extent as such
Target Employee was entitled immediately prior to the Effective Time to
credit for such service under any similar Target Benefit Plan. The Parent
Plans shall not deny Target Employees coverage on the basis of pre-existing
conditions and shall credit such Target Employees for any deductibles and
out-of-pocket expenses paid in the year of initial participation in the
Parent Plans.
(c) Nothing contained in this Section 5.05 or elsewhere
in this Agreement shall be construed to prevent the termination of
employment of any individual Target Employee or any change in the employee
benefits available to any individual Target Employee or the amendment or
termination of any particular Target Benefit Plan or Target Benefit
Agreement to the extent permitted by its terms as in effect immediately
prior to the Effective Time.
SECTION 5.06. Indemnification, Exculpation and Insurance.
(a) Parent agrees that all rights to indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the Effective
Time now existing in favor of the current or former directors or officers
of Target and its subsidiaries as provided in their respective articles of
organization or by-laws (or comparable organizational documents) and any
indemnification agreements of Target (as each is in effect on the date
hereof), the existence of which does not constitute a breach of this
Agreement, shall be assumed by the Surviving Corporation in the Merger,
without further action, as of the Effective Time and shall survive the
Merger and shall continue in full force and effect in accordance with their
terms, and Parent shall cause the Surviving Corporation to honor all such
rights.
(b) In the event that the Surviving Corporation or any of
its successors or assigns (i) consolidates with or merges into any other
person and is not 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, or otherwise dissolves the
Surviving Corporation, then, and in each such case, Parent shall cause
proper provision to be made so that the successors and assigns of the
Surviving Corporation assume the obligations set forth in this Section
5.06.
(c) The Surviving Corporation shall, at its option,
either (i) maintain for a period of not less than six years after the
Effective Time, Target's current directors' and officers' liability
insurance covering acts or omissions occurring prior to the Effective Time
("D&O Insurance") with respect to those persons who are currently covered
by Target's directors' and officers' liability insurance policy on terms
with respect to such coverage and amount no less favorable than those of
such policy in effect on the date hereof or (ii) cause to be provided
coverage no less favorable to such directors or officers, as the case may
be, than the D&O Insurance, in each case so long as the annual premium
therefor would not be in excess of 150% of the last annual premium paid for
the D&O Insurance prior to the date of this Agreement (such 150% amount the
"Maximum Premium"). If the existing or substituted directors' and officers'
liability insurance expires, is terminated or canceled during such six-year
period, the Surviving Corporation will obtain as much D&O Insurance as can
be obtained for the remainder of such period for an annualized premium not
in excess of the Maximum Premium. At the option of Parent, Parent may
assume the obligations of the Surviving Corporation set forth in Sections
5.06(a) and (b), and thereafter neither Parent nor the Surviving
Corporation shall have any further obligations pursuant to this Section
5.06(c) for so long as Parent continues to so assume the obligations of the
Surviving Corporation.
(d) From and after the consummation of the Offer, to the
full extent permitted by law, Parent shall, and shall cause Target (or any
successor to Target) to, indemnify, defend and hold harmless the present
officers and directors of Target and its subsidiaries (each an "Indemnified
Party") against all losses, claims, damages, liabilities, fees and expenses
(including attorneys' fees and disbursements), judgments, fines and amounts
paid in settlement (collectively, "Losses") arising out of actions or
omissions occurring at or prior to the Effective Time in connection with
this Agreement, the Offer and the Merger; provided, however, that an
Indemnified Party shall not be entitled to indemnification under this
Section 5.06(d) for Losses arising out of actions or omissions by the
Indemnified Party constituting (i) a breach of this Agreement, (ii)
criminal conduct or (iii) any violation of federal, state or foreign
securities laws. In order to be entitled to indemnification under this
Section 5.06(d), an Indemnified Party must give Parent and Target prompt
written notice of any third party claim which may give rise to any
indemnity obligation under this Section 5.06(d), and Parent and Target
shall have the right to assume the defense of any such claim through
counsel of their own choosing, subject to such counsel's reasonable
judgment that separate defenses that would create a conflict of interest on
the part of such counsel are not available. If Parent and Target do not
assume any such defense, they shall be liable for all reasonable costs and
expenses of defending such claim incurred by the Indemnified Party,
including reasonable fees and disbursements of counsel and shall advance
such reasonable costs and expenses to the Indemnified Party; provided,
however, that such advance shall be made only after receiving an
undertaking from the Indemnified Party that such advance shall be repaid if
it is determined that such Indemnified Party is not entitled to
indemnification therefor. Neither Parent nor Target shall be liable under
this Section 5.06(d) for any Losses resulting from any settlement,
compromise or offer to settle or compromise any such claim or litigation or
other action, without the prior written consent of Parent and Target. Any
settlement involving an Indemnified Party shall provide for a full release
of such Indemnified Party.
(e) The provisions of this Section 5.06 (i) are intended
to be for the benefit of, and will be enforceable by, each indemnified
party, his or her heirs and his or her representatives and (ii) are in
addition to, and not in substitution for, any other rights to
indemnification or contribution that any such person may have by contract
or otherwise.
SECTION 5.07. Fees and Expenses. (a) All fees and
expenses incurred in connection with the Offer, the Merger, this Agreement
and the transactions contemplated by this Agreement shall be paid by the
party incurring such fees or expenses, whether or not the Merger is
consummated. Parent shall file any tax return with respect to, and shall
pay, any state or local taxes (including any penalties or interest with
respect thereto), if any, which are attributable to the transfer of the
beneficial ownership of Target's real property (collectively, the "Real
Estate Transfer Taxes") as a result of the Merger (other than any such
taxes that are solely the obligations of a stockholder of Target, in which
case Target shall pay any such taxes). Target shall cooperate with Parent
in the filing of such tax returns including, in the case of Target,
supplying in a timely manner a complete list of all real property interests
held by Target and any information with respect to such property that is
reasonably necessary to complete such returns. The fair market value of any
real property of Target subject to the Real Estate Transfer Taxes shall be
as agreed to between Parent and Target.
(b) In the event that (1) a Takeover Proposal shall have
been made known to Target or has been made directly to its stockholders or
any person has announced an intention (whether or not conditional) to make
a Takeover Proposal and thereafter this Agreement is terminated by either
Parent or Target pursuant to Section 7.01(b)(i)(A) (as a result of the
failure to satisfy the Minimum Tender Condition or the condition set forth
in paragraph (f) of Exhibit A) or 7.01(b)(i)(B) or (2) this Agreement is
terminated by Parent pursuant to Section 7.01(d)(i) or (3) this Agreement
is terminated by Parent pursuant to Section 7.01(d)(ii) or 7.01(d)(iii) or
by Target pursuant to Section 7.01(f), then in any such case Target shall
promptly, but in no event later than the date of such termination, pay to
Parent a fee equal to $34,653,341 (the "Termination Fee"), payable by wire
transfer of same day funds; provided, however, that no Termination Fee
shall be payable to Parent pursuant to a termination by Parent pursuant to
clause (1) or (2) of this paragraph (b) unless and until within 12 months
after such termination, Target or any of its subsidiaries enters into any
Acquisition Agreement with respect to, or consummates, any Takeover
Proposal (which, for purposes of this proviso shall have the meaning
assigned in Section 4.02 except that references to "15%" shall be deemed to
be references to "35%"), in which event the Termination Fee shall be
payable upon the first to occur of such events. Target acknowledges that
the agreements contained in this Section 5.07(b) are an integral part of
the transactions contemplated by this Agreement, and that, without these
agreements, Parent would not enter into this Agreement; accordingly, if
Target fails promptly to pay the amounts due pursuant to this Section
5.07(b), and, in order to obtain such payment, Parent commences a suit
which results in a judgment against Target for the amounts set forth in
this Section 5.07(b), Target shall pay to Parent its reasonable costs and
expenses (including attorneys' fees and expenses) in connection with such
suit, together with interest on the amounts set forth in this Section
5.07(b) at the prime rate of Citibank, N.A. in effect on the date such
payment was required to be made.
(c) Target acknowledges and agrees that in the event of a
breach of Section 4.02, the payment of the Termination Fee shall not
constitute the exclusive remedies available to Parent, and that Parent
shall be entitled to the remedies set forth in Section 8.09, including
injunction and specific performance, and all other remedies available at
law or in equity to which Parent is entitled.
SECTION 5.08. Public Announcements. Parent and Target
will consult with each other before issuing, and provide each other the
opportunity to review, comment upon and concur with, any press release or
other public statements with respect to the transactions contemplated by
this Agreement, including the Offer and the Merger, and shall not issue any
such press release or make any such public statement prior to such
consultation, except as either party may determine is required by
applicable law, the SEC, court process or by obligations pursuant to any
listing or quotation agreement with any national securities exchange or
national trading system. The parties agree that the initial press release
to be issued with respect to the transactions contemplated by this
Agreement shall be in the form heretofore agreed to by the parties.
SECTION 5.09. Litigation. Target shall give Parent the
opportunity to participate in the defense of any litigation (other than
where Parent is an adverse party) against Target and/or its directors
relating to the transactions contemplated by this Agreement.
SECTION 5.10. U.S. Corporate Headquarters. It is the
current intention of Parent that the Surviving Corporation will maintain
its U.S. corporate headquarters in Boston, Massachusetts.
SECTION 5.11. Target Name. It is the current intention of
Parent that the Surviving Corporation will continue to (i) be named
Houghton Mifflin Company and (ii) utilize the Houghton Mifflin imprint on
all English language publications published and sold in the United States
to the extent Target at the Effective Time uses such imprint.
SECTION 5.12. Resignation of Directors. Prior to the
Effective Time, Target shall cause each member of its Board of Directors to
execute and deliver a letter effectuating his or her resignation as a
director of such Board effective immediately prior to the Effective Time.
SECTION 5.13. Rights Agreement. The Board of Directors of
Target shall take all further action (in addition to that referred to in
Section 3.01(s)) reasonably requested in writing by Parent in order to
render the Rights inapplicable to the Offer, the Merger and the other
transactions contemplated by this Agreement to the extent provided herein.
Except as provided above with respect to the Offer, the Merger and the
other transactions contemplated hereby, the Board of Directors of Target
shall not, without the written consent of Parent (a) waive or amend any
provisions of the Rights Agreement or (b) take any action with respect to,
or make any determination under, the Rights Agreement, including a
redemption of the Rights or any action to facilitate a Takeover Proposal.
SECTION 5.14. Directors. (a) Upon the purchase of shares
of Target Common Stock pursuant to the Offer and from time to time
thereafter, subject to compliance with Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder, Parent shall be entitled to
designate such number of directors of Target, rounded down to the next
whole number, as is equal to the product of the total number of directors
on Target's Board of Directors (giving effect to the directors designated
by Parent pursuant to this sentence) multiplied by the Board Fraction.
"Board Fraction" shall mean a fraction, the numerator of which shall be the
number of shares of Target Common Stock that Parent and its subsidiaries
beneficially own at the time of calculation of the Board Fraction, and the
denominator of which shall be the total number of shares of Target Common
Stock then outstanding. Subject to Section 5.14 of the Target Disclosure
Schedule, in furtherance thereof, subject to applicable law, Target shall
promptly take such actions as are necessary to enable such designees of
Parent to be elected or appointed to Target's Board of Directors, including
increasing the number of directors on Target's Board of Directors and
obtaining the resignations of a number of its incumbent directors, or both.
Target shall use its best efforts to cause the vacancies created by such
increase in the number of directors or the resignation of incumbent
directors to be filled by the designees of Parent. At such time, Target
shall also, subject to applicable law, take all action necessary to cause
persons designated by Parent to constitute the same Board Fraction of (i)
each committee of Target's Board of Directors, (ii) each board of directors
(or similar body) of each subsidiary of Target and (iii) each committee (or
similar body) of each such board.
(b) Subject to applicable law, Target shall take all
action requested by Parent necessary to effect any such election or
appointment of the designees of Parent to Target's Board of Directors,
including mailing to its stockholders an information statement containing
the information required by Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder, and Target agrees to make such mailing with
the mailing of the Schedule 14D-9 so long as Parent or Sub shall have
provided to Target on a timely basis all information required to be
included in such information statement with respect to Parent's designees.
Parent and Sub shall be solely responsible for any information with respect
to either of them and their nominees, officers, directors and affiliates
required by Section 14(f) and Rule 14f-1.
(c) In the event that Parent's designees are elected or
appointed to Target's Board of Directors, until the Effective Time,
Target's Board of Directors shall have at least two directors of Target who
are directors on the date hereof and who are not affiliates of Parent or
Sub (the "Independent Directors"); provided that, in such event, if the
number of Independent Directors shall be reduced below two for any reason
whatsoever, any remaining Independent Directors (or Independent Director,
if there be only one remaining) shall be entitled to designate persons to
fill such vacancies who shall be deemed to be Independent Directors for
purposes of this Agreement or, if no Independent Director then remains, the
other directors shall designate two persons to fill such vacancies who
shall not be shareholders, affiliates or associates of Parent or Sub, and
such persons shall be deemed to be Independent Directors for purposes of
this Agreement. The Independent Directors shall form a committee that,
during the period from the time shares of Target Common Stock are purchased
pursuant to the Offer until the Effective Time, shall have the sole power
and authority, by a majority vote of such Independent Directors, for Target
to (a) amend or terminate this Agreement or to extend the time for the
performance of any of the obligations or other acts of Parent or Sub under
the Offer, the Merger or this Agreement, (b) exercise or waive any of
Target's rights, benefits or remedies hereunder, or (c) take any other
action under or in connection with this Agreement if such action materially
and adversely affects holders of Target Common Stock other than Parent or
Sub.
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligation To
Effect the Merger. The respective obligation of each party to effect the
Merger is subject to the satisfaction or waiver on or prior to the Closing
Date of the following conditions:
(a) Stockholder Approval. The Target Stockholder
Approval shall have been obtained.
(b) HSR Act. The waiting period (and any extension
thereof) applicable to the Merger under the HSR Act shall have
been terminated or shall have expired and any approvals under
Foreign Antitrust Laws applicable to the Merger shall have been
obtained.
(c) No Restraints. No judgment, order, decree, statute,
law, ordinance, rule or regulation, entered, enacted, promulgated,
enforced or issued by any court or other Governmental Entity of
competent jurisdiction or other legal restraint or prohibition
(collectively, "Restraints") shall be in effect preventing the
consummation of the Merger; provided, however, that each of the
parties shall have used its reasonable efforts to prevent the
entry of any such Restraints and to appeal as promptly as possible
any such Restraints that may be entered.
(d) Purchase of Shares in the Offer. Sub shall have
previously accepted for payment and paid for the shares of Target
Common Stock pursuant to the Offer.
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01. Termination. This Agreement may be
terminated, and the Offer and the Merger may be abandoned, at any time
prior to the Effective Time, notwithstanding any requisite approval and
adoption of this Agreement:
(a) by mutual written consent of Parent and Target
(provided, that after the Specified Date, the consent of a
majority of the Independent Directors shall also be required);
(b) by either Parent or Target:
(i) if (A) as of the result of the failure of
any of the conditions set forth in Exhibit A, the Offer
shall have terminated or expired in accordance with its
terms without Sub having purchased any shares of Target
Common Stock pursuant to the Offer or (B) Sub shall not
have accepted for payment any shares of Target Common
Stock pursuant to the Offer prior to September 30, 2001
(provided that if the condition set forth in clause (ii)
of the first sentence of Exhibit A has not been satisfied
by such date, then such date shall be automatically
extended to December 31, 2001) (the "Outside Date");
provided, however, that the right to terminate this
Agreement pursuant to this Section 7.01(b)(i) shall not
be available to any party whose failure to perform any of
its obligations under this Agreement results in the
failure of the Offer to be consummated by such time; and
provided, further, however, that the passage of such
period shall be tolled for any part thereof during which
any party or any of its affiliates shall be subject to a
nonfinal order, decree, ruling or action restraining,
enjoining or otherwise prohibiting the consummation of
the Offer or any of the other transactions contemplated
by this Agreement;
(ii) if any Restraint having any of the effects
set forth in Section 6.01(c) or having the effect of
preventing the consummation of the Offer shall be in
effect and shall have become final and nonappealable;
provided that the party seeking to terminate this
Agreement pursuant to this Section 7.01(b)(ii) shall have
used reasonable efforts to prevent the entry of and to
remove such Restraint; or
(iii) if, upon a vote at a duly held meeting to
obtain the Target Stockholder Approval, the Target
Stockholder Approval is not obtained; provided, however,
that this Agreement may not be terminated by Parent
pursuant to this clause (iii) if Parent or Sub is in
breach of Section 5.01(c);
(c) by Parent, if Target shall have breached or failed to
perform in any material respect any of its representations,
warranties, covenants or other agreements contained in this
Agreement, which breach or failure to perform (A) would give rise
to the failure of a condition set forth in paragraph (d) or (e) of
Exhibit A, and (B) is incapable of being or has not been cured by
Target within 30 calendar days after giving written notice to Target
of such breach or failure to perform;
(d) by Parent:
(i) if Target or any of its directors or
officers shall breach Section 4.02 in any material
respect; or
(ii) (w) if the Board of Directors of Target or
any committee thereof shall withdraw or modify, or make
any disclosure to the stockholders of Target, whether or
not permitted pursuant to Section 4.02(d), that has the
effect of withdrawing or modifying, its approval or
recommendation of the Offer, the Merger or this
Agreement, (x) if the Board of Directors of Target or any
committee thereof shall approve or recommend, or make any
disclosure to the stockholders of Target, whether or not
permitted pursuant to Section 4.02(d), that has the
effect of approving or recommending, to the stockholders
of Target a Takeover Proposal, (y) if, after a Takeover
Proposal shall have been made public, the Board of
Directors of Target fails to affirm its recommendation of
the Offer, the Merger and this Agreement as promptly as
practicable (but in any case within 3 business days)
after any request from Parent or (z) if a tender offer or
exchange offer constituting a Takeover Proposal is
commenced, and the Board of Directors of Target fails to
recommend against acceptance of such offer by the
stockholders of Target (including by taking no position
with respect to the acceptance of such offer by the
stockholders of Target); or
(iii) if any person shall have consummated a
tender offer or an exchange offer or other transaction
constituting a Takeover Proposal;
(e) prior to the Specified Date by Target, if Parent or
Sub shall have breached in any material respect any of their
respective representations, warranties, covenants or other
agreements contained in this Agreement which breach is incapable
of being or has not been cured by Parent within 30 calendar days
after giving written notice to Parent of such breach;
(f) prior to the Specified Date by Target, in accordance
with Section 4.02(b), subject to compliance by Target with the
notice provisions therein and the Termination Fee and expense
reimbursement provisions of Section 5.07; or
(g) by Target, if Sub shall have failed to commence the
Offer within 15 days following the date of this Agreement;
provided, however, that the right to terminate this Agreement
pursuant to this Section 7.01(g) shall not be available to any
party whose failure to perform any of its obligations under this
Agreement results in the failure of the Offer to be commenced by
such time.
SECTION 7.02. Effect of Termination. In the event of
termination of this Agreement by either Target or Parent as provided in
Section 7.01, this Agreement shall forthwith become void and have no
effect, without any liability or obligation on the part of Parent or
Target, other than the provisions of Section 3.01(o), Section 4.02(e), the
last sentence of Section 5.02, Section 5.07, this Section 7.02 and Article
VIII, which provisions survive such termination, and except to the extent
that such termination results from the willful and material breach by a
party of any of its representations, warranties, covenants or agreements
set forth in this Agreement.
SECTION 7.03. Amendment. This Agreement may be amended by
the parties at any time prior to the Effective Time; provided, however,
that after the purchase of shares of Target Common Stock pursuant to the
Offer, no amendment shall be made which decreases the Merger Consideration,
and after the Target Stockholder Approval has been obtained, there shall
not be made any amendment that by law requires further approval by the
stockholders of Target without the further approval of such stockholders.
This Agreement may not be amended except by an instrument in writing signed
on behalf of each of the parties.
SECTION 7.04. Extension; Waiver. At any time prior to the
Effective Time, a party may (a) extend the time for the performance of any
of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties of the other parties
contained in this Agreement or in any document delivered pursuant to this
Agreement or (c) subject to the proviso of Section 7.03, waive compliance
by the other party with any of the agreements or conditions contained in
this Agreement. Any agreement on the part of a party to any such extension
or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement
to assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of such rights.
SECTION 7.05. Procedure for Termination, Amendment,
Extension or Waiver. Subject, in the case of Target, to Section 5.14(c), a
termination of this Agreement pursuant to Section 7.01, an amendment of
this Agreement pursuant to Section 7.03 or an extension or waiver pursuant
to Section 7.04 shall, in order to be effective, require, in the case of
Parent or Target, action by its Board of Directors or, with respect to any
amendment to this Agreement, the duly authorized committee of its Board of
Directors to the extent permitted by law.
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and
Warranties. None of the representations and warranties in this Agreement or
in any instrument delivered pursuant to this Agreement shall survive the
Effective Time. This Section 8.01 shall not limit any covenant or agreement
of the parties which by its terms contemplates performance after the
Effective Time.
SECTION 8.02. Notices. All notices, requests, claims,
demands and other communications under this Agreement shall be in writing
and shall be deemed given if delivered personally, telecopied (which is
confirmed) or sent by overnight courier (providing proof of delivery) to
the parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
(a) if to Parent or Sub, to
Vivendi Universal
▇▇, ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ Cedex 08
FRANCE
Telecopy No.: ▇▇▇-▇-▇▇-▇▇-▇▇-▇▇
Attention: ▇▇▇▇ Licoys
with a copy to:
Cravath, Swaine & ▇▇▇▇▇
Worldwide Plaza
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇;
and
Cabinet ▇▇▇▇▇▇ Prat
▇▇▇ ▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
Telecopy No.: ▇▇▇-▇-▇▇-▇▇-▇▇-▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.; and
(b) if to Target, to
Houghton Mifflin Company
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
with copies to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
and
Cadwalader, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Block
SECTION 8.03. Definitions. For purposes of this
Agreement:
(a) an "affiliate" of any person means another person
that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such
first person, where "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management policies of a person, whether through the ownership of
voting securities, by contract, as trustee or executor, or
otherwise;
(b) "business day" means any day other than Saturday,
Sunday or any other day on which banks are legally permitted to be
closed in New York;
(c) "knowledge" of any person which is not an individual
means the actual knowledge of such person's executive officers
after reasonable inquiry;
(d) "material adverse change" or "material adverse
effect" means, when used in connection with Target or Parent, any
change, effect, event, occurrence, condition or development or
state of facts that is materially adverse to the business, assets
or results of operations or condition (financial or other) of such
party and its subsidiaries taken as a whole, other than any
change, effect, event, occurrence, condition or development or
state of facts (i) relating to the U.S. economy in general, (ii)
relating to the industries in which such party operates in general
(and not having a materially disproportionate effect on such party
relative to most other industry participants), (iii) in respect of
changes in such party's stock price, in and of itself, (iv)
resulting from the announcement of this Agreement and the
transactions contemplated hereby or (v) in the case of Target,
resulting from the failure to secure adoption contracts as a
result of the pendency of this Agreement;
(e) "person" means an individual, corporation,
partnership, limited liability company, joint venture,
association, trust, unincorporated organization or other entity;
and
(f) a "subsidiary" of any person means another person, an
amount of the voting securities, other voting ownership or voting
partnership interests of which is sufficient to elect at least a
majority of its Board of Directors or other governing body (or, if
there are no such voting interests, 50% or more of the equity
interests of which) is owned directly or indirectly by such first
person.
SECTION 8.04. Interpretation. When a reference is made in
this Agreement to an Article, Section, Exhibit or Annex, such reference
shall be to an Article or Section of, or an Exhibit or Annex to, this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include", "includes" or "including" are used in this Agreement,
they shall be deemed to be followed by the words "without limitation". The
words "hereof", "herein" and "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or
other document made or delivered pursuant hereto unless otherwise defined
therein. The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such term. Any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including
(in the case of agreements or instruments) by waiver or consent and (in the
case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a person are also to its permitted successors and assigns. To
the extent a matter contained in the Target Disclosure Schedule expressly
qualifies or modifies a definition contained in this Agreement, such
definition shall be construed and interpreted as so qualified or modified.
SECTION 8.05. Counterparts. This Agreement may be
executed in one or more counterparts, all of which shall be considered one
and the same agreement and shall become effective when one or more
counterparts have been signed by each of the parties and delivered to the
other parties.
SECTION 8.06. Entire Agreement; No Third-Party
Beneficiaries. This Agreement (including the documents and instruments
referred to herein) (a) constitutes the entire agreement, and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter of this Agreement and (b) except
for the provisions of Article II and Section 5.06, are not intended to
confer upon any person other than the parties any rights or remedies.
SECTION 8.07. Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York, regardless of the laws that might otherwise govern under applicable
principles of conflict of laws thereof, except to the extent that the laws
of the Commonwealth of Massachusetts are mandatorily applicable to the
Merger; provided, however, that the laws of the respective states (or
country, in the case of Parent) of each of the parties hereto shall govern
the relative rights, obligations, powers, duties and other internal affairs
of such party and its Board of Directors.
SECTION 8.08. Assignment. Neither this Agreement nor any
of the rights, interests or obligations under this Agreement shall be
assigned, in whole or in part, by operation of law or otherwise by any of
the parties hereto without the prior written consent of the other parties.
Any assignment in violation of the preceding sentence shall be void.
Subject to the preceding two sentences, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
SECTION 8.09. Enforcement. Each of the parties hereto
agrees that irreparable damage would occur and that the parties would not
have any adequate remedy at law in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms
or were otherwise breached. It is accordingly agreed that the parties shall
be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this
Agreement in any Federal court located in the State of New York or in any
New York state court, this being in addition to any other remedy to which
they are entitled at law or in equity. In addition, each of the parties
hereto (a) consents to submit itself to the personal jurisdiction of any
Federal court located in the State of New York or any New York state court
in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, (c) agrees that it will not bring
any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a Federal court
sitting in the State of New York or any New York state court and (d) waives
any right to trial by jury with respect to any claim or proceeding related
to or arising out of this Agreement or any transaction contemplated by this
Agreement.
SECTION 8.10. Severability. If any term or other
provision of this Agreement is invalid, illegal or incapable of being
enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and
effect. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
IN WITNESS WHEREOF, Vivendi Universal, Soraya Merger Inc.
and Houghton Mifflin Company have caused this Agreement to be signed as an
instrument under seal by their respective officers thereunto duly
authorized, all as of the date first written above.
VIVENDI UNIVERSAL,
by /s/ ▇▇▇▇ Licoys
_______________________________________
Name: ▇▇▇▇ Licoys
Title: Chief Operating Officer
SORAYA MERGER INC.,
by /s/ ▇▇▇▇▇ ▇▇▇▇
_______________________________________
Name: ▇▇▇▇▇ ▇▇▇▇
Title: President and Treasurer
by /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
_______________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Assistant Treasurer
HOUGHTON MIFFLIN COMPANY,
by /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
_______________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Chairman of the Board,
President and CEO
by /s/ ▇▇▇▇ ▇▇▇▇▇
_______________________________________
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Treasurer
EXHIBIT A
Conditions of the Offer
Notwithstanding any other term of the Offer or this
Agreement, Sub shall not be required to accept for payment or, subject to
any applicable rules and regulations of the SEC, including Rule 14e-l(c)
under the Exchange Act (relating to Sub's obligation to pay for or return
tendered shares of Target Common Stock promptly after the termination or
withdrawal of the Offer), to pay for any shares of Target Common Stock
tendered pursuant to the Offer unless (i) there shall have been validly
tendered and not withdrawn prior to the expiration of the Offer that number
of shares of Target Common Stock which would represent at least two-thirds
of the Fully Diluted Shares (the "Minimum Tender Condition"), and (ii) any
waiting period (and any extension thereof) applicable to the purchase of
shares of Target Common Stock pursuant to the Offer or to the Merger under
the HSR Act shall have been terminated or shall have expired and any
approvals under any Foreign Antitrust Laws applicable to the purchase of
shares of Target Common Stock pursuant to the Offer or to the Merger shall
have been obtained. The term "Fully Diluted Shares" means all outstanding
securities entitled generally to vote in the election of directors of
Target on a fully diluted basis, after giving effect to the exercise or
conversion of all options, rights and securities exercisable or convertible
into such voting securities. Furthermore, notwithstanding any other term of
the Offer or this Agreement, Sub shall not be required to accept for
payment or, subject as aforesaid, to pay for any shares of Target Common
Stock not theretofore accepted for payment or paid for, and, subject to
Section 1.01 of this Agreement, may terminate or amend the Offer, with the
consent of Target or if, as of the scheduled expiration date of the Offer
(as extended pursuant to Section 1.01(a)) and before the acceptance of such
shares for payment or the payment therefor, any of the following conditions
exists:
(a) any Restraint shall be in effect preventing the
purchase of shares of Target Common Stock pursuant to the Offer or
the Merger or there shall be any statute, rule, regulation,
judgment, order or injunction enacted, entered, enforced,
promulgated or issued by any Governmental Entity that would be
reasonably likely to result in any of the consequences referred to
in paragraph (b) below;
(b) there shall be pending any suit, action or proceeding
by any Governmental Entity, (i) challenging the acquisition by
Parent or Sub of any shares of Target Common Stock, seeking to
restrain or prohibit consummation of the Offer or the Merger, or
seeking to place limitations on the ownership of shares of Target
Common Stock (or shares of common stock of the Surviving
Corporation) by Parent or Sub, (ii) seeking to prohibit or limit
the ownership or operation by Target or Parent and their
respective subsidiaries of any material portion of the business or
assets of Target or Parent and their respective subsidiaries taken
as a whole, or to compel Target or Parent and their respective
subsidiaries to dispose of or hold separate any material portion
of the business or assets of Target or Parent and their respective
subsidiaries taken as a whole, as a result of the Offer, the
Merger or any of the other transactions contemplated by this
Agreement, or (iii) seeking to prohibit Parent or any of its
subsidiaries from effectively controlling in any material respect
the business or operations of Target or Parent and their
respective subsidiaries taken as a whole;
(c) there shall have occurred and continue to exist (i)
any general suspension of trading in, or limitation on prices for,
securities on the New York Stock Exchange for a period in excess
of ten consecutive trading hours (excluding suspensions or
limitations resulting solely from physical damage or interference
with such exchange not related to market conditions), (ii) a
declaration of a banking moratorium or any suspension of payments
in respect of banks in the United States (whether or not
mandatory) or (iii) any limitation (whether or not mandatory) by
any Governmental Entity in the United States on the extension of
credit by banks or other financial institutions;
(d) any representation and warranty of Target set forth
in this Agreement, disregarding all qualifications and exceptions
contained therein relating to materiality or material adverse
effect, shall not be true and correct, in each case, as of the
date of this Agreement or as of the scheduled or extended
expiration of the Offer (except to the extent such representation
and warranty is expressly made as of an earlier date, in which
case as of such earlier date), except to the extent that the facts
or matters as to which such representations and warranties are not
so true and correct as of such dates, individually and
in the aggregate, are not reasonably likely to have a
material adverse effect on Target;
(e) Target shall have failed to perform in any material
respect its obligations or to comply in any material respect with
its agreements or covenants required to be performed or complied
with by it under this Agreement;
(f) the Rights shall have become exercisable; or
(g) this Agreement shall have been terminated in
accordance with its terms,
which, in the sole and reasonable judgment of Sub or Parent, in any such
case, and regardless of the circumstances giving rise to any such condition
(including any action or inaction by Parent or any of its affiliates),
makes it inadvisable to proceed with such acceptance for payment or
payment.
The foregoing conditions are for the sole benefit of Sub
and Parent and may be asserted by Sub or Parent regardless of the
circumstances giving rise to such condition or may be waived by Sub and
Parent in whole or in part at any time and from time to time in their sole
discretion. The failure by Parent, Sub or any other affiliate of Parent 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.
The terms in this Exhibit A that are defined in the
attached merger agreement have the meanings set forth therein.
ANNEX I
TO THE MERGER AGREEMENT
Index of Defined Terms
Term Page
Accounting Rules...........................................................15
Acquisition Agreement..................................................... 41
affiliate..................................................................59
Agreement.................................................................. 1
Articles of Merger......................................................... 5
Board Fraction.............................................................51
business day...............................................................59
Certificates............................................................... 8
Closing.................................................................... 5
Closing Date............................................................... 5
Code..................................................................... 10
Commonly Controlled Entity.................................................20
Confidentiality Agreement..................................................39
Contract...................................................................14
control....................................................................59
D&O Insurance..............................................................47
Dissenting Shares...........................................................7
Effective Time............................................................. 6
Environmental Law..........................................................20
ERISA......................................................................21
Exchange Act................................................................3
Foreign Antitrust Laws.....................................................14
Fully Diluted Shares......................................................A-1
GAAP.......................................................................15
Governmental Entity........................................................14
Hazardous Materials........................................................20
HSR Act....................................................................14
Indemnified Party..........................................................48
Independent Directors......................................................52
Information Statement......................................................16
Intellectual Property
Rights...................................................................29
knowledge..................................................................59
Liens......................................................................11
Losses.....................................................................48
material adverse change....................................................59
material adverse effect....................................................59
Maximum Premium............................................................47
MBCL........................................................................5
Merger......................................................................1
Merger Consideration........................................................7
Minimum Tender Condition..................................................A-1
New Parent Proposal........................................................41
Offer.......................................................................1
Offer Documents.............................................................3
Optionee...................................................................45
Outside Date...............................................................54
Parent......................................................................1
Parent Plans...............................................................46
Paying Agent................................................................8
person.....................................................................59
Primary Target Executives..................................................24
Proxy Statement............................................................14
Real Estate Transfer Taxes.................................................49
Release....................................................................20
Restraints.................................................................53
Rights.....................................................................12
Rights Agreement...........................................................12
SARs.......................................................................12
Schedule 14D-9..............................................................4
SEC.........................................................................2
Securities Act.............................................................15
Specified Date.............................................................39
Sub.........................................................................1
subsidiary.................................................................59
Superior Proposal..........................................................39
Surviving Corporation.......................................................5
Takeover Proposal..........................................................40
Target..................................................................... 1
Target Authorized Preferred Stock..........................................11
Target Benefit Agreements..................................................21
Target Benefit Plans.......................................................20
Target Common Stock........................................................ 1
Target Disclosure Schedule................................................ 11
Target Employees...........................................................46
Target SEC Documents.......................................................15
Target Filed SEC Documents.................................................17
Target Pension Plans.......................................................21
Target Permits.............................................................19
Target SEC Documents.......................................................15
Target Stock Options.......................................................12
Target Stock Plans.........................................................12
Target Stockholder Approval................................................27
Target Stockholders Meeting................................................43
taxes......................................................................27
tax returns................................................................27
Termination Fee............................................................49