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Exhibit 10.1
AGREEMENT AND PLAN OF MERGER
BETWEEN
MATTEL, INC.
AND
THE LEARNING COMPANY, INC.
DATED AS OF DECEMBER 13, 1998
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TABLE OF CONTENTS
ARTICLE I. DEFINITIONS .......................................................................2
ARTICLE II. THE MERGER .......................................................................11
SECTION 2.1. THE MERGER........................................................................11
SECTION 2.2. CLOSING AND CLOSING DATE..........................................................11
SECTION 2.3. EFFECTIVE TIME....................................................................11
SECTION 2.4. EFFECTS OF THE MERGER.............................................................12
SECTION 2.5. CERTIFICATE OF INCORPORATION; BYLAWS..............................................12
SECTION 2.6. DIRECTORS AND OFFICERS............................................................12
SECTION 2.7. CONVERSION OF SECURITIES..........................................................12
SECTION 2.8. TREATMENT OF EMPLOYEE OPTIONS AND OTHER COMPANY STOCK RIGHTS......................14
SECTION 2.9. TREATMENT OF EXCHANGEABLE SHARES..................................................15
SECTION 2.10. FRACTIONAL INTERESTS .............................................................16
SECTION 2.11. SURRENDER OF SHARES OF COMPANY COMMON STOCK; STOCK TRANSFER BOOKS ................16
SECTION 2.12. LOST, STOLEN OR DESTROYED CERTIFICATES ...........................................18
SECTION 2.13. TAX CONSEQUENCES .................................................................19
SECTION 2.14. WITHHOLDING RIGHTS ...............................................................19
SECTION 2.15. AFFILIATES .......................................................................19
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ....................................19
SECTION 3.1. ORGANIZATION AND QUALIFICATION....................................................19
SECTION 3.2. AUTHORIZATION; VALIDITY AND EFFECT OF AGREEMENT...................................20
SECTION 3.3. CAPITALIZATION....................................................................20
SECTION 3.4. SUBSIDIARIES......................................................................21
SECTION 3.5. OTHER INTERESTS...................................................................22
SECTION 3.6. NO CONFLICT; REQUIRED FILINGS AND CONSENTS........................................22
SECTION 3.7. COMPLIANCE........................................................................23
SECTION 3.8. SEC DOCUMENTS.....................................................................23
SECTION 3.9. ABSENCE OF CERTAIN CHANGES........................................................24
SECTION 3.10. LITIGATION .......................................................................24
SECTION 3.11. TAXES ............................................................................24
SECTION 3.12. EMPLOYEE BENEFIT PLANS ...........................................................26
SECTION 3.13. ASSETS ...........................................................................27
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SECTION 3.14. CONTRACTS ........................................................................28
SECTION 3.15. LABOR RELATIONS ..................................................................29
SECTION 3.16. INTELLECTUAL PROPERTY ............................................................30
SECTION 3.17. AFFILIATE TRANSACTIONS ...........................................................31
SECTION 3.18. ENVIRONMENTAL MATTERS ............................................................31
SECTION 3.19. JOINT PROXY STATEMENT PROSPECTUS; REGISTRATION STATEMENT .........................32
SECTION 3.20. OPINION OF FINANCIAL ADVISOR .....................................................32
SECTION 3.21. BROKERS ..........................................................................33
SECTION 3.22. VOTE REQUIRED ....................................................................33
SECTION 3.23. ACCOUNTING AND TAX MATTERS .......................................................33
SECTION 3.24. NO OTHER AGREEMENTS TO SELL THE COMPANY OR ITS ASSETS; NO EXISTING DISCUSSIONS ...34
SECTION 3.25. INSURANCE ........................................................................34
SECTION 3.26. TAKEOVER PROVISIONS INAPPLICABLE .................................................34
SECTION 3.27. ACCOUNTS RECEIVABLE ..............................................................34
SECTION 3.28. INVENTORY ........................................................................34
SECTION 3.29. PRODUCT LIABILITY ................................................................35
SECTION 3.30. STANDSTILL AGREEMENT .............................................................35
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF ACQUIROR .......................................35
SECTION 4.1. ORGANIZATION AND QUALIFICATION....................................................35
SECTION 4.2. AUTHORIZATION; VALIDITY AND EFFECT OF AGREEMENT...................................35
SECTION 4.3. CAPITALIZATION....................................................................36
SECTION 4.4. SUBSIDIARIES......................................................................37
SECTION 4.5. OTHER INTERESTS...................................................................37
SECTION 4.6. NO CONFLICT; REQUIRED FILINGS AND CONSENTS........................................37
SECTION 4.7. COMPLIANCE........................................................................38
SECTION 4.8. SEC DOCUMENTS.....................................................................38
SECTION 4.9. ABSENCE OF CERTAIN CHANGES........................................................39
SECTION 4.10. LITIGATION .......................................................................39
SECTION 4.11. TAXES ............................................................................40
SECTION 4.12. EMPLOYEE BENEFIT PLANS ...........................................................41
SECTION 4.13. TITLE TO ASSETS ..................................................................42
SECTION 4.14. CONTRACTS ........................................................................42
SECTION 4.15. LABOR RELATIONS ..................................................................43
SECTION 4.16. INTELLECTUAL PROPERTY ............................................................43
SECTION 4.17. ENVIRONMENTAL MATTERS ............................................................44
SECTION 4.18. JOINT PROXY STATEMENT PROSPECTUS; REGISTRATION STATEMENT .........................44
SECTION 4.19. OPINION OF FINANCIAL ADVISOR .....................................................44
SECTION 4.20. OWNERSHIP OF COMPANY COMMON STOCK ................................................45
SECTION 4.21. BROKERS ..........................................................................45
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SECTION 4.22. VOTE REQUIRED ....................................................................45
SECTION 4.23. TAX AND ACCOUNTING MATTERS .......................................................45
SECTION 4.24. RIGHTS PLAN ......................................................................45
ARTICLE V. CONDUCT OF BUSINESS PENDING THE MERGER ...........................................46
SECTION 5.1. CONDUCT OF BUSINESS OF THE COMPANY PENDING THE MERGER.............................46
SECTION 5.2. CONDUCT OF BUSINESS OF ACQUIROR PENDING THE MERGER................................49
ARTICLE VI. ADDITIONAL AGREEMENTS ............................................................50
SECTION 6.1. PREPARATION OF FORM S-4 AND THE PROXY STATEMENT; STOCKHOLDER MEETING..............50
SECTION 6.2. COOPERATION; NOTICE; CURE.........................................................51
SECTION 6.3. NO SOLICITATION...................................................................52
SECTION 6.4. ACCESS TO INFORMATION.............................................................54
SECTION 6.5. GOVERNMENTAL APPROVALS............................................................54
SECTION 6.6. PUBLICITY.........................................................................55
SECTION 6.7. INDEMNIFICATION...................................................................55
SECTION 6.8. EMPLOYEE BENEFITS MATTERS.........................................................56
SECTION 6.9. AFFILIATE AGREEMENTS..............................................................57
SECTION 6.10. POOLING ACCOUNTING ...............................................................57
SECTION 6.11. TAX TREATMENT OF REORGANIZATION ..................................................58
SECTION 6.12. FURTHER ASSURANCES AND ACTIONS ...................................................58
SECTION 6.13. STOCK EXCHANGE LISTING ...........................................................58
SECTION 6.14. LETTER OF THE COMPANY'S ACCOUNTANTS ..............................................58
SECTION 6.15. LETTER OF ACQUIROR'S ACCOUNTANTS .................................................59
ARTICLE VII. CONDITIONS OF MERGER .............................................................59
SECTION 7.1. CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER.......................59
SECTION 7.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY TO EFFECT THE MERGER.....................60
SECTION 7.3. CONDITIONS TO OBLIGATIONS OF ACQUIROR TO EFFECT THE MERGER........................60
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER ................................................61
SECTION 8.1. TERMINATION.......................................................................61
SECTION 8.2. EFFECT OF TERMINATION.............................................................62
SECTION 8.3. EXPENSES..........................................................................64
SECTION 8.4. AMENDMENT.........................................................................64
SECTION 8.5. WAIVER............................................................................64
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ARTICLE IX. GENERAL PROVISIONS ...............................................................64
SECTION 9.1. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS........................64
SECTION 9.2. NOTICES...........................................................................64
SECTION 9.3. SEVERABILITY......................................................................65
SECTION 9.4. ENTIRE AGREEMENT; ASSIGNMENT......................................................65
SECTION 9.5. PARTIES IN INTEREST...............................................................66
SECTION 9.6. GOVERNING LAW.....................................................................66
SECTION 9.7. HEADINGS..........................................................................66
SECTION 9.8. SPECIFIC PERFORMANCE..............................................................66
SECTION 9.9. ALTERNATIVE TRANSACTION STRUCTURE.................................................66
SECTION 9.10. COUNTERPARTS .....................................................................66
EXHIBITS
EXHIBIT A FORM OF STOCK OPTION AGREEMENT
EXHIBIT B FORM OF STOCKHOLDER SUPPORT AGREEMENT
EXHIBIT C FORM OF COMPANY AFFILIATE LETTER
EXHIBIT D FORM OF ACQUIROR AFFILIATE LETTER
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of December 13, 1998
(the "Agreement"), between MATTEL, INC., a Delaware corporation ("Acquiror"),
and THE LEARNING COMPANY, INC., a Delaware corporation (the "Company").
RECITALS
WHEREAS, the Boards of Directors of Acquiror and the Company
have each approved the merger of the Company with and into Acquiror (the
"Merger") in accordance with the Delaware General Corporation Law (the "DGCL")
upon the terms and subject to the conditions set forth herein;
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to Acquiror's willingness to enter
into this Agreement, Acquiror and the Company have entered into Stock Option
Agreement, dated as of the date of this Agreement, in the form attached hereto
as Exhibit A (the "Stock Option Agreement"), pursuant to which the Company has
granted to Acquiror an option to purchase shares of common stock of the Company
under certain circumstances;
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to Acquiror's willingness to enter
into this Agreement, certain stockholders of the Company have entered into
Stockholder Support Agreements with Acquiror, dated as of the date of this
Agreement, in the form attached hereto as Exhibit B (the "Stockholder Support
Agreements"), pursuant to which such stockholders have agreed, among other
things, to vote all voting securities of the Company beneficially owned by them
in favor of approval and adoption of the Agreement and the Merger;
WHEREAS, for federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, it is intended that, for accounting purposes, the
Merger will be accounted for as a "pooling of interests" under GAAP and
applicable rules and regulations of the SEC.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, Acquiror and the Company hereby agree as follows:
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ARTICLE I.
DEFINITIONS
For purposes of this Agreement, the term:
"Acquiror" shall have the meaning set forth in the Preamble.
"Acquiror Board" shall have the meaning set forth in Section
2.8(a).
"Acquiror Common Stock" shall mean the common stock, par value
$1.00 per share, of Acquiror.
"Acquiror Contract" shall mean any note, bond, mortgage,
indenture, guarantee, other evidence of indebtedness, lease, license, contract,
agreement or other instrument or obligation to which Acquiror or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound and which involves the payment or receipt of money in excess
of $5,000,000 in any year.
"Acquiror Employee Plans" shall mean all Employee Plans with
respect to which Acquiror, any of its Subsidiaries or any ERISA Affiliates of
Acquiror or any Subsidiary of Acquiror has or may have any liability (accrued,
contingent or otherwise).
"Acquiror Disclosure Schedule" shall have the meaning set
forth in Article IV.
"Acquiror Intellectual Property Rights" shall have the meaning
set forth in Section 4.16(a).
"Acquiror Option Plans" shall have the meaning set forth in
Section 4.3(a).
"Acquiror Options" shall have the meaning set forth in Section
4.3(a).
"Acquiror Preferred Stock" shall have the meaning set forth in
Section 4.3(a).
"Acquiror Right" shall mean a Right (as defined in the
Acquiror Rights Agreement).
"Acquiror Rights Agreement" shall mean the Rights Agreement,
dated as of February 7, 1992, between Acquiror and The First National Bank of
Boston, as Rights Agent.
"Acquiror SEC Reports" shall have the meaning set forth in
Section 4.8(a).
"Acquiror Series E Preference Stock" shall have the meaning
set forth in Section 4.3(a).
"Acquiror Special Voting Share" shall mean the one share of a
class or series of capital stock of Acquiror, to be issued by Acquiror to, and
deposited with, the trustee under the
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Old Voting and Exchange Trust Agreement, and to entitle the holder of record
thereof to a number of votes at meetings of holders of shares of Acquiror Common
Stock equal to the number of shares of Acquiror Common Stock into which the
Exchangeable Shares outstanding from time to time after the Effective Time
(other than Exchangeable Shares held by Acquiror, its Subsidiaries and
Affiliates) are exchangeable, and to have substantially the rights, privileges,
restrictions and conditions to be described in the Old Voting and Exchange Trust
Agreement.
"Acquiror Stockholder Approval" shall have the meaning set
forth in Section 4.22.
"Acquiror Stockholder Meeting" shall have the meaning set
forth in Section 3.19.
"Acquisition Proposal" shall have the meaning set forth in
Section 6.3(b).
"Acquisition Transaction" shall have the meaning set forth in
Section 6.3(b).
"Action" shall mean any action, order, writ, injunction,
judgment or decree outstanding or claim, suit, litigation, proceeding,
arbitration or investigation by or before any court, governmental or other
regulatory or administrative agency or commission or any other Person.
"Additional Termination Fee" shall have the meaning set forth
in Section 8.2(b).
"Affiliate" shall mean, with respect to any Person, any other
Person that directly, or through one or more intermediaries, controls or is
controlled by or is under common control with such Person.
"Affiliate Agreement" shall have the meaning set forth in
Section 2.15.
"Agreement" shall have the meaning set forth in the Preamble.
"Assets" shall mean, with respect to any Person, all land,
buildings, improvements, leasehold improvements, Fixtures and Equipment and
other assets, real or personal, tangible or intangible, owned, leased or
licensed by such Person or any of its Subsidiaries.
"Average Acquiror Price" shall mean the average of the closing
prices of the Acquiror Common Stock on the NYSE as reported on the NYSE
Composite Transaction Tape for the Random Trading Days. "Random Trading Days"
means the ten trading days selected by lot out of the twenty trading days ending
on and including the fifth trading day preceding the Effective Time. The Random
Trading Days shall be selected by lot by designated representatives of Acquiror
and the Company at 5:00 p.m. New York City time on the second trading day
preceding the Effective Time.
"Benefit Arrangement" shall mean, with respect to any Person,
any employment,
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consulting, severance, change in control or other similar contract, arrangement
or policy and each plan, arrangement (written or oral), program, agreement or
commitment providing for insurance coverage (including without limitation any
self-insured arrangements), workers' compensation, disability benefits, life,
health, disability or accident benefits (including without limitation any
"voluntary employees' beneficiary association" as defined in Section 501(c)(9)
of the Code providing for the same or other benefits) or for deferred
compensation, profit-sharing bonuses, stock options, stock appreciation rights,
stock purchases or other forms of incentive compensation other than Welfare
Plan, Pension Plan or Multiemployer Plan, in each case with respect to which
such Person or any ERISA Affiliate has or may have any liability (accrued,
contingent or otherwise).
"Blue Sky Laws" shall have the meaning set forth in Section
3.6(b).
"Business Day" shall mean each day other than Saturdays,
Sundays and days when commercial banks are authorized to be closed for business
in New York, New York.
"Bylaws" shall have the meaning set forth in Section 2.5(b).
"Canadian Sub" shall mean SoftKey Software Products Inc., a
corporation governed by the Business Corporations Act (Ontario), all of the
issued and outstanding shares of which, other than 5,205,191 Exchangeable
Shares, are, as of the date hereof, owned, directly or indirectly, by the
Company.
"Canadian Sub Board" shall have the meaning set forth in
Section 2.9(a).
"Certificate of Incorporation" shall have the meaning set
forth in Section 2.5(a).
"Certificate of Merger" shall have the meaning set forth in
Section 2.3.
"Certificates" shall have the meaning set forth in Section
2.11(b).
"Claims" shall have the meaning set forth in Section 4.12(d).
"Closing" shall have the meaning set forth in Section 2.2.
"Closing Date" shall have the meaning set forth in Section
2.2.
"Code" shall have the meaning set forth in the Recitals.
"Common Merger Consideration" shall have the meaning set forth
in Section 2.7(a).
"Company" shall have the meaning set forth in the Preamble.
"Company Affiliate" shall have the meaning set forth in
Section 6.9.
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"Company Board" shall have the meaning set forth in Section
2.8(a).
"Company Common Stock" shall have the meaning set forth in
Section 2.7(a).
"Company Contract" shall have the meaning set forth in Section
3.14(a).
"Company Disclosure Schedule" shall have the meaning set forth
in Article III.
"Company Employee Plans" shall mean all Employee Plans with
respect to which the Company, any of its Subsidiaries or any ERISA Affiliates of
the Company or any Subsidiary of the Company has or may have any liability
(accrued, contingent or otherwise).
"Company Financial Advisor" shall have the meaning set forth
in Section 3.20.
"Company Insurance Policies" shall have the meaning set forth
in Section 3.25.
"Company Intellectual Property Rights" shall have the meaning
set forth in Section 3.16(a).
"Company Leased Property" shall have the meaning set forth in
Section 3.13(a).
"Company Options" shall have the meaning set forth in Section
3.3(a).
"Company Owned Property" shall have the meaning set forth in
Section 3.13(a).
"Company Preferred Stock" shall have the meaning set forth in
Section 2.7(b).
"Company Real Property" shall have the meaning set forth in
Section 3.13(a).
"Company SEC Reports" shall have the meaning set forth in
Section 3.8(a).
"Company Special Voting Stock" shall have the meaning set
forth in Section 2.7(c).
"Company Stock" shall have the meaning set forth in Section
2.11(a).
"Company Stock Plans" shall mean the LTIP, the Non-Employee
Director Plans, the Stock Option Plan, the Employee Stock Purchase Plan and any
other stock option, performance unit or similar plan of the Company and its
Subsidiaries provided, however, that "Company Stock Plans" shall not include the
Stock Option Agreement.
"Company Stock Rights" shall mean all stock options,
restricted stock awards, performance awards, dividend equivalents, deferred
stock, stock payments, stock appreciation
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rights and shares of capital stock granted, awarded, earned or purchased
pursuant to any Company Stock Plan.
"Company Stockholder Approval" shall have the meaning set
forth in Section 3.22.
"Company Stockholder Meeting" shall have the meaning set forth
in Section 3.19.
"Confidentiality Agreement" shall have the meaning set forth
in Section 6.4.
"Consents" shall have the meaning set forth in Section 7.3(e).
"Contracts" shall have the meaning set forth in Section
3.14(a).
"Current Premium" shall have the meaning set forth in Section
6.7(b).
"DGCL" shall have the meaning set forth in the Recitals.
"Effective Time" shall have the meaning set forth in Section
2.3.
"Employee Benefits" shall have the meaning set forth in
Section 6.8.
"Employee Plans" shall mean all Benefit Arrangements,
Multiemployer Plans, Pension Plans and Welfare Plans.
"Employee Stock Purchase Plan" shall mean the Company's 1997
Employee Stock Purchase Plan.
"Encumbrances" shall mean any claim, lien, pledge, option,
charge, easement, security interest, deed of trust, mortgage, right-of-way,
covenant, condition, restriction, encumbrance or other rights of third parties,
including, without limitation, Encumbrances that arise pursuant to Environmental
Laws.
"Environmental Laws" shall mean any foreign, federal, state or
local law, statute, ordinance, order, decree, rule or regulation relating to
releases, discharges, emissions or disposals to air, water, land or groundwater
of Hazardous Materials; to the use, handling, transport, release or disposal of
polychlorinated biphenyls, asbestos or urea formaldehyde or any other Hazardous
Material; to the treatment, storage, disposal or management of Hazardous
Materials; to exposure to toxic, hazardous or other controlled, prohibited or
regulated substances; to health or safety in the workplace; and to the
protection of the public's health and safety and the environment, including the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
9601, et seq. ("CERCLA"), the Resource Conservation and Recovery Act, 42 U.S.C.
6901, et seq. ("RCRA"), the Toxic Substances Control Act, 15 U.S.C. 2601, et
seq. ("TSCA"), the Occupational, Safety and Health Act, 29 U.S.C. 651, et seq.,
the Clean Air Act, 42 U.S.C. 7401, et seq., the Federal Water Pollution Control
Act, 33 U.S.C. 1251, et seq., the Safe Drinking ▇▇▇▇▇ ▇▇▇, ▇▇ ▇.▇.▇. ▇▇▇▇, et
seq., the Hazardous Materials Transportation Act, 49 U.S.C. 1802
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et seq. ("HMTA") and the Emergency Planning and Community Right to Know Act, 42
U.S.C. 11001 et seq. ("EPCRA"), and other comparable foreign, state and local
laws and all rules, regulations and guidance documents promulgated pursuant
thereto or published thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate" shall mean, with respect to any Person, any
entity which is (or at any relevant time was) a member of a "controlled group of
corporations" with, under "common control" with, or a member of as "affiliated
service group" with, such Person as defined in Section 414(b), (c), (m) or (o)
of the Code.
"Exchange Act" shall mean the Securities and Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
"Exchange Agent" shall have the meaning set forth in Section
2.11(a).
"Exchange Ratio" shall have the meaning set forth in Section
2.7(a).
"Exchangeable Shares" shall mean the Exchangeable Non-Voting
Shares in the capital of Canadian Sub.
"Fees and Expenses" shall have the meaning set forth in
Section 8.2(c).
"Fixtures and Equipment" shall mean, with respect to any
Person, all of the furniture, fixtures, furnishings, machinery and equipment
owned, leased or licensed by such Person and located in, at or upon the
facilities of such Person.
"GAAP" shall mean generally accepted accounting principles in
the United States of America, as in effect from time to time, consistently
applied.
"Governmental Approvals" shall have the meaning set forth in
Section 6.5(a).
"Governmental Entities" shall mean all courts, administrative
agencies, commissions or other governmental authorities, bodies or
instrumentalities, federal, state, local, domestic or foreign.
"Hazardous Materials" shall mean each and every element,
compound, chemical mixture, contaminant, pollutant, material, waste or other
substance which is defined, determined or identified as or has the potential to
be hazardous or toxic under Environmental Laws or the release of which is
regulated under Environmental Laws. Without limiting the generality of the
foregoing, the term includes: "hazardous substances" as defined in CERCLA;
"extremely hazardous substances" as defined in EPCRA; "hazardous waste" as
defined in RCRA; "hazardous materials" as defined in HMTA; "chemical substance
or mixture" as defined in TSCA; crude oil, petroleum products or any fraction
thereof; radioactive materials including source, byproduct or
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special nuclear materials; asbestos or asbestos-containing materials;
chlorinated fluorocarbons ("CFCs"); and radon.
"HSR Act" shall have the meaning set forth in Section 3.6(b).
"Indemnified Parties" shall have the meaning set forth in
Section 6.7(a).
"Initial Termination Fee" shall have the meaning set forth in
Section 8.2(b).
"Joint Proxy Statement/Prospectus" shall have the meaning set
forth in Section 3.19.
"Lease and Operational Documents" shall have the meaning set
forth in Section 3.13(c).
"LTIP" shall mean the Company's Long-Term Equity Incentive
Plan, restated as of August 31, 1998.
"Material Adverse Effect" shall mean, with respect to either
of the Company or Acquiror, as the context requires, a material adverse change
in, or effect on, the business, results of operations or financial condition of
such Person and its Subsidiaries taken as a whole or any change which materially
impairs or materially delays the ability of such Person to consummate the
transactions contemplated by this Agreement; provided, however, that none of the
following shall be deemed by itself or by themselves, either alone or in
combination, to constitute a Material Adverse Effect: (i) with respect to the
Company, a failure by the Company to meet the revenue or earnings predictions of
equity analysts as reflected in the First Call consensus estimate, or any other
revenue or earnings predictions or expectations, for any period ending on or
after the date of this Agreement, or, in the case of the Acquiror, a failure by
the Acquiror to meet the revenue or earnings predictions of equity analysts as
reflected in the First Call consensus estimate, or any other revenue or earnings
predictions or expectations, for any period ending on or after the date of this
Agreement, (ii) in the case of the Company, conditions affecting the educational
and/or productivity software industries as a whole, or, in the case of the
Acquiror, conditions affecting the toy and edutainment industries as whole,
(iii) any effect arising primarily out of or resulting primarily from actions
contemplated by the parties in connections with, or which is attributable to,
the announcement of this Agreement and the transactions contemplated hereby.
"Material Intellectual Property Rights" shall have the meaning
set forth in Section 3.16(c).
"Material Licenses" shall have the meaning set forth in
Section 3.16(b).
"Merger" shall have the meaning set forth in the Recitals.
"Merger Consideration" shall have the meaning set forth in
Section 2.11(a).
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"Multiemployer Plan" shall mean, with respect to any Person,
any "multiemployer plan," as defined in Section 4001(a)(3) of ERISA, under which
such Person or any ERISA Affiliate has or may have any liability (accrued,
contingent or otherwise).
"New Stock Rights" shall have the meaning set forth in Section
2.8(a).
"Non-Employee Director Plans" shall mean the Company's 1994
Non-Employee Director Stock Option Plan, as amended and restated effective
February 5, 1996 and the Company's 1996 Non-Employee Director Stock Option Plan.
"Notifying Party" shall have the meaning set forth in Section
6.5(a).
"NYSE" shall mean the New York Stock Exchange.
"Old Support Agreement" shall mean that certain support
agreement made as of February 4, 1994 between the Company (under its previous
name, "SoftKey International, Inc.") and Canadian Sub.
"Old Voting and Exchange Trust Agreement" shall mean that
certain voting and exchange trust agreement made as of February 4, 1994 between
the Company (under its previous corporate name, "SoftKey International, Inc."),
Canadian Sub and CIBC Mellon Trust Company (under its previous corporate name,
"The R-M Trust Company").
"Pension Plan" shall mean, with respect to any Person, any
"employee pension benefit plan" as defined in Section 3(2) of ERISA (other than
a Multiemployer Plan) which such Person contributed to or was required to
contribute to, or under which such Person or any ERISA Affiliate has or may have
any liability (accrued, contingent or otherwise).
"Permitted Encumbrances" shall mean any Encumbrances resulting
from (i) all statutory or other liens for Taxes or assessments which are not yet
due or delinquent or the validity of which are being contested in good faith by
appropriate proceedings for which adequate reserves are being maintained in
accordance with GAAP; (ii) all cashiers', landlords', workers' and repairers'
liens, and other similar liens imposed by law, incurred in the ordinary course
of business; (iii) all laws and governmental rules, regulations, ordinances and
restrictions; (iv) all leases, subleases, licenses, concessions or service
contracts to which any Person or any of its Subsidiaries is a party; (v)
Encumbrances identified on title policies or preliminary title reports or other
documents or writing delivered or made available for inspection to any Person
prior to the date hereof or included in the Public Records; and (vi) all other
liens and mortgages, covenants, imperfections in title, charges, easements,
restrictions and other Encumbrances which, in the case of any such Encumbrances
pursuant to clause (i) through (vi), do not materially detract from or
materially interfere with the present use of the asset subject thereto or
affected thereby.
"Person" shall mean any individual, corporation, partnership,
limited liability company, joint venture, governmental agency or
instrumentality, or any other entity.
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"Preferred Merger Consideration" shall have the meaning set
forth in Section 2.7(b).
"Proceeding" shall have the meaning set forth in Section
6.7(a).
"Registration Statement" shall have the meaning set forth in
Section 3.19.
"Representative" shall have the meaning set forth in Section
6.3(b).
"Rule 145" shall have the meaning set forth in Section 6.9.
"SEC" shall mean the Securities Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Special Voting Stock Merger Consideration" shall have the
meaning set forth in Section 2.7(c).
"Stock Option Agreement" shall have the meaning set forth in
the Recitals.
"Stock Option Plan" shall mean the Company's 1996 Stock Option
Plan, restated as of March 5, 1998.
"Stockholder Support Agreement" shall have the meaning set
forth in the Recitals.
"Subsidiary" shall mean, with respect to any Person, any
corporation, entity or other organization, whether incorporated or
unincorporated, of which (i) such Person directly or indirectly owns or controls
at least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the board of directors or others
performing similar functions; or (ii) such Person is a general partner, manager
or managing member.
"Superior Proposal" shall have the meaning set forth in
Section 6.3(b).
"Support Agreement Amendment" shall mean an agreement to be
made as of the Effective Time between Acquiror, the Company and Canadian Sub, as
required by Section 2.9 thereof, for the purpose of amending the Old Support
Agreement, and providing for, among other things, the Merger.
"Surviving Corporation" shall have the meaning set forth in
Section 2.1.
"Tax" or "Taxes" shall mean all federal, state, local, foreign
and other taxes, levies, imposts, assessments, impositions or other similar
government charges, including, without limitation, income, estimated income,
business, occupation, franchise, real property, payroll, personal property,
sales, transfer, stamp, use, employment, commercial rent or withholding,
occupancy, premium, gross receipts, profits, windfall profits, deemed profits,
license, lease,
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severance, capital, production, corporation, ad valorem, excise, duty or other
taxes, including interest, penalties and additions (to the extent applicable)
thereto whether disputed or not.
"Tax Return" shall mean any report, return, document,
declaration or other information or filing required to be supplied to any taxing
authority or jurisdiction (foreign or domestic) with respect to Taxes,
including, without limitation, information returns, any documents with respect
to or accompanying payments of estimated Taxes, or with respect to or
accompanying requests for the extension of time in which to file any such
report, return, document, declaration or other information.
"Termination Time" shall have the meaning set forth in Section
8.1(b).
"Third Party" shall have the meaning set forth in Section
6.3(b).
"Voting and Exchange Trust Supplement" shall mean an agreement
to be made as of the Effective Time between Acquiror, the Company, Canadian Sub
and a trustee for the holders of the Exchangeable Shares, to the extent required
by Section 11.1 and Section 12.4 of the Old Voting and Exchange Trust Agreement,
providing for the assumption by Acquiror of the obligations of the Company under
the Old Voting and Exchange Trust Agreement and the other matters specified
therein.
"Voting Debt" shall have the meaning set forth in Section
3.3(b).
"Welfare Plan" shall mean, with respect to any Person, any
"employee welfare benefit plan" as defined in Section 3(1) of ERISA under which
such Person has or may have any liability (accrued, contingent or otherwise).
ARTICLE II.
THE MERGER
SECTION 2.1. THE MERGER
Upon the terms and subject to the conditions of this Agreement
and in accordance with the DGCL, at the Effective Time, the Company shall be
merged with and into Acquiror. As a result of the Merger, the separate corporate
existence of the Company shall cease and Acquiror shall continue as the
surviving corporation (the "Surviving Corporation") and shall succeed to and
assume all of the rights and obligations of the Company in accordance with the
DGCL. The name of Acquiror, as the Surviving Corporation, shall remain "Mattel,
Inc."
SECTION 2.2. CLOSING AND CLOSING DATE
Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to the
provisions of Section 8.1, the closing (the "Closing") of the Merger shall take
place (a) at 9:00 a.m., New York City time, on the second Business Day after all
of the conditions to the respective obligations of the parties set
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forth in Article VII hereof shall have been satisfied or waived or (b) at such
other time and date as Acquiror and the Company shall agree (such date and time
on and at which the Closing occurs being referred to herein as the "Closing
Date"). The Closing shall take place at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ located
at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. At the
Closing the documents, certificates, opinions and instruments referred to in
Article VII shall be executed and delivered.
SECTION 2.3. EFFECTIVE TIME
The parties hereto shall cause the Merger to be consummated by
filing a certificate of merger (the "Certificate of Merger") on the Closing Date
with the Secretary of State of the State of Delaware, in such form as required
by and executed in accordance with the relevant provisions of the DGCL (the date
and time of the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware or at such later time or date after such filing as may
be specified in the Certificate of Merger being the "Effective Time").
SECTION 2.4. EFFECTS OF THE MERGER
The Merger shall have the effects set forth in the applicable
provisions of the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time all the property, rights, privileges,
immunities, powers and franchises of the Company and Acquiror shall vest in the
Surviving Corporation, and all debts, liabilities and duties of the Company and
Acquiror shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 2.5. CERTIFICATE OF INCORPORATION; BYLAWS.
(a) At the Effective Time and without any further action on
the part of the Company and Acquiror, the Certificate of Incorporation (the
"Certificate of Incorporation") of Acquiror shall be the Certificate of
Incorporation of the Surviving Corporation.
(b) At the Effective Time and without any further action on
the part of the Company and Acquiror, the bylaws (the "Bylaws") of Acquiror as
in effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation until duly amended as provided for therein and under the
DGCL.
SECTION 2.6. DIRECTORS AND OFFICERS
The directors of Acquiror immediately prior to the Effective
Time shall continue as the directors of the Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and Bylaws of the
Surviving Corporation, and the officers of Acquiror immediately prior to the
Effective Time shall continue as the officers of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed (as
the case may be) and qualified.
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SECTION 2.7. CONVERSION OF SECURITIES
At the Effective Time, by virtue of the Merger and without any
action on the part of Acquiror, the Company or the holders of any of the
following securities:
(a) Subject to Section 2.10, each share of Common Stock, par value $.01
per share, of the Company (the "Company Common Stock"), issued and outstanding
immediately prior to the Effective Time (other than shares of Company Common
Stock to be canceled in accordance with Section 2.7(d) hereof) shall be changed
and converted into and represent the right to receive a number (rounded to the
nearest hundred thousandth of a share) (adjusted as set forth in subsection (f),
the "Exchange Ratio") of fully paid and nonassessable shares of Acquiror Common
Stock equal to the number determined by dividing $33.00 by the Average Acquiror
Price; provided, however, that (i) if the number determined by dividing $33.00
by the Average Acquiror Price is less than or equal to 1.0, the Exchange Ratio
shall be 1.0, and (ii) if the number determined by dividing $33.00 by the
Average Acquiror Price is 1.2 or higher, the Exchange Ratio shall be 1.2 (the
"Common Merger Consideration"). As of the Effective Time, all such shares of
Company Common Stock shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a certificate
which, prior to the Effective Time, represented any such shares of Company
Common Stock shall cease to have any rights with respect thereto, except the
right to receive (i) the Common Merger Consideration, (ii) any cash in lieu of
fractional shares of Acquiror Common Stock to be issued or paid in consideration
therefor upon surrender of such certificate in accordance with Section 2.10 and
(iii) any dividends and distributions in accordance with Section 2.11(e), in
each case without interest.
(b) Subject to Section 2.10, each share of Series A Convertible
Participating Preferred Stock, par value $.01 per share, of the Company (the
"Company Preferred Stock"), issued and outstanding immediately prior to the
Effective Time (other than shares of Company Preferred Stock to be canceled in
accordance with Section 2.7(d) hereof) shall be changed and converted into and
represent the right to receive a number of fully paid and nonassessable shares
of Acquiror Common Stock equal to the product of (i) the Exchange Ratio and (ii)
the number of shares of Company Common Stock issuable upon conversion of such
share of Company Preferred Stock immediately prior to the Effective Time (the
"Preferred Merger Consideration"). As of the Effective Time, all such shares of
Company Preferred Stock shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each holder of a
certificate which, prior to the Effective Time, represented any such shares of
Company Preferred Stock shall cease to have any rights with respect thereto,
except the right to receive (i) the Preferred Merger Consideration, (ii) any
cash in lieu of fractional shares of Acquiror Common Stock to be issued or paid
in consideration therefor upon surrender of such certificate in accordance with
Section 2.10 and (iii) any dividends and distributions in accordance with
Section 2.11(e), in each case without interest.
(c) As of the Effective Time, each outstanding share of special voting
stock, par value $1.00 per share, of the Company ("Company Special Voting
Stock") shall be changed and
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converted into and represent the right to receive one Acquiror Special Voting
Share (the "Special Voting Stock Merger Consideration"). As of the Effective
Time, all such shares of Company Special Voting Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate which, prior to the Effective Time,
represented any such shares of Company Special Voting Stock shall cease to have
any rights with respect thereto, except the right to receive the Special Voting
Stock Merger Consideration.
(d) Each share of Company Common Stock and Company Preferred Stock that
is (i) held in the treasury of the Company or (ii) owned by Acquiror or any
direct or indirect Subsidiary of Acquiror or the Company, in each case
immediately prior to the Effective Time, shall be canceled and retired without
any conversion thereof and no payment or distribution shall be made with respect
thereto.
(e) Each share of common, preferred or other capital stock of Acquiror
issued and outstanding immediately prior to the Effective Time shall remain
outstanding and shall be unchanged after the Merger.
(f) The Exchange Ratio shall be adjusted to reflect fully the effect of
any stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into Acquiror Common Stock),
reorganization, recapitalization, reclassification or other like change with
respect to Acquiror Common Stock occurring after the date hereof and prior to
the Effective Time.
SECTION 2.8. TREATMENT OF EMPLOYEE OPTIONS AND OTHER COMPANY STOCK
RIGHTS
(a) Prior to the Effective Time, the Board of Directors of the Company
(the "Company Board") (or, if appropriate, any Committee thereof) and the Board
of Directors of Acquiror (the "Acquiror Board") shall adopt appropriate
resolutions and take all other actions necessary to provide that effective at
the Effective Time, all outstanding Company Stock Rights heretofore granted
under the Company Stock Plans, whether vested or unvested, shall be assumed by
Acquiror and converted automatically into options to purchase shares of Acquiror
Common Stock (collectively, "New Stock Rights") in an amount and, if applicable,
at an exercise price determined as provided below:
(i) The number of shares of Acquiror Common Stock to be
subject to the New Stock Rights shall be equal to the product of (x)
the number of shares of Company Common Stock remaining subject (as of
immediately prior to the Effective Time) to the original Company Stock
Right multiplied by (y) the Exchange Ratio, provided that any
fractional shares of Acquiror Common Stock resulting from such
multiplication shall be rounded down to the nearest share.
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(ii) The exercise price per share of Acquiror Common Stock
under the New Stock Right shall be equal to the exercise price per
share of the Company Common Stock under the original Company Stock
Right divided by the Exchange Ratio, provided that such exercise price
shall be rounded up to the nearest tenth of a cent.
The adjustment provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Code) shall be, and is intended
to be, effected in a manner which is consistent with Section 424(a) of the Code.
Subject to Sections 2.8(b) and 2.8(c), after the Effective Time, each New Stock
Right shall be exercisable and shall vest upon the same terms and conditions as
were applicable to the related Company Stock Right immediately prior to the
Effective Time (except that with regard to such New Stock Right, any references
to the Company shall be deemed, as appropriate, to include Acquiror), it being
understood that the vesting of the Company Stock Rights shall accelerate in
accordance with their respective terms, or the terms of separate agreements
between the Company and the holders thereof, as a result of the Merger. Acquiror
agrees that it shall take all action necessary, on or prior to the Effective
Time, to authorize and reserve a number of shares of Acquiror Common Stock
sufficient for issuance upon exercise of New Stock Rights as contemplated by
this Section 2.8. As soon as practicable after the Effective Time, Acquiror
shall file a registration statement on Form S-8 (or any successor or other
appropriate form) with respect to the shares of Acquiror Common Stock subject to
the Company Stock Rights assumed pursuant to this Section 2.8 and shall use its
reasonable best efforts to maintain the effectiveness of such registration
statement or statements (and maintain the current status of the prospectus or
prospectuses contained therein) for as long as the New Stock Rights remain
outstanding.
(b) Prior to the Effective Time, the Company will take all actions
necessary (i) to shorten the offering period under the Company's Employee Stock
Purchase Plan in which the Effective Time occurs so that such offering period
terminates on the day prior to the Effective Time and (ii) to terminate the
Employee Stock Purchase Plan effective as of the Effective Time.
(c) The Company will use its best efforts so that, as of the Effective
Time, none of its Subsidiaries is or will be bound by any Company Stock Rights,
other options, warrants, rights or agreements which would entitle any person,
other than Acquiror or its affiliates, to own any capital stock of any of its
Subsidiaries or to receive any payment in respect thereof.
SECTION 2.9. TREATMENT OF EXCHANGEABLE SHARES
(a) Prior to the Effective Time, the Company Board, the Acquiror Board
and the Board of Directors of Canadian Sub (the "Canadian Sub Board"), or any of
their respective appropriate committees, shall adopt appropriate resolutions
and, along with the Company, Acquiror and Canadian Sub, shall take all other
actions required under the Old Support Agreement and the Old Voting and Exchange
Trust Agreement to provide that at and after the Effective Time each outstanding
Exchangeable Share shall thereafter be exchangeable for that
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number of shares of Acquiror Common Stock equal to the Exchange Ratio.
(b) Without limiting the generality of Section 2.9(a), the parties
agree as follows:
(i) at or before the Effective Time, the Company and Canadian
Sub (including its Board of Directors) shall comply with their
respective obligations under the provisions attaching to the
Exchangeable Shares, the Old Support Agreement and the Old Voting and
Exchange Trust Agreement;
(ii) at or before the Effective Time, Acquiror, the Company
and Canadian Sub shall execute and deliver the Support Agreement
Amendment and Acquiror, Canadian Sub, the Company and a trustee for the
holders of the Exchangeable Shares shall execute and deliver the Voting
and Exchange Trust Supplement;
(iii) at or before the Effective Time, Acquiror shall have
authorized the Acquiror Special Voting Share and at the Effective Time,
Acquiror shall deliver to the trustee for the holders of the
Exchangeable Shares a new certificate evidencing the Acquiror Special
Voting Share, to the extent required by the Voting and Exchange Trust
Supplement;
(iv) at or before the Effective Time, Acquiror, Company and
Canadian Sub shall take all such actions as may reasonably be required
to permit the continued unrestricted tradeability in Canada of the
Exchangeable Shares and the issuance and first resale in Canada and the
United States of America of the shares of Acquiror Common Stock issued
upon exchange of the Exchangeable Shares from time to time (but only to
the extent that such unrestricted tradeability is available to holders
of Exchangeable Shares in a particular jurisdiction on the date
hereof), in each case without requiring the holder of the relevant
share, in connection with any such trade or resale, to qualify with,
file any document or take any proceeding with, or obtain any further
order, ruling or consent from, any Governmental Entity or regulatory
authority under any Canadian or United States federal, provincial,
state or territorial securities or other laws or pursuant to the rules
and regulations of any regulatory authority administering such laws, or
the fulfillment of any other legal requirement in any such jurisdiction
(other than, with respect to such first resales, any restrictions on
transfer by reason of, among other things, a holder being a "control
person" of Acquiror for purposes of Canadian federal, provincial or
territorial securities laws). Without limiting the generality of the
foregoing, such actions shall include the confirmation of the continued
effectiveness, following the Merger, of all existing Canadian
securities regulatory orders and rulings, or the granting of new such
orders and rulings, respecting such unrestricted tradeability of the
Exchangeable Shares and such unrestricted issuance and first resale of
the shares of Acquiror Common Stock issuable upon exchange of the
Exchangeable Shares from time to time, and respecting the satisfaction
of Canadian Sub's Canadian securities law continuous and timely
disclosure obligations through the filing and provision of information
relating to Acquiror; and
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(v) at or before the Effective Time, Acquiror shall take all
action necessary to authorize and reserve that number of shares of
Acquiror Common Stock sufficient for issuance upon all exchanges of the
outstanding Exchangeable Shares (other than Exchangeable Shares held by
Acquiror, its Subsidiaries and Affiliates) from time to time after the
Effective Time.
(c) Acquiror agrees that at the Effective Time, the holder(s) of each
Exchangeable Share shall receive a number of Acquiror Rights equal to the number
of shares of Acquiror Common Stock issuable upon exchange of such Exchangeable
Share, or similar rights having economically equivalent value to such Acquiror
Rights.
SECTION 2.10. FRACTIONAL INTERESTS
No certificates or scrip representing fractional shares of
Acquiror Common Stock shall be issued in connection with the Merger or any
exchange of an Exchangeable Share at any time after the Effective Time, and such
fractional interests will not entitle the owner thereof to any rights of a
stockholder of Acquiror. In lieu of any such fractional interests, each holder
of shares of Company Common Stock exchanged pursuant to Section 2.7(a), Company
Preferred Stock exchanged pursuant to Section 2.7(b) or Exchangeable Shares
exchanged pursuant to the provisions thereof who would otherwise have been
entitled to receive a fraction of a share of Acquiror Common Stock (after taking
into account all shares of Acquiror Common Stock to which such holder is
entitled pursuant to Sections 2.7(a) and 2.7(b) and the provisions of the
Exchangeable Shares) shall be entitled to receive cash (without interest) in an
amount equal to the product of such fractional part of Acquiror Common Stock
multiplied by the Average Acquiror Price.
SECTION 2.11. SURRENDER OF SHARES OF COMPANY COMMON STOCK; STOCK
TRANSFER BOOKS
(a) Prior to the Closing Date, Acquiror shall designate a bank or trust
company reasonably acceptable to the Company to act as agent for the holders of
shares of Company Common Stock and Company Preferred Stock (collectively,
"Company Stock") in connection with the Merger (the "Exchange Agent") to receive
the Common Merger Consideration and the Preferred Merger Consideration
(collectively, the "Merger Consideration") to which holders of shares of Company
Stock shall become entitled to receive pursuant to Sections 2.7(a) and (b) and
Section 2.10. Prior to the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, Acquiror will make available to the
Exchange Agent sufficient shares of Acquiror Common Stock to make all exchanges
pursuant to Section 2.11(b). The Exchange Agent shall cause the shares of
Acquiror Common Stock deposited by Acquiror to be (i) held for the benefit of
the holders of the Company Stock and (ii) promptly applied to making the
exchanges and payments provided for in Section 2.11(b). Such shares of Acquiror
Common Stock shall not be used for any purpose that is not provided for herein.
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(b) Promptly after the Effective Time, Acquiror shall cause to be
mailed to each record holder, as of the Effective Time, of an outstanding
certificate or certificates which immediately prior to the Effective Time
represented shares of Company Common Stock or Company Preferred Stock
(collectively, the "Certificates"), a form of letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent) and instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender to the
Exchange Agent of a Certificate, together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions thereto, and
such other documents as may be reasonably required pursuant to such
instructions, the holder of such Certificate shall be entitled to receive in
exchange therefor, (i) a certificate representing that number of whole shares of
Acquiror Common Stock which such holder has the right to receive pursuant to the
provisions of Sections 2.7(a) and (b), (ii) cash in lieu of any fractional
shares of Acquiror Common Stock to which such holder is entitled pursuant to
Section 2.10, after giving effect to any required tax withholdings, and (iii)
any dividends or distributions to which such holder is entitled pursuant to
Section 2.11(e), and the Certificate so surrendered shall forthwith be canceled.
Until so surrendered and exchanged, each Certificate, subject to Section 2.7(d),
shall represent solely the right to receive the consideration payable in respect
thereto pursuant to Sections 2.7(a) and (b) and Section 2.10. If the exchange of
certificates representing shares of Acquiror Common Stock is to be made to a
person other than the person in whose name the surrendered Certificate is
registered, it shall be a condition of exchange that the Certificate so
surrendered shall be properly endorsed or shall be otherwise in proper form for
transfer and that the person requesting such exchange shall have paid any
transfer and other taxes required by reason of the exchange of certificates
representing shares of Acquiror Common Stock to a person other than the
registered holder of the Certificate surrendered or shall have established to
the satisfaction of the Surviving Corporation that such tax either has been paid
or is not applicable.
(c) At any time after the one-year anniversary of the Effective Time,
Acquiror shall be entitled to require the Exchange Agent to deliver to Acquiror
all cash and any other instruments (including shares of Acquiror Common Stock)
in its possession relating to the transactions contemplated by this Agreement
which had been made available to the Exchange Agent and which have not been
distributed to holders of Certificates. Thereafter, each holder of a
Certificate, subject to Section 2.7(d), may surrender such Certificate to the
Surviving Corporation and (subject to applicable abandoned property, escheat or
other similar laws) receive in exchange therefor the consideration payable in
respect thereof pursuant to Sections 2.7(a) and (b) and Section 2.10, without
interest, but shall have no greater rights against the Surviving Corporation
than may be accorded to general creditors of the Surviving Corporation under the
DGCL. Notwithstanding the foregoing, none of Acquiror, the Surviving Corporation
or the Exchange Agent shall be liable to any holder of a Certificate for shares
of Acquiror Common Stock (and any cash payable in lieu of any fractional shares
of Acquiror Common Stock) delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(d) At the Effective Time, the stock transfer books of the Company
shall be closed
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and thereafter there shall be no further registration of transfers of shares of
Company Stock on the records of the Company. From and after the Effective Time,
the holders of Certificates evidencing ownership of shares of Company Stock
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such shares of Company Stock except as otherwise provided
for herein or by applicable law.
(e) No dividends or other distributions declared or made after the
Effective Time with respect to shares of Acquiror Common Stock shall be paid to
the holder of any unsurrendered Certificate with respect to the shares of
Acquiror Common Stock it is entitled to receive and no cash payment in lieu of
fractional interests shall be paid pursuant to Section 2.10 until the holder of
such Certificate shall surrender such Certificate in accordance with the
provisions of this Agreement. Upon such surrender, Acquiror shall cause to be
paid to the person in whose name the certificates representing such shares of
Acquiror Common Stock shall be issued, any dividends or distributions with
respect to such shares of Acquiror Common Stock which have a record date after
the Effective Time and shall have become payable between the Effective Time and
the time of such surrender. In no event shall the person entitled to receive
such dividends, distributions or cash in lieu of fractional interests be
entitled to receive interest thereon.
(f) If, at any time after the Effective Time, the Surviving Corporation
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties or assets
of the Company acquired or to be acquired by the Surviving Corporation as a
result of, or in connection with, the Merger or otherwise to carry out this
Agreement, the officers of the Surviving Corporation shall be authorized to
execute and deliver, in the name and on behalf of the Company or otherwise, all
such deeds, bills of sale, assignments and assurances and to take and do, in
such names and on such behalves or otherwise, all such other actions and things
as may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out the purposes of this Agreement.
SECTION 2.12. LOST, STOLEN OR DESTROYED CERTIFICATES
In the event any Certificates shall have been lost, stolen or
destroyed, the Exchange Agent shall issue in exchange for such lost, stolen or
destroyed Certificates, upon the making of an affidavit of that fact by the
holder thereof, such shares of Acquiror Common Stock (and cash in lieu of any
fractional shares of Acquiror Common Stock and dividends or distributions, if
any, in respect thereof) as may be required pursuant to Sections 2.7(a) and (b);
provided, however, that Acquiror may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against Acquiror or the Exchange
Agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
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SECTION 2.13. TAX CONSEQUENCES
It is intended by the parties hereto that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the Code.
The parties hereto hereby adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Treasury Regulations.
SECTION 2.14. WITHHOLDING RIGHTS
Acquiror or the Exchange Agent shall be entitled to deduct and
withhold from the Merger Consideration otherwise payable pursuant to this
Agreement to any holder of Certificates which prior to the Effective Time
represented shares of Company Stock such amounts as Acquiror or the Exchange
Agent is required to deduct and withhold with respect to the making of such
payment under the Code or any provision of state, local, or foreign tax law. To
the extent that amounts are so withheld by Acquiror or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Company Stock in respect of which such
deduction and withholding was made by the Company or the Exchange Agent.
SECTION 2.15. AFFILIATES
Notwithstanding anything herein to the contrary, Certificates
surrendered for exchange by any Company Affiliate (as defined in Section 6.9)
shall not be exchanged until the later of (i) the date Acquiror has received a
signed agreement (an "Affiliate Agreement") from such Company Affiliate (the
form of which is attached hereto as Exhibit C) as provided in Section 6.9 or
(ii) the date such shares of Acquiror Common Stock are transferable pursuant to
the Affiliate Agreement regardless of whether such agreement was executed by the
Company Affiliate.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Acquiror that the statements
contained in this Article III are true and correct except as set forth in the
disclosure schedule delivered by the Company to Acquiror on or before the date
of this Agreement (the "Company Disclosure Schedule"). The Company Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article III and the disclosure in any
paragraph shall qualify other paragraphs in this Article III only to the extent
that it is readily apparent from a reading of such disclosure that it also
qualifies or applies to such other paragraphs.
SECTION 3.1. ORGANIZATION AND QUALIFICATION
The Company and each of its Subsidiaries is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, with the corporate power
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and authority to own and operate its business as presently conducted, except for
any failure of any Subsidiaries to be in good standing that would not have a
Material Adverse Effect. The Company and each of its Subsidiaries is duly
qualified as a foreign corporation or other entity to do business and is in good
standing in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary, except for such failures of the Company and any of its Subsidiaries
to be so qualified as would not, individually or in the aggregate, have a
Material Adverse Effect. The Company has previously made available to Acquiror
true and correct copies of (i) its certificate of incorporation and bylaws, (ii)
the charter and bylaws of SoftKey Holdings Corporation, SoftKey Software
Products Inc. and SoftKey Products International Inc., and (iii) the charter
documents and bylaws or other organizational documents of each of its
non-corporate Subsidiaries and each of its non-wholly owned Subsidiaries, as
currently in effect.
SECTION 3.2. AUTHORIZATION; VALIDITY AND EFFECT OF AGREEMENT
The Company has the requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Company and the performance by the Company of its
obligations hereunder and the consummation of the transactions contemplated
hereby have been duly authorized by the Company Board and all other necessary
corporate action on the part of the Company, other than the adoption and
approval of this Agreement by the holders of the Company Common Stock, the
Company Preferred Stock and the Company Special Voting Stock and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the Company and constitutes a legal, valid
and binding obligation of the Company, enforceable against it in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
SECTION 3.3. CAPITALIZATION
(a) The authorized capital stock of the Company consists of (i)
200,000,000 shares of Company Common Stock, (ii) 5,000,000 shares of Preferred
Stock, par value $.01 per share, of which 750,000 shares have been designated as
Company Preferred Stock, and (iii) one share of Company Special Voting Stock.
The Special Voting Stock entitles the holder thereof to vote, together with the
holders of Company Common Stock, on all matters submitted for the vote of the
holders of Company Common Stock. The number of votes represented by the Special
Voting Stock is equal to the number of outstanding Exchangeable Shares (other
than Exchangeable Shares held by the Company, its Subsidiaries and its
Affiliates). As of December 7, 1998, there were issued and outstanding (i)
87,073,106 shares of Company Common Stock, (ii) 750,000
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shares of Company Preferred Stock, currently convertible into 15,000,000 shares
of Company Common Stock, and (iii) 12,580,133 Exchangeable Shares (of which
7,374,942 are held directly or indirectly by the Company). Section 3.3(a) of the
Company Disclosure Schedule sets forth the number of shares of capital stock of
the Company (including Exchangeable Shares) held in treasury and the number of
shares of Company Common Stock reserved for future issuance upon (i) exercise of
any unexpired and unexercised outstanding option, whether or not vested or
exercisable in accordance with its terms, to purchase shares of Company Common
Stock ("Company Options") granted and outstanding as of the date hereof under
any Company Stock Plans and (ii) exchange of the outstanding Exchangeable
Shares. As of the date of this Agreement, the Company and its Subsidiaries have
not granted any stock appreciation rights or any other contractual rights the
value of which is derived from the financial performance of the Company or any
Subsidiary or the value of shares of Company Common Stock. Except as disclosed
in Section 3.3(a) of the Company Disclosure Schedule, there are no obligations,
contingent or otherwise, of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of Company Common Stock or
the capital stock or ownership interests of any Subsidiary or to provide funds
to or make any material investment (in the form of a loan, capital contribution
or otherwise) in any such Subsidiary or any other entity other than guarantees
of bank obligations or indebtedness for borrowed money of Subsidiaries entered
into in the ordinary course of business. All of the outstanding shares of
capital stock (including shares which may be issued upon exercise of outstanding
options) or other ownership interests of each of the Company's Subsidiaries are
duly authorized, validly issued, fully paid and nonassessable and, except as
disclosed in Section 3.3(a) of the Company Disclosure Schedule, all such shares
(other than directors' qualifying shares) are owned by the Company or another
Subsidiary of the Company free and clear of all security interests, liens,
claims, pledges, agreements, limitations on the Company's voting rights, charges
or other encumbrances or restrictions on transfer of any nature (other than
restrictions imposed by law).
(b) There are no bonds, debentures, notes or other indebtedness having
voting rights (or convertible into securities having such rights) ("Voting
Debt") of the Company or any of its Subsidiaries issued and outstanding. Except
as set forth in Section 3.3(b) of the Company Disclosure Schedule or as reserved
for future grants of options under the Company Stock Plans as of the date hereof
and for future exchanges of Exchangeable Shares, (i) there are no shares of
capital stock of any class of, or any security exchangeable into or exercisable
for such equity securities, issued, reserved for issuance or outstanding; (ii)
there are no options, warrants, equity securities, calls, rights, commitments or
agreements of any character to which the Company or any of its Subsidiaries is a
party or by which it is bound obligating the Company or any of its Subsidiaries
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other ownership interests (including Voting Debt) of
the Company or any of its Subsidiaries or obligating the Company or any of its
Subsidiaries to grant, extend, accelerate the vesting of or enter into any such
option, warrant, equity security, call, right, commitment or agreement; and
(iii) there are no voting trusts, proxies or other voting agreements or
understandings with respect to the shares of capital stock of the Company to
which the Company or any of its Subsidiaries is a party. All shares of Company
Common Stock subject to issuance as specified in this Section 3.3(b) are duly
authorized and, upon issuance on the terms and
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conditions specified in the instruments pursuant to which they are issuable,
shall be validly issued, fully paid and nonassessable.
SECTION 3.4. SUBSIDIARIES
The only Subsidiaries of the Company are those set forth in
Section 3.4 of the Company Disclosure Schedule. There are no existing options,
warrants, calls, subscriptions, convertible securities or other securities,
agreements, commitments or obligations of any character relating to the
outstanding capital stock or other securities of any Subsidiary of the Company
or which would require any Subsidiary of the Company to issue or sell any shares
of its capital stock, ownership interests or securities convertible into or
exchangeable for shares of its capital stock or ownership interests.
SECTION 3.5. OTHER INTERESTS
Except as set forth in Section 3.5 of the Company Disclosure
Schedule, neither the Company nor any of the Company's Subsidiaries owns,
directly or indirectly, any interest or investment in (whether equity or debt)
any corporation, partnership, limited liability company, joint venture,
business, trust or other Person (other than the Company's Subsidiaries).
SECTION 3.6. NO CONFLICT; REQUIRED FILINGS AND CONSENTS
(a) Except as set forth in Section 3.6 of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
performance by the Company of its obligations hereunder, nor the consummation of
the transactions contemplated hereby, will: (i) conflict with the Company's
certificate of incorporation or bylaws or the comparable charter or
organizational documents of any of its material Subsidiaries; (ii) assuming
satisfaction of the requirements set forth in Section 3.6(b) below, violate any
statute, law, ordinance, rule or regulation, applicable to the Company or any of
its Subsidiaries or any of their properties or assets; or (iii) violate, breach,
be in conflict with or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or permit the
termination of any provision of, or result in the termination of, the
acceleration of the maturity of, or the acceleration of the performance of any
obligation of the Company or any of its Subsidiaries under, or result in the
creation or imposition of any lien upon any properties, assets or business of
the Company or any of its Subsidiaries under, any note, bond, indenture,
mortgage, deed of trust, lease, franchise, permit, authorization, license,
contract (including, without limitation, Company Contracts), instrument or other
agreement or commitment or any order, judgment or decree to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their respective assets or properties is bound or
encumbered, or give any Person the right to require the Company or any of its
Subsidiaries to purchase or repurchase any notes, bonds or instruments of any
kind except, in the case of clauses (ii) and (iii), for such violations,
breaches, conflicts, defaults or other occurrences which, individually or in the
aggregate, are not reasonably likely to have a Material Adverse Effect.
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(b) Except (i) for applicable requirements, if any, of the Exchange
Act, the Securities Act, and state securities or "blue sky" laws ("Blue Sky
Laws"), (ii) for the pre-merger notification requirements of the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR Act"), (iii) for the filing of the
Certificate of Merger pursuant to the DGCL, (iv) for other governmental
approvals and filings required under the applicable laws of any foreign
jurisdiction, and (v) with respect to matters set forth in Sections 3.6(a) or
3.6(b) of the Company Disclosure Schedule, no consent, approval or authorization
of, permit from, or declaration, filing or registration with, any governmental
or regulatory authority, or any other Person is required to be made or obtained
by the Company or its Subsidiaries in connection with the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby, except where the failure to obtain such consent, approval,
authorization, permit or declaration or to make such filing or registration
would not, individually or in the aggregate, have a Material Adverse Effect.
SECTION 3.7. COMPLIANCE
The Company and each of its Subsidiaries are in compliance
with all foreign, federal, state and local laws and regulations applicable to
its operations or with respect to which compliance is a condition of engaging in
the business thereof, except to the extent that failure to comply would not,
individually or in the aggregate, have a Material Adverse Effect. To the
knowledge of the Company, neither the Company nor any of its Subsidiaries has
received any notice asserting a failure, or possible failure, to comply with any
such law or regulation, the subject of which notice has not been resolved as
required thereby or otherwise to the satisfaction of the party sending the
notice, except for such failure as would not, individually or in the aggregate,
have a Material Adverse Effect. The Company and its Subsidiaries hold all
permits, licenses and franchises from Governmental Entities required to conduct
their respective businesses as they are now being conducted, except for such
failures to have such permits, licenses and franchises that would not,
individually or in the aggregate, have a Material Adverse Effect.
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SECTION 3.8. SEC DOCUMENTS
(a) The Company has filed and made available to Acquiror true and
complete copies of each registration statement, proxy or information statement,
form, report and other document required to be filed by the Company or any of
its Subsidiaries with the SEC or any securities regulatory authority in Canada
since January 1, 1995 (collectively, the "Company SEC Reports"). As of their
respective dates, the Company SEC Reports (i) complied, or, with respect to
those not yet filed, will comply, in all material respects with the applicable
requirements of the Securities Act and the Exchange Act or any applicable
Canadian law, rule or regulation, and (ii) did not, or, with respect to those
not yet filed, will not, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. The Company has filed each registration statement, proxy
or information statement, form, report and other documents required to be filed
by the Company or any of its subsidiaries with any foreign governmental agency
equivalent to, or of like purpose as, the SEC, except as would not have a
Material Adverse Effect.
(b) Each of the consolidated balance sheets of the Company included in
or incorporated by reference into the Company SEC Reports (including the related
notes and schedules) presents fairly, in all material respects, the consolidated
financial position of the Company and its consolidated Subsidiaries as of its
date, and each of the consolidated statements of income, retained earnings and
cash flows of the Company included in or incorporated by reference into the
Company SEC Reports (including any related notes and schedules) presents fairly,
in all material respects, the results of operations, retained earnings or cash
flows, as the case may be, of the Company and its Subsidiaries for the periods
set forth therein (subject, in the case of unaudited statements, to normal
year-end audit adjustments), in each case in accordance with GAAP consistently
applied during the periods involved, except as may be noted therein.
(c) Except as set forth in Section 3.8(c) of the Company Disclosure
Schedule and except as set forth in the Company SEC Reports, neither the Company
nor any of its Subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on, or reserved against in, a balance sheet of the Company or in
the notes thereto, prepared in accordance with GAAP consistently applied, except
for (i) liabilities or obligations that were so reserved on, or reflected in
(including the notes to), the consolidated balance sheet of the Company as of
October 3, 1998, (ii) liabilities or obligations arising in the ordinary course
of business (including trade indebtedness) since October 3, 1998 and (iii)
liabilities or obligations which would not, individually or in the aggregate,
have a Material Adverse Effect.
SECTION 3.9. ABSENCE OF CERTAIN CHANGES
Except as set forth in Section 3.9 of the Company Disclosure
Schedule or the
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Company SEC Reports, and except for the transactions expressly contemplated
hereby, since October 3, 1998, the Company and its Subsidiaries have conducted
their respective businesses only in the ordinary and usual course consistent
with past practices and there has not been any change in the Company's business,
operations, condition (financial or otherwise), results of operations, assets or
liabilities, except for changes contemplated hereby or changes which have not,
individually or in the aggregate, had or are reasonably likely to have a
Material Adverse Effect. Except as set forth in Section 3.9 of the Company
Disclosure Schedule, from October 3, 1998 through the date of this Agreement,
neither the Company nor any of its Subsidiaries has taken any of the actions
prohibited by Section 5.1 hereof.
SECTION 3.10. LITIGATION
Except as set forth in Section 3.10 of the Company Disclosure
Schedule and except as set forth in the Company SEC Reports, there is no Action
instituted, pending or, to the knowledge of the Company, threatened, in each
case against the Company or any of its Subsidiaries, which, individually or in
the aggregate, directly or indirectly, could reasonably be expected to have a
Material Adverse Effect, nor is there any outstanding judgment, decree or
injunction, in each case against the Company or any of its Subsidiaries, or any
statute, rule or order of any domestic or foreign court, governmental
department, commission or agency applicable to the Company or any of its
Subsidiaries which has or could reasonably be expected to have, individually or
in the aggregate, any Material Adverse Effect.
SECTION 3.11. TAXES
Except as set forth in Section 3.11 of the Company Disclosure
Schedule:
(a) The Company and its Subsidiaries have (A) duly filed (or there have
been filed on their behalf) with the appropriate governmental authorities all
Tax Returns required to be filed by them and such Tax Returns are true, correct
and complete in all respects, except for any such filings which are not
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect, and (B) duly paid in full all Taxes, whether or not shown to be due on
such Tax Returns, except for which the failure to pay would not, individually or
in the aggregate, be reasonably likely to have a Material Adverse Effect;
(b) No claim has ever been made by an authority in a jurisdiction where
any of the Company and its Subsidiaries does not file Tax Returns that it is or
may be subject to taxation by that jurisdiction which is reasonably likely to
have a Material Adverse Effect;
(c) Each of the Company and its Subsidiaries has withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder, or other
third party, except for amounts which are not reasonably likely, individually or
in the aggregate, to have a Material Adverse Effect;
(d) No federal income Tax Returns of the Company have ever been
audited, and no federal or state, local or foreign audits or other
administrative proceedings or court proceedings
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are presently being conducted with regard to any Taxes or Tax Returns of the
Company or its Subsidiaries and neither the Company nor its Subsidiaries has
received a written notice of any pending audits with respect to Taxes or Tax
Returns of the Company, and neither the Company nor any of its Subsidiaries has
waived any statute of limitations with respect to Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency, except with
respect to Taxes which are not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect;
(e) Neither the Internal Revenue Service nor any other taxing authority
(whether domestic or foreign) has asserted against the Company or any of its
Subsidiaries any material deficiency or material claim for Taxes not reserved
under the Company's most recent balance sheet as set forth in its most recent
Quarterly Report on Form 10-Q;
(f) There are no liens for Taxes upon any Assets of the Company or any
Subsidiary thereof, except for liens for Taxes not yet due and payable and liens
for Taxes that are being contested in good faith by appropriate proceedings,
except for liens which would not be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect, and no written power of attorney
that has been granted by the Company or its Subsidiaries (other than to the
Company or a Subsidiary) currently is in force with respect to any matter
relating to Taxes except with respect to Taxes which are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect;
(g) Neither the Company nor any of its Subsidiaries has, with regard to
any assets or property held by any of them, agreed to have Section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by the Company or any of its
Subsidiaries;
(h) None of the Company and its Subsidiaries has made any payments, is
obligated to make any payments, or is a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Section 280G of the Code;
(i) None of the Company and its Subsidiaries has been a United States
real property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code;
(j) None of the Company and its Subsidiaries is a party to any Tax
allocation or sharing agreement; and
(k) None of the Company and its Subsidiaries (A) has been a member of
an affiliated group filing a consolidated federal income Tax Return (other than
a group the common Parent of which was the Company) or (B) has any Liability for
the Taxes of any Person (other than any of the Company and its Subsidiaries)
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or otherwise,
other than such Taxes which are not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect.
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SECTION 3.12. EMPLOYEE BENEFIT PLANS
(a) Section 3.12 of the Company Disclosure Schedule contains a complete
list of all Company Pension Plans, Welfare Plans and material Benefit
Arrangements (other than those maintained outside the United States) as of the
date hereof. To the extent in the Company's or its Subsidiaries' possession,
true and complete copies or descriptions of the Pension Plans, Welfare Plans and
material Benefit Arrangements (other than those maintained outside the United
States), including, without limitation, trust instruments, if any, that form a
part thereof, and all amendments thereto have been furnished or made available
to Acquiror and its counsel.
(b) Except as described in Section 3.12 of the Company Disclosure
Schedule, each of the Company Employee Plans (other than any Multiemployer Plan)
has been administered and is in material compliance with the terms of such
Company Employee Plan and all applicable laws, rules and regulations.
(c) No material "reportable event" (as such term is used in Section
4043 of ERISA) for which the notice requirements to the Pension Benefit Guaranty
Corporation have not been waived, "prohibited transaction" (as such term is used
in Section 406 of ERISA or Section 4975 of the Code) for which no exemption
exists, or material "accumulated funding deficiency" (as such term is used in
Section 412 or 4971 of the Code) has heretofore occurred with respect to any
Pension Plan (other than any Multiemployer Plan) of the Company or its
Subsidiaries.
(d) There is no material action, order, writ, injunction, judgment or
decree outstanding or claim, suit litigation, proceeding, arbitral action,
governmental audit or investigation relating to or seeking benefits under any
Company Employee Plan that is pending or, to the Company's knowledge, threatened
against the Company, any of its ERISA Affiliates, or any Company Employee Plan,
other than routine claims for benefits or which are not reasonably likely to
result in a material liability.
(e) Except as set forth in Section 3.12 of the Company Disclosure
Schedule, none of the Company, its Subsidiaries or ERISA Affiliates have
incurred any withdrawal liability with respect to any Multiemployer Plan under
Title IV of ERISA which remains unsatisfied.
(f) Except as set forth in Section 3.12 of the Company Disclosure
Schedule, any termination of, or withdrawal from, any Pension Plans or
Multiemployer Plan of the Company any Subsidiaries or any ERISA Affiliate, on or
prior to the Closing Date, will not subject the Company to any liability under
Title IV of ERISA.
(g) Except as set forth in Section 3.12 of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby will result in the
acceleration or creation of any rights of any current or former employee of the
Company or any of its Subsidiaries to benefits under any Company Employee Plan
(including, without limitation, the acceleration of the vesting or
exercisability of
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any stock options, the acceleration of the vesting of any restricted stock, the
acceleration of the accrual or vesting of any benefits under any Pension Plan or
the acceleration or creation of any rights under any severance, parachute or
change in control agreement).
(h) With respect to the Company Employee Plans, individually and in the
aggregate, there are no funded benefit material obligations for which material
contributions have not been made or properly accrued and there are no unfunded
material benefit obligations which have not been accounted for by reserves, or
otherwise properly footnoted in accordance with generally accepted accounting
principles, on the financial statements of the Company.
SECTION 3.13. ASSETS
(a) Section 3.13(a) of the Company Disclosure Schedule identifies all
real property owned by the Company and its Subsidiaries (the "Company Owned
Property") and all real property leased or operated by the Company and its
Subsidiaries and providing for occupancy of more than 20,000 square feet (the
"Company Leased Property" and, together with the Company Owned Property, the
"Company Real Property").
(b) The Company and its Subsidiaries have good and marketable fee
simple title to the Company Owned Property, and a valid leasehold interest in
the Company Leased Property, sufficient to allow each of the Company and its
Subsidiaries to conduct, and to continue to conduct, its business as and where
currently conducted, except for such matters that, individually or in the
aggregate, are not reasonably likely to have a Material Adverse Effect. Such
title and leasehold interest is free and clear of any and all Encumbrances,
except for the exceptions described in the Company SEC Reports filed prior to
the date of this Agreement or in Section 3.13(b) of the Company Disclosure
Schedule and such other Encumbrances that would not, individually or in the
aggregate, result in a Material Adverse Effect. Prior to the date hereof, the
Company has delivered to Acquiror true and correct copies of all title reports
and surveys for each parcel of Company Real Property.
(c) True and correct copies of all of the principal documents under
which the Company Owned Property and the Company Leased Property is leased or
operated (the "Lease and Operational Documents") have been delivered or made
available for review to Acquiror. The Lease and Operational Documents are
unmodified and in full force and effect. None of the Company, its Subsidiaries
or any other party is in material default under the Lease and Operational
Documents, and, to the best knowledge of the Company, no defaults (whether or
not subsequently cured) by the Company, its Subsidiaries or any other party have
been alleged thereunder, except for such defaults that, individually, or in the
aggregate, are not reasonably likely to have a Material Adverse Effect.
(d) To the best knowledge of the Company, the Company and each of its
Subsidiaries has sufficiently good and valid title to, or an adequate leasehold
interest in, its material tangible personal properties and assets in order to
allow it to conduct, and continue to conduct, its
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business as and where currently conducted. Such material tangible personal
assets and properties are sufficiently free of Encumbrances to allow each of the
Company and its Subsidiaries to conduct, and continue to conduct, its business
as currently conducted and, to the best knowledge of the Company, the
consummation of the transactions contemplated by this Agreement will not alter
or impair such ability in any respect which, individually or in the aggregate,
would be reasonably likely to have a Material Adverse Effect. There are no
defects in the physical condition or operability of such material tangible
personal assets and properties which would impair the use of such assets and
properties as such assets and properties are currently used, except for such
defects which, individually or in the aggregate, would not be reasonably likely
to have a Material Adverse Effect.
SECTION 3.14. CONTRACTS
(a) Section 3.14(a) of the Company Disclosure Schedule contains a
complete and accurate list of all contracts (written or oral), plans,
undertakings, commitments or agreements ("Contracts") of the following
categories to which the Company or any of its Subsidiaries is a party or by
which any of them is bound as of the date of this Agreement:
(i) (A) with respect to officers with annual base compensation
equal to or in excess of $100,000: all employment contracts, severance,
change in control or similar arrangements that will result in any
obligation (absolute or contingent) of the Company or any of its
Subsidiaries to make any payment to the foregoing following either the
consummation of the transactions contemplated hereby, termination of
employment, or both and (B) all other contracts (that are not available
to officers, directors, employees or agents generally) with any
officer, director, employee or agent that provides for compensation
based on operating results or other financial performance of the
Company;
(ii) contracts with labor unions;
(iii) material exclusive distribution agreements not
terminable by the Company without penalty upon 90 days or less notice;
(iv) promissory notes, loans, agreements, indentures,
evidences of indebtedness or other instruments relating to the lending
of money, whether as borrower, lender or guarantor, in excess of
$5,000,000;
(v) Contracts containing covenants limiting the freedom of the
Company or any of its Subsidiaries to engage in any line of business or
compete with any Person or operate at any location which are not
terminable by the Company without penalty upon 90 days or less notice;
(vi) any material Contract with any federal, state or local
government other than such Contracts relating to the sales of goods in
the ordinary course of business;
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(vii) other than license agreements and distribution agreements,
Contracts involving annual expenditures or liabilities in excess of
$10,000,000 which are not terminable by the Company without penalty upon
90 days or less notice;
(viii) the principal documents (excluding escrow agreements,
affiliate agreements and other ancillary documents) relating to any
merger, consolidation, business combination, share exchange, business
acquisition, or for the purchase, acquisition, sale or disposition of any
material assets of the Company or any of its Subsidiaries outside the
ordinary course of business which (A)(1) involves consideration to any
party in excess of $20,000,000, and (2) were entered into after January 1,
1995, or (B) under which the Company remains obligated to make "earnout"
payments or other conditional payments of cash or stock based on the
operating results or other financial performance of the Company or a
portion of its business; and
(ix) other than as set forth in Section 3.12 of the Company
Disclosure Schedule, any other Contract to be performed after the date
hereof which would be a material contract (as defined in Item 601(b)(10)
of Regulation S-K of the SEC).
True copies of the written Contracts identified in Section 3.14(a) of
the Company Disclosure Schedule (collectively with the Material Licenses, the
"Company Contracts") have been delivered or made available to Acquiror.
(b) Except as disclosed in Schedule 3.14(a) of the Company Disclosure
Schedule, as of the date of this Agreement, (i) each of the Company Contracts is
valid and binding upon the Company or any of its Subsidiaries (and, to the
Company's best knowledge, on all other parties thereto) in accordance with its
terms and is in full force and effect, (ii) there is no material breach or
violation of or default by the Company or any of its Subsidiaries under any of
the Company Contracts, whether or not such breach, violation or default has been
waived, and (iii) no event has occurred with respect to the Company or any of
its Subsidiaries which, with notice or lapse of time or both, would constitute a
material breach, violation or default, or give rise to a right of termination,
modification, cancellation, foreclosure, imposition of a lien, prepayment or
acceleration under any of the Company Contracts, which breach, violation or
default referred to in clauses (ii) or (iii), alone or in the aggregate with
other such breaches, violations or defaults referred to in clauses (ii) or
(iii), would be reasonably likely to have a Material Adverse Effect.
SECTION 3.15. LABOR RELATIONS
Except as disclosed in Schedule 3.15 of the Company Disclosure Schedule
or as would not be reasonably likely to have a Material Adverse Effect, (i) to
the knowledge of the Company, there are no activities or proceedings of any
labor union to organize any non-unionized employees; (ii) neither the Company
nor any of its Subsidiaries has breached or otherwise failed to comply with any
provision of any collective bargaining agreement or contract and there are no
grievances outstanding against the Company or any of its Subsidiaries under any
such
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agreement or contract; (iii) there are no unfair labor practice charges and/or
complaints pending against the Company or any of its Subsidiaries before the
National Labor Relations Board, or any similar foreign labor relations
governmental bodies, or any current union representation questions involving
employees of the Company or any of its Subsidiaries; and (iv) there is no
strike, slowdown, work stoppage or lockout, or, to the knowledge of the Company,
threat thereof, by or with respect to any employees of the Company or any of its
Subsidiaries. The Company and its Subsidiaries are not parties to any collective
bargaining agreements, except for collective bargaining agreements disclosed in
Schedule 3.15 of the Company Disclosure Schedule. To the knowledge of the
Company, there are no controversies pending or threatened between the Company or
any of its Subsidiaries and any of their respective employees, except for such
controversies that would not be reasonably likely to have a Material Adverse
Effect.
SECTION 3.16. INTELLECTUAL PROPERTY
(a) The Company and its Subsidiaries own, or are licensed or otherwise
possess, legally enforceable rights to use, all patents, trademarks, trade
names, service marks and copyrights, any applications for and registrations of
such patents, trademarks, trade names, service marks and copyrights, and all
processes, formulae, methods, schematics, technology, know-how, computer
software programs or applications, tangible or intangible proprietary
information or material, waivers or licenses of publicity or privacy rights or
any other third party licenses that are necessary to conduct the business of
Company and its Subsidiaries as currently conducted, the absence of which would
be reasonably likely to have a Material Adverse Effect (the "Company
Intellectual Property Rights").
(b) (i) The execution and delivery of this Agreement and consummation
of the Merger will not result in the breach of, or create on behalf of any third
party the right to terminate or modify, any license, sublicense or other
agreement relating to the Company Intellectual Property Rights, or any material
licenses, sublicenses and other agreements as to which Company or any of its
Subsidiaries is a party and pursuant to which Company or any of its Subsidiaries
is authorized to use any third party patents, trademarks, copyrights, trade
secrets, likeness or other proprietary rights, including software that is used
in the manufacture of, incorporated in, or forms a part of any product sold by
or expected to be sold by the Company or any of its Subsidiaries (collectively,
"Licenses"), the termination, modification (including without limitation any
modification to the scope of any license from the scope as currently granted to
and enjoyed by the Company even if such modification is contemplated by the
agreement) or breach of which would be reasonably likely to have a Material
Adverse Effect.
(ii) Except as set forth in Section 3.16(b)(i) of the Company
Disclosure Schedule, the execution and delivery of this Agreement and
consummation of the Merger will not result in the breach of, or create on behalf
of any third party the right to terminate or modify, any License the
termination, modification (including without limitation any modification to the
scope of any license from the scope as currently granted to and enjoyed by the
Company even
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if such modification is contemplated by the agreement) or breach of which would
be reasonably likely to have a material adverse effect on any Company Material
Product. "Company Material Product" means any product of the Company which
accounted for more than $3,000,000 of revenues in the United States during the
nine month fiscal period ending September 30, 1998.
(iii) Schedule 3.16(b)(iii) sets forth each License relating to
Company Material Products.
(c) All patents, registered trademarks, service marks and copyrights which
are held by the Company or any of its Subsidiaries the loss or invalidity of
which would cause a Material Adverse Effect or would have a material adverse
effect on any Company Material Product ("Material Intellectual Property
Rights"), are valid and subsisting. Section 3.16(c) of the Company Disclosure
Schedule sets forth a complete and accurate list of all registered copyrights,
registered tradenames, patents, patent applications and the unregistered
tradenames for the twenty-five highest revenue producing products included in
the Material Intellectual Property Rights. Except as would not be reasonably
expected to have a Material Adverse Effect, the Company (i) has not been sued in
any suit, action or proceeding, or received in writing any claim or notice,
which involves a claim of (w) infringement or violation of any patents,
trademarks, service marks, copyrights, trade secrets, right of privacy or
publicity or any other proprietary right of any third party or (x) libel or
defamation; and (ii) has no knowledge that the manufacturing, marketing,
licensing or sale of its products infringes or violates any patent, trademark,
service ▇▇▇▇, copyright, trade secret, right of privacy or publicity, or other
proprietary right of any third party.
SECTION 3.17. AFFILIATE TRANSACTIONS
Except as set forth in the Company SEC Reports and as set forth in
Section 3.17 of the Company Disclosure Schedule, from January 1, 1998 through
the date of this Agreement there have been no transactions, agreements,
arrangements or understandings between the Company or any of its Subsidiaries,
on the one hand, and any Affiliates (other than wholly owned Subsidiaries) of
the Company or other Persons, on the other hand, that would be required to be
disclosed under Item 404 of Regulation S-K under the Securities Act.
SECTION 3.18. ENVIRONMENTAL MATTERS
Except as set forth in Section 3.18 of the Company Disclosure Schedule
or the Company SEC Reports and except for such matters that, individually or in
the aggregate, are not reasonably likely to have a Material Adverse Effect: the
Company and each of its Subsidiaries (i) have obtained all applicable permits,
licenses and other authorizations which are required to be obtained under all
applicable Environmental Laws by the Company or its Subsidiaries; (ii) are in
material compliance with all terms and conditions of such required permits,
licenses and authorization, and also are in material compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in or arising from applicable
Environmental Laws; (iii) have not received notice of any past or
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present violations of Environmental Laws, or of any spill, release, event,
incident, condition or action or failure to act which is reasonably likely to
prevent continued compliance with such Environmental Laws, or which would give
rise to any common law environmental liability or liability under Environmental
Laws, or which would otherwise form the basis of any claim, action, suit or
proceeding against the Company or any of its Subsidiaries based on or resulting
from the manufacture, processing, use, treatment, storage, disposal, transport,
or handling, or the emission, discharge or release into the environment, of any
Hazardous Material by any Person; and (iv) have taken all actions required under
applicable Environmental Laws to register any products or materials required to
be registered by the Company or its Subsidiaries thereunder.
SECTION 3.19. JOINT PROXY STATEMENT PROSPECTUS; REGISTRATION STATEMENT
None of the information supplied by the Company or its Subsidiaries to
be included or incorporated by reference in the joint proxy statement/prospectus
to be sent to the stockholders of Acquiror and the Company in connection with
the meeting of the Company's stockholders (the "Company Stockholder Meeting")
and the meeting of Acquiror's stockholders (the "Acquiror Stockholder Meeting")
to consider the Agreement and the Merger (the "Joint Proxy
Statement/Prospectus") or any amendment thereof or supplement thereto, will, on
the date it becomes effective with the SEC, at the time of the mailing of the
Joint Proxy Statement/Prospectus or any amendment or supplement, at the time of
the Company Stockholder Meeting and the Acquiror Stockholder Meeting and at the
Effective Time, 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 Joint Proxy Statement/Prospectus will comply as to form in
all material respects with the provisions of the Securities Act and the Exchange
Act and the rules and regulations thereunder; provided, however, that the
Company makes no representations with respect to any information supplied or to
be supplied by the Acquiror for inclusion or incorporation by reference from
Acquiror SEC Filings in the Joint Proxy Statement/Prospectus or any amendment
thereof or supplement thereto. None of the information supplied by the Company
or its Subsidiaries to be included or incorporated by reference from Company SEC
filings in the registration statement on Form S-4 pursuant to which shares of
Acquiror Common Stock issued in the Merger will be registered under the
Securities Act (the "Registration Statement"), of which the Joint Proxy
Statement/Prospectus will form a part, will, at the time the Registration
Statement is declared effective by the SEC, 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.
SECTION 3.20. OPINION OF FINANCIAL ADVISOR
The Company has received the written opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co.,
Inc. (the "Company Financial Advisor"), dated the date of this Agreement, to the
effect that, as of such date and based upon and subject to certain matters
stated in such opinion, the Exchange Ratio
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is fair to the holders of Company's Common Stock (including shares of Common
Stock issued upon conversion of the Company's Preferred Stock) from a financial
point of view. The Company has been authorized by the Company Financial Advisor
to permit, subject to prior review and consent by such Company Financial
Adviser, the inclusion of such opinion (or a reference thereto) in the Joint
Proxy Statement/Prospectus.
SECTION 3.21. BROKERS
No broker, finder or investment banker (other than the Company
Financial Adviser) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company. The Company has
heretofore furnished to Acquiror a complete and correct copy of all agreements
between the Company and the Company Financial Adviser pursuant to which such
firm would be entitled to any payment relating to the transactions contemplated
hereby.
SECTION 3.22. VOTE REQUIRED
The approval by a majority of the voting power represented by the
outstanding shares of Company Common Stock, Company Preferred Stock and Company
Special Voting Stock entitled to vote thereon, and voting together as a single
class, is the only vote of the holders of any class or series of the Company's
capital stock necessary to approve this Agreement, the Merger and, if necessary
for the consummation of the Merger, an amendment to the Company's Certificate of
Incorporation; provided, however, that if an amendment to the certificate of
designations relating to the Company Preferred Stock is required to consummate
the Merger as contemplated in this Agreement, the approval (i) by the holders of
66 2/3% of the shares of Company Preferred Stock, voting as a single class, and
(ii) the approval by a majority of the voting power represented by the
outstanding shares of Company Common Stock, Company Preferred Stock and Company
Special Voting Stock entitled to vote thereon, and voting as a single class, are
the only votes of the holders of any class or series of the Company's capital
stock necessary to approve such amendment to such certificate of designations
("Company Stockholder Approval"). No separate approval by the holders of the
Exchangeable Shares is necessary to approve the Merger, this Agreement or any of
the transactions contemplated hereby. The Company Board, at a meeting duly
called and held, by unanimous vote of the directors present (i) determined that
this Agreement and the Merger are fair to, and in the best interests of, the
stockholders of the Company, (ii) approved this Agreement, the Merger, the Stock
Option Agreement, the Stockholder Support Agreement and the Employment
Agreements, (iii) declared advisable and resolved to recommend that the holders
of the shares of the Company Stock approve this Agreement and the Merger, and
(iv) adopted any necessary resolution having the effect of causing the Company
not to be subject, to the extent permitted by applicable law, to any state
takeover law that may purport to be applicable to the Merger and the
transactions contemplated by this Agreement. The Company hereby agrees to the
inclusion in the Joint Proxy Statement/Prospectus of the recommendations of the
Company Board described in this Section 3.22 (subject to the right of the
Company Board to withdraw, amend or modify such recommendation in accordance
with Section 6.3(d)). The Board of Directors of Canadian Sub
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has determined, in accordance with the provisions of Section 2.7(b) of the Old
Support Agreement, that the changes to the rights of the holders of Exchangeable
Shares resulting from the Merger are economically equivalent to the changes to
the rights of the holders of Company Common Stock resulting from the Merger.
SECTION 3.23. ACCOUNTING AND TAX MATTERS
To the Company's knowledge, neither the Company nor any of its
Affiliates has taken or agreed to take any action, or knows of any
circumstances, that (without regard to any action taken or agreed to be taken by
Acquiror or any of its Affiliates) would (i) prevent Acquiror from accounting
for the business combination to be effected by the Merger as a "pooling of
interests" under GAAP and the applicable rules and regulations of the SEC, or
(ii) prevent the Merger from qualifying as a reorganization within the meaning
of Sections 368(a) of the Code.
SECTION 3.24. NO OTHER AGREEMENTS TO SELL THE COMPANY OR ITS ASSETS; NO
EXISTING DISCUSSIONS
The Company has no legal obligation, absolute or contingent, to any
other Person to sell any material portion of the assets of the Company, to sell
any material portion of the capital stock or other ownership interests of the
Company or any of its Subsidiaries, or to effect any merger, consolidation or
other reorganization of the Company or any of its Subsidiaries or to enter into
any agreement with respect thereto. As of the date hereof, the Company is not
engaged, directly or indirectly, in any discussions or negotiations with any
other party with respect to an Acquisition Proposal or Acquisition Transaction.
SECTION 3.25. INSURANCE
The Company has made available to Acquiror accurate and complete copies
of all material fire and casualty, general liability, business interruption,
product liability, and sprinkler and water damage insurance policies maintained
by the Company or any of its Subsidiaries (collectively, "Company Insurance
Policies"). All Company Insurance policies are with reputable insurance carries,
provide full and adequate coverage for all normal risks incident to the business
of the Company and its Subsidiaries and their respective properties and assets,
and are in character and amount at least equivalent to that carried by Persons
engaged in similar businesses and substantially equivalent to that carried by
Persons engaged in similar businesses and subject to the same or similar perils
or hazards.
SECTION 3.26. TAKEOVER PROVISIONS INAPPLICABLE
As of the date hereof and at all times on or prior to the Effective
Time, the restrictions of Section 203 of the DGCL are, and shall be,
inapplicable to the Merger, this Agreement, the Stock Option Agreement, the
Stockholder Support Agreement and the transactions contemplated by this
Agreement.
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SECTION 3.27. ACCOUNTS RECEIVABLE
To the Company's knowledge, as of the date hereof, the accounts
receivable of the Company and its Subsidiaries as reflected in the most recent
financial statements contained in the Company SEC Reports, to the extent
uncollected on the date hereof, and the accounts receivable reflected the books
of the Company and its Subsidiaries as of the date hereof are valid and existing
and represent monies due, and the Company as of the date hereof, has made
reserves reasonably considered adequate for receivables not collectible in the
ordinary course of business, and (subject to the aforesaid reserves) are subject
to no refunds or other adjustments and to no defenses, rights or setoff,
assignments, restrictions, encumbrances or conditions enforceable by third
parties on or affecting any thereof, except for such refunds, adjustments,
defenses, rights of setoff, assignments, restrictions, encumbrances or
conditions as would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
SECTION 3.28. INVENTORY
To the Company's knowledge, as of the date hereof, the inventories of
the Company and its Subsidiaries as reflected in the most recent financial
statements contained in the Company SEC Reports, except for normal year-end
adjustments made in accordance with GAAP applied consistently with prior
periods, (i) are carried as provided in the Company SEC Reports not in excess of
the lower of cost or net realizable value and (ii) do not include any inventory
which is obsolete, surplus or not usable or saleable in the lawful and ordinary
course of business of the Company and its Subsidiaries as heretofore conducted,
in each case net of reserves provided therefor, except in the cases of clauses
(i) and (ii) as would not, individually or in the aggregate, have a Material
Adverse Effect.
SECTION 3.29. PRODUCT LIABILITY
The Company is not aware of any claim against the Company or any of its
Subsidiaries for injury to person or property of employees or any third parties
suffered as a result of the sale of any product or performance of any service by
the Company or any of its Subsidiaries, including claims arising out of the
defective or unsafe nature of its products or services, which could,
individually or in the aggregate, have a Material Adverse Effect on the Company.
The Company and its Subsidiaries have, and at the Effective Time will have, full
and adequate insurance coverage for potential product liability claims against
it.
SECTION 3.30. STANDSTILL AGREEMENT
Except as set forth in Section 3.30 of the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries is a party to any material
standstill agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to the Company that the statements
contained
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in this Article IV are true and correct except as set forth herein and in the
disclosure schedule delivered by the Acquiror to the Company on or before the
date of this Agreement (the "Acquiror Disclosure Schedule"). The Acquiror
Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article IV and the disclosure
in any paragraph shall qualify other paragraphs in this Article IV only to the
extent that it is readily apparent from a reading of such disclosure that it
also qualifies or applies to such other paragraphs.
SECTION 4.1. ORGANIZATION AND QUALIFICATION
Acquiror is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, with the corporate power and
authority to own and operate its businesses as presently conducted, except for
any failure of any Subsidiaries to be in good standing that would not have a
Material Adverse Effect. Acquiror is duly qualified as a foreign corporation or
other entity to do business and is in good standing in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except for such failures of
Acquiror to be so qualified as would not, individually or in the aggregate, have
a Material Adverse Effect. Acquiror has previously made available to the Company
true and correct copies of the certificate of incorporation and bylaws of
Acquiror, as currently in effect.
SECTION 4.2. AUTHORIZATION; VALIDITY AND EFFECT OF AGREEMENT
Acquiror has the requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Acquiror and the performance by Acquiror of its obligations hereunder and the
consummation by them of the transactions contemplated hereby have been duly
authorized by the Acquiror Board and, other than the adoption and approval of
this Agreement by the holders of the Acquiror Common Stock and Acquiror
Preferred Stock, voting together as a single class, no other corporate
proceedings on the part of Acquiror are necessary to authorize this Agreement
and the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Acquiror and constitutes a legal, valid and
binding obligation of Acquiror, enforceable against Acquiror in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
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SECTION 4.3. CAPITALIZATION
(a) The authorized capital stock of Acquiror consists of (i) 1,000,000,000
shares of Acquiror Common Stock, (ii) 3,000,000 shares of Preferred Stock, par
value $1.00 per share, of which 772,800 shares have been designated as Series C
Mandatorily Convertible Redeemable
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Preferred Stock ("Acquiror Preferred Stock") and (iii) 20,000,000 shares of
Preference Stock, par value $.01 per share, of which 2,000,000 shares have been
designated as Series E Junior Participating Preference Stock ("Acquiror Series E
Preference Stock"). As of December 8, 1998, (i) 286,283,375 shares of Acquiror
Common Stock, (ii) 771,920 shares of Acquiror Preferred Stock (which are
represented by 19,298,000 Series C Depositary Shares, each representing one
twenty-fifth of a share of Acquiror Preferred Stock) and (iii) no shares of
Acquiror Series E Preference Stock, were issued and outstanding. As of the date
hereof, 14,098,106 shares of Acquiror Common Stock are held in the Acquiror
treasury. Schedule 4.3(a) of the Acquiror Disclosure Schedule sets forth the
number of shares of Acquiror Common Stock reserved for future issuance upon
exercise of any unexpired and unexercised outstanding option, whether or not
vested or exercisable in accordance with its terms, to purchase shares of
Acquiror Common Stock ("Acquiror Options") granted and outstanding as of the
date hereof under any Acquiror stock option plan (the "Acquiror Option Plans").
As of the date of this Agreement, Acquiror has not granted any stock
appreciation rights or any other contractual rights the value of which is
derived from the financial performance of Acquiror or the value of shares of
Acquiror Common Stock. Except as disclosed in Schedule 4.3(a) of the Acquiror
Disclosure Schedule, there are no obligations, contingent or otherwise, of
Acquiror or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any shares of Acquiror Common Stock or the capital stock or ownership interests
of any Subsidiary or to provide funds to or make any material investment (in the
form of a loan, capital contribution or otherwise) in any such Subsidiary or any
other entity other than guarantees of bank obligations or indebtedness for
borrowed money of Subsidiaries entered into in the ordinary course of business.
All of the outstanding shares of capital stock (including shares which may be
issued upon exercise of outstanding options) or other ownership interests of
each of the Acquiror's domestic Subsidiaries are duly authorized, validly
issued, fully paid and nonassessable and, except as disclosed in Schedule 4.3(a)
of the Acquiror Disclosure Schedule, all such shares (other than director's
qualify shares and similar shares in the case of foreign Subsidiaries) are owned
by the Acquiror or another Subsidiary of Acquiror free and clear of all security
interests, liens, claims, pledges, agreements, limitations on the Acquiror's
voting rights, charges or other encumbrances or restrictions on transfer of any
nature (other than restrictions imposed by law).
(b) There is no Voting Debt of Acquiror or any of its Subsidiaries issued
and outstanding. Except as set forth in Schedule 4.3(b) of the Acquiror
Disclosure Schedule or as reserved for future grants of options under the
Acquiror Stock Plans as of the date hereof, (i) there are no shares of capital
stock of any class of, or any security exchangeable into or exercisable for such
capital stock, issued, reserved for issuance or outstanding; (ii) there are no
options, warrants, equity securities, calls, rights, commitments or agreements
of any character to which Acquiror or any of its Subsidiaries is a party (or by
which it is bound) obligating Acquiror or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other ownership interests (including Voting Debt) of Acquiror
or any of its Subsidiaries or obligating Acquiror or any of its Subsidiaries to
grant, extend, accelerate the vesting of or enter into any such option, warrant,
equity security, call, right, commitment or agreement; and (iii) there are no
voting trusts, proxies or other voting agreements or understandings with respect
to the shares of capital stock of Acquiror to which Acquiror or
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any of its Subsidiaries is a party. All shares of Acquiror Common Stock subject
to issuance as specified in this Section 4.3(b) are duly authorized and, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, shall be validly issued, fully paid and nonassessable.
SECTION 4.4. SUBSIDIARIES
The only Subsidiaries of Acquiror are those set forth in Section 4.4 of
the Acquiror Disclosure Schedule. There are no existing options, warrants,
calls, subscriptions, convertible securities or other securities, agreements,
commitments or obligations of any character relating to the outstanding capital
stock or other securities of any domestic Subsidiary of Acquiror or which would
require any domestic Subsidiary of Acquiror to issue or sell any shares of its
capital stock, ownership interests or securities convertible into or
exchangeable for shares of its capital stock or ownership interests.
SECTION 4.5. OTHER INTERESTS
Except as set forth in Schedule 4.5 of the Acquiror Disclosure
Schedule, neither Acquiror nor any of Acquiror's Subsidiaries owns, directly or
indirectly, any material interest or investment in the equity or debt for
borrowed money of any corporation, partnership, limited liability company, joint
venture, business, trust or other Person (other than Acquiror's Subsidiaries).
SECTION 4.6. NO CONFLICT; REQUIRED FILINGS AND CONSENTS
(a) Except as set forth in Section 4.6 of the Acquiror Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
performance by Acquiror of Acquiror's obligations hereunder, nor the
consummation of the transactions contemplated hereby, will: (i) conflict with
Acquiror's certificate of incorporation or bylaws or the comparable charter or
organizational documents of any of its material Subsidiaries; (ii) assuming
satisfaction of the requirements set forth in Section 4.6(b) below, violate any
statute, law, ordinance, rule or regulation, applicable to Acquiror or any of
its Subsidiaries or any of their properties or assets; or (iii) violate, breach,
be in conflict with or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or permit the
termination of any provision of, or result in the termination of, the
acceleration of the maturity of, or the acceleration of the performance of any
obligation of Acquiror or any of its Subsidiaries under, or result in the
creation of imposition of any lien upon any properties, assets or business of
Acquiror or any of its Subsidiaries under, any note, bond, indenture, mortgage,
deed of trust, lease, franchise, permit, authorization, license, contract
(including, without limitation, Parent Contracts), instrument or other agreement
or commitment or any order, judgment or decree to which Acquiror or any of its
Subsidiaries is a party or by which Acquiror or any of its Subsidiaries or any
of their respective assets or properties is bound or encumbered, or give any
Person the right to require Acquiror or any of its Subsidiaries to purchase or
repurchase any
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notes, bonds or instruments of any kind except, in the case of clauses (ii) and
(iii), for such violations, breaches, conflicts, defaults or other occurrences
which, individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect.
(b) Except (i) for applicable requirements, if any, of the Exchange Act,
the Securities Act and Blue Sky Laws, (ii) for the pre-merger notification
requirements of the HSR Act, (iii) for the filing of the Certificate of Merger
pursuant to the DGCL, (iv) for other governmental approvals and filings required
under the applicable laws of any foreign jurisdiction, and (v) with respect to
matters set forth in Section 4.6(a) or 4.6(b) of the Acquiror Disclosure
Schedule, no consent, approval or authorization of, permit from, or declaration,
filing or registration with, any governmental or regulatory authority, or any
other Person or entity is required to be made or obtained by Acquiror in
connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby, except where the
failure to obtain such consent, approval, authorization, permit or declaration
or to make such filing or registration would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 4.7. COMPLIANCE
Acquiror and each of its Subsidiaries are in compliance with all
foreign, federal, state and local laws and regulations applicable to its
operations or with respect to which compliance is a condition of engaging in the
business thereof, except to the extent that failure to comply would not,
individually or in the aggregate, have a Material Adverse Effect. To the
knowledge of Acquiror, neither Acquiror nor any of its Subsidiaries has received
any notice asserting a failure, or possible failure, to comply with any such law
or regulation, the subject of which notice has not been resolved as required
thereby or otherwise to the satisfaction of the party sending the notice, except
for such failure as would not, individually or in the aggregate, have a Material
Adverse Effect. Acquiror and its Subsidiaries hold all permits, licenses and
franchises from governmental agencies required to conduct their respective
businesses as they are now being conducted, except for such failures to have
such permits, licenses and franchises that would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 4.8. SEC DOCUMENTS
(a) Acquiror has filed and made available to the Company true and complete
copies of each registration statement, proxy or information statement, form,
report and other documents required to be filed by it with the SEC since January
1, 1995 (collectively, the "Acquiror SEC Reports"). As of their respective
dates, the Acquiror SEC Reports (i) complied, or, with respect to those not yet
filed, will comply, in all material respects with the applicable requirements of
the Securities Act and the Exchange Act and (ii) did not, or, with respect to
those not yet filed, will not, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading.
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(b) Each of the consolidated balance sheets included in or incorporated by
reference into Acquiror SEC Reports (including the related notes and schedules)
presents fairly, in all material respects, the consolidated financial position
of Acquiror and its consolidated Subsidiaries as of its date, and each of the
consolidated statements of income, retained earnings and cash flows of Acquiror
included in or incorporated by reference into Acquiror SEC Reports (including
the related notes and schedules) presents fairly, in all material respects, the
results of operations, retained earnings or cash flows, as the case may be, of
Acquiror and its Subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments), in each
case in accordance with GAAP consistently applied during the periods involved,
except as may be noted therein.
(c) Except as set forth in Section 4.8(c) of the Acquiror Disclosure
Schedule and except as set forth in the Acquiror SEC Reports, neither Acquiror
nor any of its Subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on, or reserved against in, a balance sheet of Acquiror or in the
notes thereto, prepared in accordance with GAAP consistently applied, except for
(i) liabilities or obligations that were so reserved on, or reflected in
(including the notes to), the consolidated balance sheet of Acquiror as of
September 30, 1998, (ii) liabilities or obligations arising in the ordinary
course of business (including trade indebtedness) since September 30, 1998, and
(iii) liabilities or obligations which would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 4.9. ABSENCE OF CERTAIN CHANGES
Except as set forth in Section 4.9 of the Acquiror Disclosure Schedule
or the Acquiror SEC Reports, and except for the transactions expressly
contemplated hereby, since September 30, 1998, Acquiror and its Subsidiaries
have conducted their respective businesses only in the ordinary and usual course
consistent with past practices and there has not been any change in Acquiror's
business, operations, condition (financial or otherwise), results of operations,
assets or liabilities, except for changes contemplated hereby or changes which
have not, individually or in the aggregate, had or are reasonably likely to have
a Material Adverse Effect. Except as set forth in Section 4.9 of the Acquiror
Disclosure Schedule, from September 30, 1998 through the date of this Agreement,
neither Acquiror nor any of its Subsidiaries has taken any of the actions
prohibited by Section 5.2 hereof.
SECTION 4.10. LITIGATION
Except as set forth in Section 4.10 of the Acquiror Disclosure Schedule
or in the Acquiror SEC Reports there is no Action instituted, pending or, to the
knowledge of Acquiror, threatened, in each case against Acquiror or any of its
Subsidiaries, which, individually or in the aggregate, directly or indirectly,
could reasonably be expected to have a Material Adverse Effect, nor is there any
outstanding judgment, decree or injunction, in each case against Acquiror or any
of its Subsidiaries, or any statute, rule or order of any domestic or foreign
court, governmental department, commission or agency applicable to Acquiror or
any of its Subsidiaries
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which has or could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
SECTION 4.11. TAXES
Except as set forth in Section 4.11 of the Acquiror Disclosure
Schedule:
(a) Acquiror and its Subsidiaries have (A) duly filed (or there have been
filed on their behalf) with the appropriate governmental authorities all Tax
Returns required to be filed by them and such Tax Returns are true, correct and
complete in all respects, except for any such filings which are not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect, and
(B) duly paid in full all Taxes, whether or not shown to be due on such Tax
Returns, except for which the failure to pay would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect;
(b) No claim has ever been made by an authority in a jurisdiction where
any of Acquiror and its non-foreign Subsidiaries do not file Tax Returns that it
is or may be subject to taxation by that jurisdiction which is reasonably likely
to have a Material Adverse Effect;
(c) Each of Acquiror and its non-foreign Subsidiaries has withheld and
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party, except for amounts which are not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect;
(d) All federal income Tax Returns of Acquiror and its non-foreign
Subsidiaries for periods through the taxable year ended in 1991 have been
audited, and no federal or state, local or foreign audits or other
administrative proceedings or court proceedings are presently being conducted
with regard to any Taxes or Tax Returns of Acquiror or its Subsidiaries and
neither Acquiror nor its Subsidiaries has received a written notice of any
pending audits with respect to Taxes or Tax Returns of Acquiror, and neither
Acquiror nor any of its Subsidiaries has waived any statute of limitations with
respect to Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency, except with respect to Taxes which are not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect;
(e) Neither the Internal Revenue Service nor any other taxing authority
(whether domestic or foreign) has asserted against Acquiror or any of its
Subsidiaries any material deficiency or material claim for Taxes not reserved
for on the most recent balance sheet of the Acquiror as set forth in its most
recent Quarterly Report on Form 10-Q;
(f) There are no liens for Taxes upon any Assets of Acquiror or any
Subsidiary thereof, except for liens for Taxes not yet due and payable and liens
for Taxes that are being contested in good faith by appropriate proceedings,
except for liens which would not be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect, and no written power of attorney
that has been granted by Acquiror or its Subsidiaries (other than to
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Acquiror or a Subsidiary) currently is in force with respect to any material
matter relating to Taxes except with respect to Taxes which are not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect;
(g) Neither Acquiror nor any of its Subsidiaries has, with regard to
any assets or property held by any of them, agreed to have Section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by Acquiror or any of its
Subsidiaries;
(h) None of Acquiror and its Subsidiaries has made any payments, is
obligated to make any payments, or is a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Section 280G of the Code;
(i) None of Acquiror and its Subsidiaries has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code;
(j) None of Acquiror and its Subsidiaries is a party to any Tax
allocation or sharing agreement; and
(k) None of Acquiror and its Subsidiaries (A) has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which was Acquiror) or (B) has any Liability for the
Taxes of any Person (other than any of Acquiror and its Subsidiaries) under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local,
or foreign law), as a transferee or successor, by contract, or otherwise, other
than such Taxes which are not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect.
SECTION 4.12. EMPLOYEE BENEFIT PLANS
(a) Section 4.12 of the Acquiror Disclosure Schedule contains a
complete list of all Acquiror Pension Plans, Welfare Plans and material Benefit
Arrangements (other than those maintained outside the United States) as of the
date hereof. To the extent in the Acquiror's or its Subsidiaries' possession,
true and complete copies or descriptions of the Acquiror Pension Plans, Welfare
Plans and material Benefit Arrangements (other than those maintained outside the
United States), including, without limitation, trust instruments, if any, that
form a part thereof, and all amendments thereto have been furnished or made
available to the Company and its counsel.
(b) Except as described in Section 4.12 of the Acquiror Disclosure
Schedule, each of the Acquiror Employee Plans (other than any Multiemployer
Plan) has been administered and is in compliance with the terms of such Acquiror
Employee Plan and all applicable laws, rules and regulations except for
noncompliance which, individually or in the aggregate, are not reasonably
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likely to have a Material Adverse Effect.
(c) No "reportable event" (as such term is used in section 4043 of ERISA)
for which the notice requirements to the Pension Benefit Guaranty Corporation
have not been waived, "prohibited transaction" (as such term is used in section
406 of ERISA or section 4975 of the Code) for which no exemption exists, or
"accumulated funding deficiency" (as such term is used in section 412 or 4971 of
the Code) has heretofore occurred with respect to any Pension Plan (other than
any Multiemployer Plan) of Acquiror or any of its Subsidiaries except for such
events which, individually or in the aggregate, are not reasonably like to have
a Material Adverse Effect.
(d) There is no material action, order, writ, injunction, judgment or
decree outstanding or claim, suit litigation, proceeding, arbitral action,
governmental audit or investigation relating to or seeking benefits under any
Acquiror Employee Plan that is pending or, to Acquiror's knowledge, threatened
against Acquiror, any of its ERISA Affiliates, or any Acquiror Employee Plans
(collectively, "Claims"), other than routine claims for benefits or Claims
which, individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect.
(e) Except as set forth in Section 4.12 of the Acquiror Disclosure
Schedule, Acquiror has not incurred any withdrawal liability with respect to any
Multiemployer Plan under Title IV of ERISA which remains unsatisfied, except for
such liabilities as would not, individually or in the aggregate, have a Material
Adverse Effect.
(f) With respect to the Acquiror Employee Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions have
not been made or properly accrued and there are no unfunded benefit obligations
which have not been accounted for by reserves, or otherwise properly footnoted
in accordance with generally accepted accounting principles, on the financial
statements of Acquiror, except for obligations which, individually or in the
aggregate, are not reasonably likely to have a Material Adverse Effect with
respect to Acquiror.
SECTION 4.13. TITLE TO ASSETS
The Assets of Acquiror and its Subsidiaries, taken as a whole, are
sufficient to permit Acquiror and its Subsidiaries to conduct their business as
currently being conducted with only such exceptions as would not have a Material
Adverse Effect. All of the material Assets owned by Acquiror are owned free and
clear of all Encumbrances, except as described in Section 4.13 of the Acquiror
Disclosure Schedule or Permitted Encumbrances or when the failure to have such
ownership would not have a Material Adverse Effect.
SECTION 4.14. CONTRACTS
Each Acquiror Contract is valid, binding and enforceable and in full force
and effect, except where failure to be valid, binding and enforceable and in
full force and effect would not have a Material Adverse Effect, and there are no
material defaults thereunder by Acquiror or its Subsidiaries or, to the best
knowledge of Acquiror, by any other party thereto
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which could reasonably be expected to have a Material Adverse Effect.
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SECTION 4.15. LABOR RELATIONS
Except as set forth on Section 4.15 of the Acquiror Disclosure
Schedule, there is no labor strike, slowdown or work stoppage or lockout against
Acquiror or any of its Subsidiaries, there is no unfair labor practice charge or
complaint against or pending before the National Labor Relations Board which if
decided adversely could reasonably be expected to have a Material Adverse Effect
on Acquiror and its Subsidiaries, taken as a whole, and there is no
representation claim or petition pending before the National Labor Relations
Board and no question concerning representation exists with respect to the
employees of Acquiror or its Subsidiaries.
SECTION 4.16. INTELLECTUAL PROPERTY
(a) Acquiror and its Subsidiaries own, or are licensed or otherwise
possess legally enforceable rights to use, all patents, trademarks, trade names,
service marks and copyrights, any applications for and registrations of such
patents, trademarks, trade names, service marks and copyrights, and all
processes, formulae, methods, schematics, technology, know-how, computer
software programs or applications, tangible or intangible proprietary
information or material, waivers or licenses of publicity or privacy rights or
any other third party licenses that are necessary to conduct the business of
Acquiror and its Subsidiaries as currently conducted, the absence of which would
be reasonably likely to have a Material Adverse Effect (the "Acquiror
Intellectual Property Rights").
(b) The execution and delivery of this Agreement and consummation of
the Merger will not result in the breach of, or create on behalf of any third
party the right to terminate or modify, any license, sublicense or other
agreement relating to the Acquiror Intellectual Property Rights, or any material
licenses, sublicenses and other agreements as to which Acquiror or any of its
Subsidiaries is a party and pursuant to which Acquiror or any of its
Subsidiaries is authorized to use any third party patents, trademarks,
copyrights, trade secrets, likeness or other proprietary rights, including
software that is used in the manufacture of, incorporated in, or forms a part of
any product sold by or expected to be sold by Acquiror or any of its
Subsidiaries, the termination, modification (including without limitation any
modification to the scope of any license from the scope as currently granted by
Acquiror even if such modification is contemplated by the agreement) or breach
of which would be reasonably likely to have a Material Adverse Effect.
(c) All patents, registered trademarks, service marks and copyrights
which are held by Acquiror or any of its Subsidiaries the loss or invalidity of
which would cause a Material Adverse Effect, are valid and subsisting. Except as
would not be reasonably expected to have a Material Adverse Effect, Acquiror (i)
has not been sued in any suit, action or proceeding, or received in writing any
claim or notice, which involves a claim of (w) infringement or violation of any
patents, trademarks, service marks, copyrights, trade secrets,
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right of privacy or publicity or any other proprietary right of any third party
or (x) libel or defamation; and (ii) has no knowledge that the manufacturing,
marketing, licensing or sale of its products infringes or violates any patent,
trademark, service ▇▇▇▇, copyright, trade secret, right of privacy or publicity,
or other proprietary right of any third party.
SECTION 4.17. ENVIRONMENTAL MATTERS
Except as set forth in Section 4.17 of the Acquiror Disclosure Schedule
or the Acquiror SEC Reports and except for such matters that, individually or in
the aggregate, are not reasonably likely to have a Material Adverse Effect, and
except as has not had, and would not reasonably be expected to have, a Material
Adverse Effect, Acquiror and each of its Subsidiaries (i) have obtained all
applicable permits, licenses and other authorizations which are required to be
obtained under all applicable Environmental Laws by Acquiror or its
Subsidiaries; (ii) are in material compliance with all terms and conditions of
such required permits, licenses and authorization, and also are in material
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
or arising from applicable Environmental Laws; (iii) have not received notice of
any past or present violations of Environmental Laws, or of any spill, release,
event, incident, condition, action or failure to act which is reasonably likely
to prevent continued compliance with such Environmental Laws, or which would
give rise to any common law environmental liability or liability under
Environmental Laws, or which would otherwise form the basis of any claims,
action, suit or proceeding against Acquiror or any of its Subsidiaries based on
or resulting from the manufacture, processing, use, treatment, storage,
disposal, transport, or handling, or the emission, discharge or release into the
environment, of any Hazardous Material by any Person; and (iv) have taken all
actions required under applicable Environmental Laws to register any products or
materials required to be registered by Acquiror or its Subsidiaries thereunder.
SECTION 4.18. JOINT PROXY STATEMENT PROSPECTUS; REGISTRATION STATEMENT
None of the information supplied by Acquiror to be included or
incorporated by reference in the Joint Proxy Statement/Prospectus or any
amendment thereof or supplement thereto, will, on the date it became effective
with the SEC, at the time of the mailing of the Joint Proxy Statement/Prospectus
or any amendment or supplement thereto to the stockholders of Acquiror or the
Company, at the time of the Acquiror Stockholder Meeting and the Company
Stockholder Meeting and at the Effective Time, 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 Joint Proxy
Statement/Prospectus will comply as to form in all material respects with the
provisions of the Securities Act and the Exchange Act and the rules and
regulations thereunder; provided, however, that Acquiror makes no representation
with respect to any information supplied or to be supplied by the Company for
inclusion or incorporated by reference from Company SEC filings in the Joint
Proxy Statement/Prospectus or any amendment thereof or supplement thereto. None
of the information supplied by Acquiror to be included or incorporated
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by reference from Acquiror SEC filings in the Registration Statement will, at
the time the Registration Statement is declared effective by the SEC, 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.
SECTION 4.19. OPINION OF FINANCIAL ADVISOR
Acquiror has received the written opinion of ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.,
dated the date of this Agreement, to the effect that the consideration to be
paid by Acquiror in connection with the Merger is fair to Acquiror from a
financial point of view.
SECTION 4.20. OWNERSHIP OF COMPANY COMMON STOCK
To the best knowledge of Acquiror, neither Acquiror, nor any of its
affiliates, beneficially or of record, owns any shares of Company Stock or
Exchangeable Shares, other than such securities, if any, held by or for the
account of employees or former employees of Acquiror, or any of its respective
affiliates pursuant to any Acquiror Employee Plan.
SECTION 4.21. BROKERS
No broker, finder or investment banker (other than ▇▇▇▇▇▇▇, Sachs & Co.
and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated, the fees and expenses of which shall be
paid by Acquiror) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Acquiror.
SECTION 4.22. VOTE REQUIRED
The approval by a majority of the voting power represented by the
outstanding shares of Acquiror Common Stock and Acquiror Preferred Stock
entitled to vote thereon, voting together as a single class, is the only vote of
the holders of any class or series of Acquiror's capital stock necessary to
approve this Agreement, the Merger and, if necessary for the consummation of the
Merger, an amendment to Acquiror's Certificate of Incorporation, ("Acquiror
Stockholder Approval"). The Acquiror Board, at a meeting duly called and held,
by unanimous vote of the directors present (i) determined that this Agreement,
the Stock Option Agreement, the Stockholder Support Agreement and the
transactions contemplated hereby, including the Merger, are fair to, and in the
best interests of, the stockholders of Acquiror, (ii) approved this Agreement
and the transactions contemplated hereby, including the Merger, and (iii)
declared advisable and resolved to recommend that the holders of the shares of
the Acquiror Common Stock approve this Agreement and the transactions
contemplated hereby, including the Merger.
SECTION 4.23. TAX AND ACCOUNTING MATTERS
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To Acquiror's knowledge, neither Acquiror nor any of its Affiliates has
taken or agreed to take any action, or knows of any circumstances, that (without
regard to any action taken or agreed to be taken by the Company or any of its
Affiliates) would (i) prevent Acquiror from accounting for the business
combination to be effected by the Merger as a "pooling of interests" under GAAP
and the applicable rules and regulations of the SEC or (ii) prevent the Merger
from qualifying as a reorganization within the meaning of Sections 368(a) of the
Code.
SECTION 4.24. RIGHTS PLAN
As of the Effective Time, each share of Acquiror Common Stock received
by holders of Company Common Stock pursuant to Section 2.7(a), or holders of
Company Preferred Stock pursuant to Section 2.7(b), shall evidence and entitle
the holder thereof to Acquiror Rights under the Acquiror Rights Agreement.
ARTICLE V.
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1. CONDUCT OF BUSINESS OF THE COMPANY PENDING THE MERGER
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time, the
Company agrees as to itself and each of its Subsidiaries (except to the extent
that Acquiror shall otherwise consent in writing) to carry on its business in
the ordinary course in substantially the same manner as previously conducted, to
pay its debts and taxes when due, subject to good faith disputes over such debts
or taxes, in the ordinary course in substantially the same manner as previously
paid, to pay or perform its other obligations when due in the ordinary course in
substantially the same manner as previously paid or performed, to maintain
insurance coverages and its books, accounts and records in the usual manner
consistent with past practices, to comply in all material respects with all
applicable laws, ordinances and regulations of Governmental Entities, to
maintain and keep its properties and equipment in good repair, working order and
condition (except ordinary wear and tear), and, to the extent consistent with
such business, use all reasonable efforts consistent with past practices and
policies to preserve intact its present business organization, keep available
the services of its present officers and key employees and preserve its
relationships with customers, suppliers, distributors, and others having
business dealings with it. Without limiting the generality of the foregoing and
except as expressly contemplated by this Agreement, or as specifically disclosed
in Section 5.1 of the Company Disclosure Schedule, during the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, without the written consent of Acquiror
(which will not be unreasonably withheld or delayed), the Company shall not and
shall not permit any of its Subsidiaries to:
(a) adopt or propose any amendment to its certificate of incorporation
or bylaws or comparable charter or organizational documents except as
contemplated by this Agreement;
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(b) (i) issue, pledge or sell, or propose or authorize the issuance,
pledge or sale of, additional shares of capital stock of any class (other than
upon exercise of Company Stock Rights outstanding on the date of this Agreement
upon payment of the exercise price thereof or upon any exchange of Exchangeable
Shares), or securities convertible into capital stock of any class, or any
subscriptions, rights, warrants or options to acquire any convertible securities
or capital stock, or any other securities in respect of, in lieu of, or in
substitution for, shares of Company Stock outstanding on the date hereof, (ii)
amend, waive or otherwise modify any of the terms of any option, warrant or
stock option plan of the Company or any of its Subsidiaries, including without
limitation, the Company Stock Rights and the Company Stock Plans, or authorize
cash payments in exchange for any options granted under any of such plans, or
(iii) adopt or implement any stockholder rights plan;
(c) declare, set aside or pay any dividend or other distribution (whether
in cash, securities or property or any combination thereof) in respect of any
class or series of its capital stock other than between any wholly-owned
Subsidiary of the Company (or the Canadian Sub) and the Company or any other
wholly-owned Subsidiary of the Company (or the Canadian Sub), or purchase or
otherwise acquire, directly or indirectly, any shares of its capital stock
(other than the Exchangeable Shares pursuant to the exchange rights thereof);
(d) split, combine, subdivide, reclassify or redeem, purchase or
otherwise acquire, or propose to redeem or purchase or otherwise acquire, any
shares of its capital stock, or any of its other securities (other than the
Exchangeable Shares pursuant to the exchange rights thereof);
(e) increase the compensation or fringe benefits payable or to become
payable to its directors, officers or employees (whether from the Company or any
of its Subsidiaries), or pay any benefit not required by any existing plan or
arrangement (including, without limitation, the granting of stock options, stock
appreciation rights, shares of restricted stock or performance units) or grant
any severance or termination pay to (except pursuant to existing agreements or
policies previously disclosed in writing to Acquiror, which shall be interpreted
and implemented in a manner consistent with past practice), or enter into any
employment or severance agreement with, any director, officer or employee of the
Company or any of its Subsidiaries or establish, adopt, enter into, or amend any
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, savings, welfare, deferred
compensation, employment, termination, severance or other employee benefit plan,
agreement, trust, fund, policy or arrangement for the benefit or welfare of any
directors, officers or current or former employees, including any Benefit
Arrangement, Pension Plan or Welfare Plan, except (i) to the extent required by
applicable law or regulation, (ii) pursuant to any collective bargaining
agreements or Company Employee Plan as in effect on the date of this Agreement
consistent with past practices, (iii) for salary and benefit increases in the
ordinary course of business consistent with past practice to employees other
than executive officers of the Company, (iv) pursuant to Section 2.8 or (v) the
grant of options consistent with past practice to new or promoted employees
other than executive officers, which options represent in the aggregate the
right to acquire no more than 500,000 shares (net cancellations) of Company
Common Stock;
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(f) (i) sell, pledge, lease, dispose of, grant, encumber, or otherwise
authorize the sale, pledge, disposition, grant or encumbrance of any of the
properties or assets of the Company or any of its Subsidiaries (including stock
of Subsidiaries), except for (A) sales of assets in the ordinary course of
business, (B) sales of assets aggregating less than $5,000,000, (C) sales of
accounts receivable under agreements with Fleet Bank and Sanwa Bank in effect as
of the date hereof consistent with past practice, (D) sales of marketable
securities aggregating less than $20,000,000, and (E) sales of assets under
sale/leaseback arrangements with Fleet Bank in effect as of the date hereof
consistent with past practice, or (ii) acquire (including, without limitation,
by merger, consolidation, lease or acquisition of stock or assets) any
corporation, partnership, other business organization or any division thereof
(or a substantial portion of the assets thereof) or any other assets, except for
acquisitions of assets in the ordinary course of business and except for
acquisitions involving an aggregate purchase price not in excess of $10,000,000;
(g) (i) incur, assume or pre-pay any debt for borrowed money, other than
pursuant to credit agreements, accounts receivable facilities, factoring
arrangements and sale/leaseback arrangements in effect as of the date hereof
consistent with past practice, (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person (other than wholly-owned subsidiaries),
(iii) make any loans, advances or capital contributions to, or investments in,
any other person (including advances to employees), except for loans, advances,
capital contributions or investments between any wholly-owned Subsidiary of the
Company and the Company or another wholly-owned Subsidiary of the Company or
which are reasonable, necessary, in the ordinary course and consistent with past
practice, or (iv) enter into any "keep well" or other agreement to maintain the
financial condition of another entity (other than the Company or any of its
wholly-owned Subsidiaries);
(h) authorize, recommend, propose or announce an intention to adopt a plan
of complete or partial liquidation or dissolution of the Company or any of its
Subsidiaries, other than in connection with the dissolution, merger or
liquidation of inactive Subsidiaries;
(i) make or rescind any material express or deemed election relating to
Taxes, settle or compromise any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to Taxes,
amend any material Tax Return except in the ordinary course of business
consistent with past practice, or except as may be required by applicable law,
make any change to any of its material methods of reporting income or deductions
(including, without limitation, any change to its methods or basis or write-offs
of accounts receivable) for federal income tax purposes from those employed in
the preparation of its federal income tax return for the taxable year ending
January 3, 1998;
(j) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted, unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of liabilities reflected or reserved
against in the consolidated financial statements of the Company;
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(k) other than in the ordinary course of business and consistent with past
practice, waive any rights of substantial value or make any payment, direct or
indirect, of any material liability of the Company or of any of its Subsidiaries
before the same comes due in accordance with its terms;
(l) fail to maintain its existing insurance coverage of all types in
effect or, in the event any such coverage shall be terminated or lapse, to the
extent available at reasonable cost, procure substantially similar substitute
insurance policies which in all material respects are in at least such amounts
and against such risks as are currently covered by such policies;
(m) enter into any collective bargaining agreement (other than as required
by law or extensions of existing agreements in the ordinary course of business);
(n) change its methods of accounting as in effect on October 3, 1998
except as required by GAAP, or take any action, other than reasonable and usual
actions in the ordinary course of business and consistent with past practice,
with respect to accounting policies or procedures, unless required by GAAP or
the SEC;
(o) modify, amend or terminate any of the Company Contracts or waive,
release or assign any material rights or claims, except in the ordinary course
of business consistent with past practice;
(p) take, or agree to commit to take, any action that would cause the
representations and warranties of the Company contained herein, individually or
in the aggregate, not to be true and correct in all material respects;
(q) close, shut down, or otherwise eliminate any facility or office
containing more than 20,000 square feet;
(r) make or commit to make any capital expenditures that exceed
$10,000,000 in the aggregate or, except as required pursuant to commitments
existing on the date hereof or made without violation of this Section 5.1, make
any cash disbursement not in the ordinary course of business exceeding
$5,000,000 for any single item or related series of items;
(s) initiate, compromise, or settle any material litigation or arbitration
proceeding except in connection with the Agreement or the transactions
contemplated hereby;
(t) enter into an agreement, contract, commitment or arrangement to do any
of the foregoing; and
(u) modify, amend, restate or terminate the Amended and Restated
Employment Agreement, dated as of the date hereof, between the Company and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ or the Amended and Restated Employment Agreement, dated as of
the date hereof, between the Company and ▇▇▇▇▇ ▇'▇▇▇▇▇, or waive, release or
assign any material rights or claims thereunder.
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SECTION 5.2. CONDUCT OF BUSINESS OF ACQUIROR PENDING THE MERGER
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time, Acquiror
agrees as to itself and each of its Subsidiaries (except to the extent that the
Company shall otherwise consent in writing) to carry on its business in the
ordinary course in substantially the same manner as previously conducted, to pay
its debts and taxes when due, subject to good faith disputes over such debts or
taxes, in the ordinary course in substantially the same manner as previously
paid, to pay or perform its other obligations when due in the ordinary course in
substantially the same manner as previously paid or performed, to maintain
insurance coverages and its books, accounts and records in the usual manner
consistent with past practices, to comply in all material respects with all
applicable laws, ordinances and regulations of Governmental Entities, to
maintain and keep its properties and equipment in good repair, working order and
condition (except ordinary wear and tear), and, to the extent consistent with
such business, use all reasonable efforts consistent with past practices and
policies to preserve intact its present business organization, keep available
the services of its present officers and key employees and preserve its
relationships with customers, suppliers, distributors, and others having
business dealings with it. Without limiting the generality of the foregoing and
except as expressly contemplated by this Agreement, or as specifically disclosed
in Section 5.2 of the Acquiror Disclosure Schedule, during the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, without the written consent of the
Company, Acquiror shall not and shall not permit any of its Subsidiaries to:
(a) adopt or propose any amendment to its certificate of incorporation or
bylaws or comparable charter or organizational documents, except as contemplated
by this Agreement;
(b) split, combine, subdivide, reclassify or redeem, purchase or otherwise
acquire, or propose to redeem or purchase or otherwise acquire, any shares of
its capital stock, or any of its other securities; and
(c) enter into an agreement, contract, commitment or arrangement to do any
of the foregoing.
ARTICLE VI.
ADDITIONAL AGREEMENTS
SECTION 6.1. PREPARATION OF FORM S-4 AND THE PROXY STATEMENT;
STOCKHOLDER MEETING
(a) As promptly as practicable after the execution of this Agreement, the
Company and Acquiror shall cooperate, prepare and file with the SEC, the Joint
Proxy Statement/Prospectus and the Registration Statement in which the Joint
Proxy
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Statement/Prospectus will be included as a prospectus, provided that
Acquiror may delay the filing of the Registration Statement until approval of
the Joint Proxy Statement/Prospectus by the SEC. The Company and Acquiror will
cause the Joint Proxy Statement/Prospectus and the Registration Statement to
comply as to form in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations thereunder. Each
of Acquiror and the Company shall use reasonable best efforts to have or cause
the Joint Proxy Statement/Prospectus to be cleared by the SEC and to cause the
Registration Statement to become effective as promptly as practicable. Without
limiting the generality of the foregoing, each of the Company and Acquiror
shall, and shall cause its respective Representatives to, fully cooperate with
the other party and its respective Representatives in the preparation of the
Joint Proxy Statement/Prospectus and the Registration Statement, and shall, upon
request, furnish the other party with all information concerning it and its
affiliates, directors, officers and stockholders as the other may reasonably
request in connection with the preparation of the Joint Proxy
Statement/Prospectus and the Registration Statement. The Joint Proxy
Statement/Prospectus with respect to the Merger shall include the determination
and recommendation of the Company Board (subject to Section 6.3(d)) and the
Acquiror Board that their respective stockholders vote in favor of the approval
and adoption of this Agreement and the Merger. The Company and Acquiror shall
use reasonable best efforts to take all actions required under any applicable
foreign, federal or state securities or Blue Sky Laws in connection with the
issuance of shares of Acquiror Common Stock pursuant to the Merger. As promptly
as practicable after the Registration Statement with respect to the Merger shall
have become effective, the Company and Acquiror shall cause the Joint Proxy
Statement/Prospectus with respect to the Merger to be mailed to their respective
stockholders.
(b) Without limiting the generality of the foregoing, (i) the Company and
Acquiror shall notify each other as promptly as practicable upon becoming aware
of any event or circumstance which should be described in an amendment of, or
supplement to, the Joint Proxy Statement/Prospectus or the Registration
Statement, and (ii) the Company and Acquiror shall each notify the other as
promptly as practicable after the receipt by it of any written or oral comments
of the SEC on, or of any written or oral request by the SEC for amendments or
supplements to, the Joint Proxy Statement/Prospectus or the Registration
Statement, and shall promptly supply the other with copies of all correspondence
between it or any of its representatives and the SEC with respect to any of the
foregoing filings.
(c) The Company shall take all action necessary to convene and hold a
meeting of its stockholders as promptly as practical for the purpose of
obtaining the Company Stockholder Approval. Subject to Section 6.3, the Company
shall, through the Company Board, recommend to its stockholders the adoption of
this Agreement and the transactions contemplated hereby and shall use its best
efforts to solicit from its stockholders proxies in favor of adoption of this
Agreement and to take all other lawful action necessary to secure the Company
Stockholder Approval. Without limiting the generality of the foregoing, the
Company agrees that its obligations pursuant to this Section 6.1(c) shall not be
affected by the commencement, public proposal or communication to the Company of
any Acquisition Proposal, subject to Section 6.3 below.
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(d) Acquiror shall take all action necessary in accordance with applicable
law and its certificate of incorporation and bylaws to convene and hold a
meeting of its stockholders as promptly as practical for the purpose of
obtaining the Acquiror Stockholder Approval. Acquiror shall, through the
Acquiror Board, recommend to its stockholders the adoption of this Agreement and
the transactions contemplated hereby and shall use its best efforts to solicit
from its stockholders proxies in favor of adoption of this Agreement and to take
all other lawful action necessary to secure the Acquiror Stockholder Approval.
Neither the Acquiror Board nor any committee thereof shall withdraw or modify,
or propose publicly to withdraw or modify, in a manner adverse to the Company,
the approval or recommendation by the Acquiror Board of this Agreement or the
transactions contemplated hereby.
(e) The Company and Acquiror shall coordinate and cooperate with each
other with respect to the timing of the Company Stockholder Meeting and the
Acquiror Stockholder Meeting and shall use their best efforts to hold such
meeting on the same day and as soon as practicable after the date hereof.
SECTION 6.2. COOPERATION; NOTICE; CURE
Subject to compliance with applicable law, from the date hereof until
the Effective Time, each of Acquiror and the Company shall confer on a regular
and frequent basis with one or more representatives of the other party to report
on the general status of ongoing operations. Each of Acquiror and the Company
shall promptly notify the other in writing of, and will use reasonable best
efforts to cure before the Closing Date, any event, transaction or circumstance,
as soon as practical after it becomes known to such party, that causes or will
cause any covenant or agreement of Acquiror or the Company, as the case may be,
under this Agreement to be breached in any material respect or that renders or
will render untrue in any material respect any representation or warranty of
Acquiror or the Company contained in this Agreement. No notice given pursuant to
this paragraph shall have any effect on the representations, warranties,
covenants or agreements contained in this Agreement for purposes of determining
satisfaction of any condition contained herein.
SECTION 6.3. NO SOLICITATION
(a) The Company shall immediately cease and terminate any existing
solicitation, initiation, encouragement, activity, discussion or negotiation
with any Persons conducted heretofore by the Company, its Subsidiaries or any of
their respective Representatives with respect to any proposed, potential or
contemplated Acquisition Transaction.
(b) From and after the date hereof, without the prior written consent of
Acquiror, the Company will not authorize or permit any of its Subsidiaries to,
and shall use its reasonable best efforts to cause any and all of its or their
respective officers, directors, employees, financial advisors, agents or
representatives (each a "Representative") not to, directly or indirectly, (i)
solicit, initiate, or encourage any inquiries or proposals that constitute, or
could reasonably be
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expected to lead to an Acquisition Proposal, or (ii) engage in negotiations or
discussions with any person (or group of persons) other than Acquiror or its
respective affiliates (a "Third Party") concerning, provide any non-public
information to any person or entity relating to, an Acquisition Proposal, or
(iii) enter into any letter of intent, agreement in principle or any acquisition
agreement or other similar agreement with respect to any Acquisition Proposal;
provided, however, that nothing contained in this Section 6.3(b) shall prevent
the Company or the Company Board from furnishing non-public information to, or
entering into discussions or negotiations with, any Third Party in connection
with an unsolicited, bona fide written proposal for an Acquisition Proposal by
such Third Party, if and only to the extent that (1) such Third Party has made a
written proposal to the Company Board to consummate an Acquisition Proposal, (2)
the Company Board determines in good faith, after consultation with a financial
advisor of nationally recognized reputation, that such Acquisition Proposal is
reasonably capable of being completed on substantially the terms proposed, and
would, if consummated, result in a transaction that would provide greater value
to the holders of Company Common Stock than the transaction contemplated by this
Agreement (a "Superior Proposal"), (3) the failure to take such action would, in
the reasonable good faith judgment of the Company Board, after consultation with
outside legal counsel, be inconsistent with its fiduciary duties to the
Company's stockholders under applicable law, and (4) prior to furnishing such
non-public information to, or entering into discussions or negotiations with,
such person or entity, the Company Board receives from such person or entity an
executed confidentiality and standstill agreement with material terms no less
favorable to the Company than those contained in the Confidentiality Agreement.
The Company agrees not to release any Third Party from, or waive any provision
of, any standstill agreement to which it is a party or any confidentiality
agreement between it and another person who has made, or who may reasonably be
considered likely to make, an Acquisition Proposal, unless the failure to take
such action would, in the reasonable good faith judgment of the Company Board,
after consultation with outside legal counsel, be inconsistent with its
fiduciary duties to the Company's stockholders under applicable law. For
purposes of this Agreement, "Acquisition Proposal" shall mean, with respect to
the Company, any proposal or offer from any Person (other than Acquiror or any
of its Subsidiaries) relating to any (i) direct or indirect acquisition or
purchase of a business of the Company or any of its Subsidiaries, that
constitutes 20% or more of the consolidated net revenues, net income or assets
of the Company and its Subsidiaries, (ii) direct or indirect acquisition or
purchase of 20% or more of any class of equity securities of the Company or any
of its Subsidiaries whose business constitutes 20% or more of the consolidated
net revenues, net income or assets of the Company and its Subsidiaries, (iii)
tender offer or exchange offer that if consummated would result in any Person
beneficially owning 20% or more of the capital stock of the Company, or (iv)
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company or any of its
Subsidiaries whose business constitutes 20% or more of the consolidated net
revenues, net income or assets of the Company and its Subsidiaries. Each of the
transactions referred to in clauses (i) - (iv) of the definition of Acquisition
Proposal, other than any such transaction to which Acquiror or any of its
Subsidiaries is a party, is referred to as an "Acquisition Transaction."
(c) The Company shall notify Acquiror promptly after receipt by the
Company or the
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Company's knowledge of the receipt by any of its advisors of any Acquisition
Proposal or any request for non-public information in connection with an
Acquisition Proposal or for access to the properties, books or records of the
Company by any person or entity that informs such party that it is considering
making or has made an Acquisition Proposal. Such notice shall be made orally and
in writing and shall indicate the identity of the offeror and the terms and
conditions of such proposal, inquiry or contact. The Company shall keep Acquiror
informed of the status (including any change to the material terms) of any such
Acquisition Proposal or request for non-public information.
(d) The Board of Directors of the Company may not withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Acquiror the approval or
recommendation by the Company Board of this Agreement or the Merger unless,
following the receipt of a Superior Proposal, in the reasonable good faith
judgment of the Company Board, after consultation with outside legal counsel,
the failure to do so would be inconsistent with its fiduciary duties to the
Company's stockholders under applicable law; provided however, that, the Board
of Directors of the Company shall submit this Agreement to the Company's
stockholders for approval, whether or not the Board of Directors of the Company
at any time subsequent to the date hereof determines that this Agreement is no
longer advisable or recommends that the stockholders of the Company reject it or
otherwise modifies or withdraws its recommendation. Unless the Board of
Directors of the Company has withdrawn its recommendation of this Agreement in
compliance herewith, the Company shall use its best efforts to solicit from
stockholders of the Company proxies in favor of the approval and adoption of
this Agreement and the Merger and to secure the vote or consent of stockholders
required by the DGCL and its certificate of incorporation and bylaws to approve
and adopt this Agreement and the Merger.
(e) Nothing contained in this Agreement shall prohibit the Company from
complying with Rule 14e-2 promulgated under the Exchange Act with regard to a
tender or exchange offer or from making any other disclosures to its
stockholders to the extent required by law.
SECTION 6.4. ACCESS TO INFORMATION
Upon reasonable notice, each of Acquiror and the Company (and each of
their respective Subsidiaries) shall afford to the other party and its
Representatives reasonable access, during normal business hours during the
period prior to the Effective Time, to all its personnel, properties, books,
contracts, commitments and records and, during such period, each of Acquiror and
the Company shall, and shall cause each of its respective Subsidiaries to,
furnish promptly to the other (a) a copy of each report, schedule, registration
statement and other documents filed or received by it during such period
pursuant to the requirements of federal or state securities laws and (b) all
other information concerning its business, properties and personnel as the other
party may reasonably request. Each party making such requests will hold any such
information furnished to it by the other party which is nonpublic in confidence
in accordance with the Confidentiality Agreement dated as of November 10, 1998,
between Acquiror and the Company (the "Confidentiality Agreement"). No
information or knowledge obtained in any investigation pursuant to this Section
6.4 shall affect or be deemed to modify any representation or warranty
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contained in this Agreement or the conditions to the obligations of the parties
to consummate the Merger.
SECTION 6.5. GOVERNMENTAL APPROVALS
(a) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, to
obtain as promptly as practicable all permits, registrations, licenses,
consents, variances, exemptions, orders, approvals and authorizations of all
third parties and Governmental Entities which are necessary to consummate the
transactions contemplated by this Agreement, including, without limitation, all
filings required under the HSR Act or any applicable foreign anti-trust law or
regulation ("Governmental Approvals"), and to comply with the terms and
conditions of all such Governmental Approvals. Each of the parties hereto shall
use their reasonable best efforts to, and shall use their reasonable best
efforts to cause their respective officers, directors and affiliates to, file
within 30 days after the date hereof, and in all events shall file within 60
days after the date hereof, all required initial applications and documents in
connection with obtaining the Governmental Approvals and shall act reasonably
and promptly thereafter in responding to additional requests in connection
therewith. Acquiror and the Company shall have the right to review in advance,
and to the extent practicable, each will consult the other on, in each case
subject to applicable laws relating to the exchange of information, all the
information relating to Acquiror and the Company, as the case may be, and any of
their respective Subsidiaries, directors, officers and stockholders which appear
in any filing made with, or written materials submitted to, any third party or
any Governmental Entity in connection with the transactions contemplated by this
Agreement. Without limiting the foregoing, each of Acquiror and the Company (the
"Notifying Party") will notify the other promptly of the receipt of comments or
requests from Governmental Entities relating to Governmental Approvals, and will
supply the other party with copies of all correspondence between the Notifying
Party or any of its representatives and Governmental Entities with respect to
Governmental Approvals.
(b) Acquiror and the Company shall promptly advise each other upon
receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the transactions contemplated by this
Agreement which causes such party to believe that there is a reasonable
likelihood that any approval needed from a Governmental Entity will not be
obtained or that the receipt of any such approval will be materially delayed.
Acquiror and the Company shall take any and all actions reasonably necessary to
vigorously defend, lift, mitigate and rescind the effect of any litigation or
administrative proceeding adversely affecting this Agreement or the transactions
contemplated hereby or thereby, including, without limitation, promptly
appealing any adverse court or administrative order or injunction to the extent
reasonably necessary for the foregoing purposes.
(c) Notwithstanding the foregoing or any other provision of this
Agreement, Acquiror
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shall have no obligation or affirmative duty under this Section 6.5 to cease or
refrain from the ownership of any assets or properties, or the association with
any person or entity which association is material to the operations of
Acquiror, whether on the date hereof or at any time in the future.
SECTION 6.6. PUBLICITY
Acquiror and the Company shall agree on the form and content of the
initial press release regarding the transactions contemplated hereby and
thereafter shall consult with each other before issuing, and use all reasonable
efforts to agree upon, any press release or other written public statement with
respect to any of the transactions contemplated hereby and shall not issue any
such press release or make any such written public statement or filings prior to
such consultation, except as may be required by law.
SECTION 6.7. INDEMNIFICATION
(a) From and after the Effective Time, Acquiror agrees that it will
indemnify and hold harmless each present and former director and officer of the
Company and its Subsidiaries (the "Indemnified Parties"), against any costs or
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages, liabilities or amounts paid in settlement incurred in
connection with any claim, action, suit, proceeding or investigation (whether
civil, criminal, administrative or investigative (a "Proceeding")), arising out
of or pertaining to matters existing or occurring at or prior to the Effective
Time, whether asserted or claimed prior to, at or after the Effective Time, to
the fullest extent permitted under Delaware law. The obligations of Acquiror
under this Section 6.7(a) shall include the obligation to advance expenses as
incurred prior to the final disposition of the Proceeding.
(b) Acquiror shall, until the fifth anniversary of the Effective Time (or
such earlier date as may be mutually agreed upon by Acquiror, and the applicable
Indemnified Party) cause to be maintained in effect, to the extent available,
the policies of directors' and officers' liability insurance maintained by the
Company and its Subsidiaries as of the date hereof (or policies of at least the
same coverage and amounts containing terms that are not less advantageous to the
insured parties) with respect to claims arising from facts that occurred on or
prior to the Effective Time, including without limitation all claims based upon,
arising out of, directly or indirectly resulting from, in consequence of, or in
any way involving the Merger and any and all related events. In lieu of the
purchase of such insurance by the Acquiror, Acquiror may purchase a five year
extended reporting period endorsement ("Reporting Tail Coverage") under the
Company's existing directors' and officers' liability insurance coverage,
providing that such Reporting Tail Coverage shall extend the directors' and
officers' liability coverage in force as of the date hereof for a period of at
least five (5) years from the Effective Time for any claim based upon, arising
out of, directly or indirectly resulting from, in consequence of, or any way
involving wrongful acts or omissions occurring or prior to the Effective Time,
including without limitation all claims
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based upon, arising out of, directly or indirectly resulting from, in
consequence of, or any way involving the Merger or any and all related events.
In no event shall the Acquiror be obligated to expend in order to maintain or
procure insurance coverage pursuant to this Section 6.7(b) an amount per year in
excess of $727,500 per annum. The Company represents and warrants that the
current premium on its directors' and officers' liability insurance for the
three year period commencing June, 1997 is $1,091,850.
(c) The provisions of this Section 6.7 are intended to be an addition to
the rights otherwise available to the current officers and directors of the
Company by law, charter, statute, bylaw or agreement, and shall operate for the
benefit of, and shall be enforceable by, each of the Indemnified Parties, their
heirs and their representatives.
SECTION 6.8. EMPLOYEE BENEFITS MATTERS
From the Effective Time until December 31, 1999, the Surviving
Corporation shall provide the employees of the Surviving Corporation and its
Subsidiaries (who were, prior to the Merger, employees of the Company or its
Subsidiaries) Employee Benefits which, in the aggregate, are no less favorable
to such employees, than the Employee Benefits provided to the employees of the
Company and its Subsidiaries immediately prior to the Effective Time. Acquiror
and the Company agree that the Company and the Surviving Corporation shall pay
promptly or provide when due all compensation and benefits required to be paid
pursuant to the terms of any individual agreement with any employee, former
employee, director or former director in effect and disclosed to Acquiror as of
the date hereof. For all Employee Benefits (including, without limitation,
Employee Plans and other programs of Acquiror and its affiliates after the
Effective Time), all service with the Company or any of its Subsidiaries prior
to the Effective Time of employees (excluding employees covered by collective
bargaining agreements) shall be treated as service with Acquiror and its
affiliates for purposes of eligibility, vesting, benefits accrued (other than
for the purposes of any pension plan) and determination of benefit levels to the
same extent that such service is taken into account by the Company and its
Subsidiaries as of the date hereof, except to the extent such treatment will
result in duplication of benefits. Acquiror will, or will cause the Surviving
Corporation to, (i) waive all limitations as to preexisting conditions,
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Company's employees under any Employee Plans that
such employees may be eligible to participate in after the Effective Time, other
than limitations, exclusions or waiting periods that are already in effect with
respect to such employees and that have not been satisfied as of the Effective
Time under any Employee Plan maintained for such employees immediately prior to
the Effective Time and (ii) use its reasonable best efforts to provide such
employees credit for any co-payments and deductibles paid prior to the Effective
Time in satisfying any applicable deductible or out of pocket requirements under
any Welfare Plans that such employees are eligible to participate in after the
Effective Time. "Employee Benefits" shall mean the following benefits: any
medical, health, dental, life insurance, long-term disability, severance,
pension, retirement or savings plan, policy or arrangement, including those such
plans for which coverage is generally limited to officers or a select group of
highly compensated employees of the Company or any of its Subsidiaries. Nothing
herein shall require
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the continued employment of any person or prevent the Company and/or the
Surviving Corporation from taking any action or refraining from taking any
action which the Company could take or refrain from taking prior to or after the
Effective Time, including, without limitation, any action the Company or the
Surviving Corporation could take to terminate any plan under its terms as in
effect as of the date hereof. Immediately at the Effective Time, Acquiror shall
and hereby does, assume those employment agreements, Company Employee Plans and
Employee Benefits arrangements as are set forth in Section 6.8 of the Company
Disclosure Schedule.
SECTION 6.9. AFFILIATE AGREEMENTS
Upon the execution of this Agreement, the Company and Acquiror shall
provide each other a list identifying, to the Company's or Acquiror's respective
best knowledge, those persons who are "affiliates" of the Company or Acquiror,
respectively, within the meaning of Rule 145 (each such person who is an
"affiliate" of the Company within the meaning of Rule 145 is referred to as a
"Company Affiliate" and each such person who is an "affiliate" of the Acquiror
is referred to as an "Acquiror Affiliate") promulgated under the Securities Act
("Rule 145"). The Company and Acquiror shall provide each other such information
and documents as each shall reasonably request for purposes of reviewing such
list and shall notify the other party in writing regarding any change in the
identity of its Affiliates prior to the Closing Date. The Company and Acquiror
shall each use their respective reasonable best efforts to deliver or cause to
be delivered to each other prior to the Effective Time an executed Affiliate
Agreement from each of its Affiliates substantially in the Form attached hereto
as Exhibit C (in the case of the Company Affiliates) and Exhibit D (in the case
of the Acquiror Affiliates).
SECTION 6.10. POOLING ACCOUNTING
The parties shall use their reasonable best efforts to cause the Merger
to be accounted for as a pooling of interests under GAAP and the applicable
rules and regulations of the SEC. Notwithstanding anything to the contrary in
this Agreement, from and after the date hereof and until the Effective Time,
neither the Company nor Acquiror, nor any of their respective Subsidiaries or
other Affiliates, shall knowingly take any action, or knowingly fail to take any
action, that is reasonably likely to jeopardize the treatment of the Merger as a
pooling of interests for accounting purposes under GAAP and the applicable rules
and regulations of the SEC. Acquiror and the Company shall each provide
reasonable cooperation to PricewaterhouseCoopers LLP to enable it to issue the
pooling letters referenced in Sections 6.14 and 6.15. As soon as is reasonably
practicable but in no event later than 45 days after the end of the first month
ending at least 30 days after the Effective Time, Acquiror will publish results
including at least 30 days of combined operations of Acquiror and the Company as
referred to in the written agreements provided for by Section 6.9.
SECTION 6.11. TAX TREATMENT OF REORGANIZATION
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(a) The parties intend the Merger to qualify as a reorganization under
Section 368(a) of the Code and shall use their best efforts (and shall cause
their respective Subsidiaries to use their best efforts) to cause the Merger to
so qualify. Neither the Company nor Acquiror, nor any of their respective
Subsidiaries or other affiliates, shall take any action, or fail to take any
action, that is not specifically provided for by this Agreement that would or
would be reasonably likely to adversely affect the treatment of the Merger as a
reorganization under Section 368(a) of the Code. Acquiror and the Company shall,
and shall cause their respective Subsidiaries to, take the position for all
purposes that the Merger qualifies as a reorganization under that Section of the
Code.
(b) Acquiror and the Company shall cooperate and use their best efforts in
obtaining the opinions of ▇▇▇▇ and ▇▇▇▇ LLP, counsel to the Company, and
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to Acquiror, dated as of the Closing Date, to the
effect that the Merger will qualify for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code.
SECTION 6.12. FURTHER ASSURANCES AND ACTIONS
(a) Subject to the terms and conditions herein, each of the parties hereto
agrees to use its reasonable best efforts to take, or cause to be taken, all
appropriate action, and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including, without
limitation, (i) using their respective reasonable best efforts to obtain all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of Governmental Entities and parties to contracts with each party hereto
as are necessary for consummation of the transactions contemplated by this
Agreement, and (ii) to fulfill all conditions precedent applicable to such party
pursuant to this Agreement.
(b) In case at any time after the Effective Date any further action is
necessary to carry out the purposes of this Agreement or to vest the Surviving
Corporation with full title to all properties, assets, rights, approvals,
immunities, franchises of any of the parties to the Merger, the proper officers
and/or directors of Acquiror and the Company shall take all such necessary
action.
SECTION 6.13. STOCK EXCHANGE LISTING
Acquiror shall use its best efforts to list on the NYSE prior to the
Effective Time, subject to official notice issuance, the shares of Acquiror
Common Stock to be issued as Merger Consideration and to be issued from time to
time upon exchange of the Exchangeable Shares.
SECTION 6.14. LETTER OF THE COMPANY'S ACCOUNTANTS
The Company shall use all reasonable efforts to cause to be delivered
to
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Acquiror a letter of PricewaterhouseCoopers LLP, the Company's independent
auditors, dated a date within two business days before the date on which the
Registration Statement shall become effective and addressed to Acquiror, in form
reasonably satisfactory to Acquiror and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
SECTION 6.15. LETTER OF ACQUIROR'S ACCOUNTANTS
Acquiror shall use all reasonable efforts to cause to be delivered to
the Company a letter of PricewaterhouseCoopers LLP, Acquiror's independent
auditors, dated a date within two business days before the date on which the
Registration Statement shall become effective and addressed to the Company, in
form reasonably satisfactory to the Company and customary in scope and substance
for letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
ARTICLE VII.
CONDITIONS OF MERGER
SECTION 7.1. CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER
The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Closing Date of the following
conditions:
(a) this Agreement and the Merger shall have been approved by the
stockholders of the Company and the stockholders of Acquiror in the manner
required under the DGCL and the certificate of incorporation of the Company and
Acquiror, respectively;
(b) no statute, rule, regulation, executive order, decree, ruling,
injunction or other order (whether temporary, preliminary or permanent) shall
have been enacted, entered, promulgated or enforced by any court or governmental
authority of competent jurisdiction which prohibits, restrains, enjoins or
restricts the consummation of the Merger; provided, however, that the parties
shall use their reasonable best efforts to cause any such decree, ruling,
injunction or other order to be vacated or lifted;
(c) any waiting period applicable to the Merger under the HSR Act shall
have terminated or expired;
(d) the Registration Statement and any required post-effective amendment
thereto shall have become effective under the Securities Act and shall not be
the subject of any stop order or proceedings seeking a stop order, and any
material Blue Sky Laws applicable to the registration of the Acquiror Common
Stock to be exchanged for Company Stock shall have been complied with;
(e) the shares of Acquiror Common Stock issuable to the holders of Company
Stock
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pursuant to this Agreement, and upon exchange of the Exchangeable Shares from
time to time, shall have been approved for listing on the NYSE, subject to
official notice of issuance; and
(f) Acquiror and the Company shall have each received letters from
PricewaterhouseCoopers LLP to the effect that the Merger qualifies for "pooling
of interests," accounting treatment if consummated in accordance with this
Agreement.
SECTION 7.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY TO EFFECT THE
MERGER
The obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following additional
conditions:
(a) each of the representations and warranties of Acquiror contained in
this Agreement shall be true and correct in all material respects, as of the
Effective Time as though made on and as of the Effective Time, except (i) for
changes specifically permitted or required by this Agreement, and (ii) that
those representations and warranties which address matters only as of a
particular date (other than the date of this Agreement) shall remain true and
correct as of such particular date, and (iii) where the failure to be so true
and correct would not, individually or in the aggregate, have or be reasonably
likely to have a Material Adverse Effect on Acquiror;
(b) Acquiror shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be performed or
complied with by them at or prior to the Effective Time;
(c) the Company shall have received a certificate executed on behalf of
the Acquiror by the Chief Executive Officer or Chief Financial Officer of the
Acquiror to the effect set forth in clauses (a) and (b) of this Section 7.2; and
(d) the Company shall have received an opinion of ▇▇▇▇ and ▇▇▇▇ LLP, dated
as of the Closing Date, in form and substance reasonably satisfactory to the
Company, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion that are consistent
with the state of facts existing as of such time, for federal income tax
purposes, the Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code; in rendering such opinion, ▇▇▇▇ and ▇▇▇▇ LLP may
receive and rely upon representations including those contained in this
Agreement or in certificates of officers of the parties hereto and others.
SECTION 7.3. CONDITIONS TO OBLIGATIONS OF ACQUIROR TO EFFECT THE MERGER
The obligations of Acquiror to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following additional
conditions:
(a) each of the representations and warranties of the Company contained in
this
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Agreement shall be true and correct as of the Effective Time as though made
on and as of the Effective, Time, except (i) for changes specifically permitted
or required by this Agreement, (ii) that those representations and warranties
which address matters only as of a particular date (other than the date of this
Agreement) shall remain true and correct as of such particular date, and (iii)
where the failure to be so true and correct would not, individually or in the
aggregate, have or be reasonably likely to have a Material Adverse Effect;
(b) the Company shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be performed or
complied with by it at or prior to the Effective Time;
(c) Acquiror shall have received a certificate executed on behalf of the
Company by the Chief Executive Officer or Chief Financial Officer of the Company
to the effect set forth in clauses (a) and (b) of this Section 7.3;
(d) Acquiror shall have received an opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, dated as
of the Closing Date, in form and substance reasonably satisfactory to Acquiror,
substantially to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion that are consistent with the state of
facts existing as of such time, for federal income tax purposes, the Merger will
constitute a "reorganization" within the meaning of Section 368(a) of the Code.
In rendering such opinion, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ may receive and rely upon
representations including those contained in this Agreement or in certificates
of officers of the parties or others;
(e) all consents, appeals, releases or authorizations from, and all
filings and registrations ("Consents") to or with, any Person, including but not
limited to any Governmental Entity set forth in Section 7.3(e) of the Acquiror
Disclosure Schedule shall have been made or obtained;
(f) Acquiror shall have received an opinion of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇, in
form and substance reasonably satisfactory to Acquiror, substantially to the
effect that, on the basis of facts, representations and assumptions set forth in
such opinion that are consistent with the state of facts existing as of such
time, no approval of the holders of the Exchangeable Shares is required by the
Old Support Agreement, the Old Voting and Exchange Trust Agreement or the
provisions attaching to the Exchangeable Shares or the Business Corporations Act
(Ontario) (being the statute by which Canadian Sub is governed) in order for the
Company to effect the Merger or for Acquiror to enter into the Support Agreement
Amendment or the Voting and Exchange Trust Supplement or for either to them to
perform their other obligations hereunder and that, on and after the Effective
Time, the Exchangeable Shares will be, by their terms, exchangeable for Acquiror
Common Shares rather than Company Common Shares without any approval of the
holders of the Exchangeable Shares; and
(g) No holder of Company Special Voting Stock shall have exercised and not
withdrawn any appraisal rights under the DGCL. The holders of no more than
12,500 shares of Company Preferred Stock shall have exercised and not withdrawn
any appraisal rights under the
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DGCL.
ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1. TERMINATION
This Agreement may be terminated at any time before the Effective Time
(except as otherwise provided) as follows:
(a) by mutual written consent of each of Acquiror and the Company;
(b) by either the Company or Acquiror, if the Effective Time shall not
have occurred on or before September 30, 1999 (the "Termination Time"); provided
however, that the right to terminate this Agreement under this Section 8.1(b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before the Termination Date;
(c) by either the Company or Acquiror, if a Governmental Entity shall have
issued an order, decree or injunction having the effect of making the Merger
illegal or permanently prohibiting the consummation of the Merger, and such
order, decree or injunction shall have become final and nonappealable (but only
if the terminating party shall have used its reasonable best efforts to cause
such order, decree or injunction to be lifted or vacated);
(d) by either the Company or Acquiror, if there shall have been a material
breach by the other of any of its (x) representations or warranties contained in
this Agreement, which breach would result in the failure to satisfy one or more
of the conditions set forth in Section 7.2(a) (in the case of a breach by
Acquiror) or Section 7.3(a) (in the case of a breach by the Company), or (y)
covenants or agreements contained in this Agreement, which breach would result
in the failure to satisfy one or more of the conditions set forth in Section
7.2(b) (in the case of a breach by Acquiror) or Section 7.3(b) (in the case of a
breach by the Company), and in any such case such breach shall be incapable of
being cured or, if capable of being cured, shall not have been cured within 30
days after written notice thereof shall have been received by the party alleged
to be in breach;
(e) by either the Company or Acquiror, if the required approvals of the
stockholders of the Company or Acquiror shall not have been obtained at a duly
held stockholders' meeting, including any adjournments or postponements; or
(f) by Acquiror (i) if the Board of Directors of the Company fails to
recommend approval and adoption of this Agreement and the Merger by the
stockholders of the Company or withdraws or modifies (or publicly announces an
intention to withdraw or modify) in any adverse manner its approval or
recommendation of this Agreement or the Merger; (ii) if the Board of Directors
of the Company makes any public recommendation with respect to any Acquisition
Proposal other than a recommendation to reject such Acquisition Proposal or as
may
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be required to comply with Rule 14e-2 under the Exchange Act; (iii) if the
Company engages in a solicitation of an Acquisition Proposal prohibited by
Section 6.3; or (iv) if the Board of Directors of the Company resolves to take
any of the actions specified above.
SECTION 8.2. EFFECT OF TERMINATION
(a) In the event of termination of this Agreement pursuant to this Article
VIII, this Agreement (other than as set forth in Section 9.1) shall become void
and of no effect with no liability on the part of any party hereto (or of any of
its Representatives); provided, however, no such termination shall relieve any
party hereto from (x) any liability for damages resulting from any willful or
intentional breach of this Agreement (whether or not any fees contemplated by
this Section 8.2 are payable) or (y) any obligation to pay the termination fees
provided for below or Fees and Expenses (as defined) pursuant to this Section
8.2.
(b) In the event that (i) this Agreement is terminated by Acquiror
pursuant to Section 8.1(f) or (ii) prior to the meeting of the Company's
stockholders duly convened and held to vote in respect of this Agreement and the
Merger, a bona fide Acquisition Proposal shall have been made to the Company and
made known to its stockholders generally or shall have been made directly to its
stockholders generally, or any Person shall have publicly announced an intention
(whether or not conditional) to make a bona fide Acquisition Proposal (whether
or not such proposal shall have been rejected or shall have been withdrawn), and
thereafter (x) this Agreement is terminated pursuant to Section 8.1(e) by reason
of the failure of the stockholders of the Company to approve this Agreement or
the Merger at such meeting or (y) this Agreement is terminated by Acquiror
pursuant to 8.1(d)(y) by reason of a breach by the Company of its covenants or
agreements hereunder, then, in the case of either clause (i) or clause (ii), the
Company shall, simultaneously with such termination, pay to Acquiror a fee equal
to $35,000,000 (the "Initial Termination Fee"). In addition, in the event that
this Agreement is terminated under circumstances in which the Initial
Termination Fee becomes payable, and within twelve months of such termination,
the Company enters into an agreement with any Person with respect to an
Acquisition Proposal or an Acquisition Proposal is consummated, then, upon the
signing of such agreement, or if no agreement is signed, then at the closing
(and as a condition to the closing, which condition may not be waived without
the express written consent of Acquiror) of such Acquisition Proposal, the
Company shall pay to Acquiror an additional termination fee equal to $75,000,000
(the "Additional Termination Fee").
(c) In the event that this Agreement is terminated by Acquiror pursuant to
Section 8.1(f) or pursuant to Section 8.1(e) by reason of the failure of the
Company's stockholders to approve this Agreement or the Merger at the Company
Stockholder Meeting, or pursuant to Section 8.1(d), the Company shall promptly
upon such termination (following receipt of a statement therefor) reimburse
Acquiror for all fees and expenses (including, without limitation, fees and
expenses of counsel, financial advisors, accountants, consultants and other
advisors and Representatives) ("Fees and Expenses"), up to a maximum of
$3,000,000, incurred
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and paid by Acquiror in connection with this Agreement and the Merger. In the
event that this Agreement is terminated by the Company pursuant to Section
8.1(e) by reason of the failure of Acquiror's stockholders to approve this
Agreement or the Merger at the Acquiror Stockholder Meeting, or pursuant to
Section 8.1(d), Acquiror shall promptly upon such termination (following receipt
of a statement therefor) reimburse the Company for all Fees and Expenses, up to
a maximum of $3,000,000, incurred by the Company in connection with this
Agreement and the Merger.
(d) Reimbursements of Fees and Expenses hereunder and any Initial
Termination Fee or Additional Termination Fee payable hereunder shall be payable
by wire transfer of immediately available funds.
(e) The parties acknowledge that the agreements contained in this Section
8.2 are an integral part of the transactions contemplated by this Agreement, and
that, without these agreements, the parties would not enter into this Section
8.2, and, if in order to obtain such payment, Acquiror commences a suit which
results in a judgment against the Company for such amount (or any portion
thereof), the Company shall pay the costs and expenses (including attorneys'
fees) of Acquiror in connection with such suit, together with interest on such
amount in respect of the period from the date such amount became due until the
date such amount is paid at the prime rate of The Chase Manhattan Bank in effect
from time to time during such period.
SECTION 8.3. EXPENSES
The Surviving Corporation shall pay all charges and expenses, including
those of the Exchange Agent, in connection with the transactions contemplated in
Article II. Except as otherwise specifically provided herein, each party shall
bear its own expenses in connection with this Agreement and the transactions
contemplated hereby.
SECTION 8.4. AMENDMENT
This Agreement may be amended by the parties hereto by action taken by or
on behalf of their respective Boards of Directors at any time before or after
any required approval of matters presented in connection with the Merger by the
stockholders of the Company; provided, however, that after any such approval,
there shall be made no amendment that by law requires further approval by such
stockholders without the further approval of such stockholders. This Agreement
may not be amended except by an instrument in writing signed by the parties
hereto.
SECTION 8.5. WAIVER
At any time prior to the Closing Date, any party hereto may (a) extend the
time for the performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid if set forth in an instrument in
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writing signed by the party or parties to be bound thereby. 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.
ARTICLE IX.
GENERAL PROVISIONS
SECTION 9.1. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
The representations, warranties and agreements in this Agreement shall
terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 8.1, as the case may be, except that (a) the agreements set
forth in Sections 2.10, 2.11(b), 2.11(c), 2.11(e), 2.11(f), 2.13, 2.14, 6.7,
6.8, 6.12 and 9.6 shall survive the Effective Time and (b) the agreements set
forth in the Confidentiality Agreement and in Sections 8.2 and 9.6 shall survive
termination indefinitely.
SECTION 9.2. NOTICES
All notices, requests, claims, demands and other communications hereunder
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in person, by cable, telecopy, telegram or
telex, by registered or certified mail (postage prepaid, return receipt
requested), or by overnight courier, to the respective parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
if to Acquiror:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with an additional copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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if to the Company:
▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 9.3. 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 so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. 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 in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the fullest extent possible.
SECTION 9.4. ENTIRE AGREEMENT; ASSIGNMENT
This Agreement (including the Company Disclosure Schedule and the Acquiror
Disclosure Schedule), together with the Confidentiality Agreement and the Stock
Option Agreement, constitutes the entire agreement among the parties with
respect to the subject matter hereof and supersedes all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. This Agreement shall not be assigned by
any party by operation of law or otherwise without the express written consent
of each of the other parties.
SECTION 9.5. PARTIES IN INTEREST
This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and, except for Section 6.7, nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 9.6. GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Delaware, without reference to the conflict of laws
principles thereof.
SECTION 9.7. HEADINGS
The descriptive headings contained in this Agreement are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
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SECTION 9.8. SPECIFIC PERFORMANCE
Each of the parties hereto acknowledges and agrees that the other parties
hereto would be irreparably damaged in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. Accordingly, each of the parties hereto agrees that they
each shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement and
the terms and conditions hereof in any action instituted in any court of the
United States or any state having competent jurisdiction, in addition to any
other remedy to which such party may be entitled, at law or in equity.
SECTION 9.9. ALTERNATIVE TRANSACTION STRUCTURE
At the request of Acquiror, the transactions contemplated by this
Agreement may be restructured in the form of a "butterfly" reorganization or
similar structure, or such other form as Acquiror may determine to be
appropriate, provided that any such alternative transaction structure does not
(i) delay the consummation of the Merger in any material respect, or (ii) result
in any adverse consequences (tax or otherwise) to the Company or its
shareholders.
SECTION 9.10. COUNTERPARTS
This Agreement may be executed in two or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
[Signature page follows.]
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IN WITNESS WHEREOF, Acquiror and the Company have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
MATTEL, INC.
/s/ ▇▇▇ ▇▇▇▇▇▇▇
By:____________________________________
Name: ▇▇▇ ▇▇▇▇▇▇▇
Title: President, Corporate Operations
THE LEARNING COMPANY, INC.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
By:____________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
/s/ ▇▇▇▇▇ ▇'▇▇▇▇▇
By:____________________________________
Name: ▇▇▇▇▇ ▇'▇▇▇▇▇
Title: President
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EXHIBIT A
FORM OF STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of December 13, 1998 (the
"Agreement"), between MATTEL, INC., a Delaware corporation (the "Grantee"), and
THE LEARNING COMPANY, INC., a Delaware corporation (the "Grantor").
WHEREAS, Grantor and Grantee are entering into an Agreement and Plan
of Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to
which, and upon the terms and subject to the conditions thereof, Grantor is to
merge (the "Merger") with and into Grantee, with Grantor continuing as the
surviving corporation after the Merger;
WHEREAS, as a condition and inducement to Grantee's willingness to
enter into the Merger Agreement, Grantor is granting to the Grantee an option to
purchase 15,673,160 shares of common stock, par value $.01 per share, of the
Grantor (the "Common Stock"), upon the terms and subject to the conditions
hereof;
WHEREAS, in order to induce the Grantee to enter into the Merger
Agreement the Grantor is willing to grant the Grantee the requested option; and
WHEREAS, the Board of Directors of the Grantor has approved the
grant by Grantor of the Option (defined below) pursuant to this Agreement.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
1. The Option; Exercise; Adjustments.
a) Contemporaneously herewith, the Grantee and the Grantor are
entering into the Merger Agreement. Subject to the other terms and conditions
set forth herein, the Grantor hereby grants to the Grantee an irrevocable option
(the "Option") to purchase up to 15,673,160 (as adjusted as provided herein)
shares of Common Stock (the shares issuable upon exercise of this Option being
referred to as the "Shares") at a per Share cash purchase price (the "Purchase
Price") equal to the lesser of (i) $28.3125 and (ii) the product of (A) the
closing price of a share of the Grantee's common stock, par value $1.00, per
share, on the New York Stock Exchange Composite Tape (the "NYSE Composite Tape")
on the trading day (the "Prior Trading Day") immediately prior to the day on
which the Grantee delivers a Stock Exercise Notice, multiplied by (B) the
Exchange Ratio (as defined in the Merger Agreement) in effect on the Prior
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Trading Day. The Option may be exercised by the Grantee, in whole or in part, at
any time, or from time to time, following the occurrence of a Triggering Event
(as defined below) and prior to the termination of the Option in accordance with
the terms of this Agreement.
b) In the event the Grantee wishes to exercise the Option, the
Grantee shall send a written notice to the Grantor (the "Stock Exercise Notice")
specifying a date (subject to the HSR Act (as defined below)) not later than 10
business days and not earlier than the next business day following the date such
notice is given for the closing of such purchase. In the event of any change in
the number of issued and outstanding shares of Common Stock by reason of any
stock dividend, stock split, split-up, reclassification, recapitalization,
merger or other change in the corporate or capital structure of the Grantor, the
number of Shares subject to this Option and the purchase price per Share shall
be appropriately adjusted to restore the Grantee to its rights hereunder,
including its right to purchase Shares representing 18% of the capital stock of
the Grantor entitled to vote generally for the election of the directors of the
Grantor which is issued and outstanding immediately prior to the exercise of the
Option at an aggregate purchase price equal to the Purchase Price multiplied by
15,673,160. In the event that any additional shares of Common Stock are issued
after the date of this Agreement upon (i) the conversion of any currently issued
Series A Convertible Participating Preferred Stock, par value $.01 per share, of
the Grantor, (ii) the exchange of any Exchangeable Non-Voting Shares of SoftKey
Software Products Inc., (iii) the conversion of any amount of the 5 1/2% Senior
Convertible Notes due 2000 of the Grantor, or (iv) the issuance of 828,054
shares of Common Stock in connection with the Grantor's acquisition of Palladium
Interactive, Inc., the number of Shares subject to this Option shall be
increased by 18% of the number of the additional shares of Common Stock so
issued (and such additional Shares shall have a purchase price equal to the
Purchase Price); provided, however, that in no event will the number of shares
issued upon exercise of the Option exceed the maximum amount permitted to be
issued without shareholder approval under the rules of the New York Stock
Exchange ("NYSE").
2. Conditions to Delivery of Shares. The Grantor's obligation to
deliver Shares upon exercise of the Option is subject only to the conditions
that:
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a) No preliminary or permanent injunction or other order
issued by any federal or state court of competent jurisdiction in the United
States prohibiting the delivery of the Shares shall be in effect; and
b) Any applicable waiting periods under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇") shall have expired or been
terminated and all other consents, approvals, orders, notifications or
authorizations, the failure of which to obtain or make would have the effect of
making the issuance of the Shares illegal (collectively, the "Regulatory
Approvals") shall have been obtained or made; and
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c) A Triggering Event has occurred. A "Triggering Event" shall
have occurred at such time at which Grantee becomes entitled to receive the
Additional Termination Fee from Grantor pursuant to Section 8.2(b) of the Merger
Agreement.
3. The Closing.
a) Any closing hereunder shall take place on the date
specified by the Grantee in its Stock Exercise Notice, at 8:00 A.M., local time,
at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or, if the conditions set forth in Section 2(a) or 2(b) have
not then been satisfied, on the second business day following the satisfaction
of such conditions, or at such other time and place as the parties hereto may
agree (the "Closing Date"). On the Closing Date, the Grantor will deliver to the
Grantee a certificate or certificates, duly endorsed (or accompanied by duly
executed stock powers), representing the Shares in the denominations designated
by the Grantee in its Stock Exercise Notice and the Grantee will purchase such
Shares from the Grantor at the price per Share equal to the Purchase Price. Any
payment made by the Grantee to the Grantor, or by the Grantor to the Grantee,
pursuant to this Agreement shall be made by certified or official bank check or
by wire transfer of federal funds to a bank designated by the party receiving
such funds.
b) The certificates representing the Shares may bear an
appropriate legend relating to the fact that such Shares have not been
registered under the Securities Act of 1933, as amended (the "Securities Act").
4. Representations And Warranties of the Grantor. The Grantor
represents and warrants to the Grantee that (a) the Grantor is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to enter
into and perform this Agreement; (b) the execution and delivery of this
Agreement by the Grantor and the consummation by it of the transactions
contemplated hereby have been duly authorized by the Board of Directors of the
Grantor and this Agreement has been duly executed and delivered by a duly
authorized officer of the Grantor and constitutes a valid and binding obligation
of the Grantor, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles; (c) the Grantor has taken all necessary corporate action to
authorize and reserve the Shares issuable upon exercise of the Option and the
Shares, when issued and delivered by the Grantor upon exercise of the Option,
will be duly authorized, validly issued, fully paid and non-assessable and free
of preemptive rights; (d) except as otherwise required by the HSR Act and other
than any filings required under the blue sky laws of any states or by the NYSE,
the execution and delivery of this Agreement by the Grantor and the issuance of
Shares upon exercise of the Option
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do not require the consent, waiver, approval or authorization of or any filing
with any person or public authority and will not violate, result in a breach of
or the acceleration of any obligation under, or constitute a default under, any
provision of any charter or bylaw or any indenture, mortgage, lien, lease,
agreement, contract, instrument, order, law, rule, regulation, judgment,
ordinance, or decree, or restriction by which the Grantor or any of its
subsidiaries or any of their respective properties or assets is bound; and (e)
none of the restrictions of any "fair price", "moratorium", "control share
acquisition" or other form of antitakeover statute or regulation (including,
without limitation, the restrictions on "business combinations" set forth in
Section 203 of the Delaware General Corporation Law) is or shall be applicable
to the acquisition of Shares pursuant to this Agreement (and the Board of
Directors of Grantor has taken all action to approve the acquisition of the
Shares to the extent necessary to avoid such application). Additionally, Grantor
will not avoid or seek to avoid (whether by charter amendment or through
reorganization, consolidation, merger, issuance of rights, dissolution or sale
of assets, or by any other voluntary act) the observance or performance of any
of the covenants, agreements or conditions to be observed or performed hereunder
by Grantor and Grantor will not take any action which would cause any of its
representations or warranties not to be true in any material respect.
5. Representations and Warranties of the Grantee. The Grantee
represents and warrants to the Grantor that (a) the execution and delivery of
this Agreement by the Grantee and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Grantee and this Agreement has been duly executed and
delivered by a duly authorized officer of the Grantee and will constitute a
valid and binding obligation of the Grantee; and (b) the Grantee is acquiring
the Option after the Grantee has been afforded the opportunity to obtain, and
has obtained, sufficient information regarding the Grantor to make an informed
investment decision with respect to the Grantee's purchase of the Shares
issuable upon the exercise thereof, and, if and when the Grantee exercises the
Option, it will be acquiring the Shares issuable upon the exercise thereof for
its own account and not with a view to distribution or resale in any manner
which would be in violation of the Securities Act.
a) 6. Listing of Shares; HSR Act Filings; Regulatory Approvals.
Subject to applicable law and the rules and regulations of the NYSE, the Grantor
will promptly file an application to list the Shares on the NYSE and will use
its best efforts to obtain approval of such listing and to file all necessary
filings by the Grantor under the HSR Act; provided, however, that if the Grantor
is unable to effect such listing on the NYSE by the Closing Date, the Grantor
will nevertheless be obligated to deliver the Shares upon the Closing Date.
Grantor will use its best efforts to obtain consents of all third parties and
all Regulatory Approvals, if any, necessary to
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the consummation of the transactions contemplated.
7. Registration Rights.
a) In the event that the Grantee shall desire to sell any of
the Shares within two years after the purchase of such Shares pursuant hereto,
and such sale requires, based on advice of counsel to Grantee, registration of
such Shares under the Securities Act, the Grantor will cooperate with the
Grantee and any underwriters in registering such Shares for resale, including,
without limitation, promptly filing a registration statement which complies with
the requirements of applicable federal and state securities laws, entering into
an underwriting agreement with such underwriters upon such terms and conditions
as are customarily contained in underwriting agreements with respect to
secondary distributions; provided that the Grantor shall not be required to have
declared effective more than two registration statements hereunder and shall be
entitled to delay the filing or effectiveness of any registration statement for
up to 120 days in any twelve month period if the offering would, in the judgment
of the Board of Directors of the Grantor, require premature disclosure of any
material corporate development or otherwise materially interfere with or
adversely affect any pending or proposed offering of securities of the Grantor
or any other material transaction involving the Grantor.
b) If the Common Stock is registered pursuant to the
provisions of this Section 7, the Grantor agrees (i) to furnish copies of the
registration statement and the prospectus relating to the Shares covered thereby
in such numbers as the Grantee may from time to time reasonably request and (ii)
if any event shall occur as a result of which it becomes necessary to amend or
supplement any registration statement or prospectus, to prepare and file under
the applicable securities laws such amendments and supplements as may be
necessary to keep effective for at least 90 days a prospectus covering the
Common Stock meeting the requirements of such securities laws, and to furnish
the Grantee such numbers of copies of the registration statement and prospectus
as amended or supplemented as may reasonably be requested. The Grantor shall
bear the cost of the registration, including, but not limited to, all
registration and filing fees, printing expenses, and fees and disbursements of
counsel and accountants for the Grantor, except that the Grantee shall pay the
fees and disbursements of its counsel, the underwriting fees and selling
commissions applicable to the shares of Common Stock sold by the Grantee. The
Grantor shall indemnify and hold harmless Grantee, its affiliates and its
officers, directors and controlling persons from and against any and all losses,
claims, damages, liabilities and expenses arising out of or based upon any
statements contained or incorporated by reference in, and omissions or alleged
omissions from, each registration statement filed pursuant to this paragraph;
provided, however, that this provision does not apply to any loss, liability,
claim, damage or expense to the extent it arises out of any untrue statement or
omission made in reliance upon and in conformity with written information
furnished to the Grantor by the Grantee, its affiliates and its officers
expressly for use in any registration statement (or any amendment
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thereto) or any preliminary prospectus filed pursuant to this paragraph. The
Grantor shall also indemnify and hold harmless each underwriter and each person
who controls any underwriter within the meaning of either the Securities Act or
the Securities Exchange Act of 1934, as amended, against any and all losses,
claims, damages, liabilities and expenses arising out of or based upon any
statements contained or incorporated by reference in, and omissions or alleged
omissions from, each registration statement filed pursuant to this paragraph;
provided, however, that this provision does not apply to any loss, liability,
claim, damage or expense to the extent it arises out of any untrue statement or
omission made in reliance upon and in conformity with written information
furnished to the Grantor by the underwriters expressly for use in any
registration statement (or any amendment thereto) or any preliminary prospectus
filed pursuant to this paragraph.
8. Right of First Refusal. If the Grantee, at any time prior to the
earlier of (a) the occurrence of a Change in Control Event (as defined below) or
(b) the second anniversary of the termination of the Merger Agreement, seeks to
sell all or any part of the Shares (i) in a transaction registered under the
Securities Act (other than in a registered public offering in which the
underwriters are instructed to make a broad public distribution) or (ii) in a
transaction not required to be registered under the Securities Act (other than
in a transfer (a) by operation of law upon consummation of a merger or (b) as a
result of which the proposed transferee would own beneficially not more than 2%
of the outstanding voting power of the Grantor), it shall give the Grantor (or a
designee of the Grantor) the opportunity, in the following manner, to purchase
such Shares:
a) The Grantee shall give notice to the Grantor in writing of
its intent to sell Shares (a "Disposition Notice"), specifying the maximum
number of Shares to be sold, the price and, if applicable, the material terms of
any agreement relating thereto. For purposes of this Section 8, if the
Disposition Notice is given with respect to the sale of the Shares pursuant to a
tender or exchange offer, it shall be assumed that all Shares tendered will be
accepted for payment. The Disposition Notice may be given at any time, including
prior to the giving of any Stock Exercise Notice.
b) The Grantor or its designee shall have the right,
exercisable by written notice given to the Grantee within five business days
after receipt of a Disposition Notice (or, if applicable, in the case of a
proposed sale pursuant to a tender or exchange offer for shares of Common Stock,
by written notice given to the Grantee at least two business days prior to the
then announced expiration date of such tender or exchange offer (the "Expiration
Date") if such
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Disposition Notice was given at least four business days prior to such
Expiration Date), to purchase all, but not less than all, of the Shares
specified in the Disposition Notice at the price set forth in the Disposition
Notice. If the purchase price specified in the Disposition Notice includes any
property other than cash, the purchase price to be paid by the Grantor shall be
an amount of cash equal to the sum of (i) the cash included in the purchase
price plus (ii) the fair market value of such other property at the date of the
Disposition Notice. If such other property consists of securities with an
existing public trading market, the average closing price (or the average
closing bid and asked price if closing prices are unavailable) for such
securities on their principal public trading market for the five trading days
ending five days prior to the date of the Disposition Notice shall be deemed to
equal the fair market value of such property. If such other property consists of
something other than cash or securities with an existing public trading market
and at the time of the closing referred to in paragraph (c) below, agreement on
the value of such other property has not been reached, the higher of (i) the
cash included in the purchase price and (ii) the average closing price of the
Common Stock on the NYSE for the five trading days ending five days prior to the
date of the Disposition Notice shall be used as the per share purchase price;
provided, however, that promptly after the closing, the Grantee and the Grantor
or its designee, as the case may be, shall settle any additional amounts to be
paid or returned as a result of the determination of fair market value of such
other property made by a nationally recognized investment banking firm selected
by the Grantor and approved by the Grantee within thirty (30) days of the
closing. Such determination shall be final and binding on all parties hereto.
If, at the time of the purchase of any Shares by the Grantor (or its designee)
pursuant to this Section 9, a tender or exchange offer is outstanding, then the
Grantor (or its designee) shall agree at the time of such purchase to promptly
pay to Grantee from time to time such additional amounts, if any, so that the
consideration received by Grantee with respect to each Share shall be equal to
the highest price paid for a share of Common Stock pursuant to such tender or
exchange, or pursuant to any other tender or exchange offer outstanding at any
time such tender or exchange offer is outstanding.
c) If the Grantor exercises its right of first refusal
hereunder, the closing of the purchase of the Shares with respect to which such
right has been exercised shall take place within five business days after the
notice of such exercise (or, if applicable, in the case of a tender or exchange
offer, no later than one business day prior to the expiration date of the offer
if written notice was given within the time set forth in the parenthetical in
the first sentence of paragraph (b) above); provided, however, that at any time
prior to the closing of the purchase of Shares hereunder, the Grantee may
determine not to sell the Shares and revoke the Disposition Notice and, by so
doing, cancel the Grantor's right of first refusal with respect to the
disposition in question. The Grantor (or its designee) shall pay for the Shares
in immediately available funds.
d) If the Grantor does not exercise its right of first refusal
hereunder
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within the time specified for such exercise, the Grantee shall be free for
ninety (90) days following the expiration of such time for exercise to sell up
to the maximum number of Shares specified in the Disposition Notice, at the
price specified in the Disposition Notice or any price in excess thereof and
otherwise on substantially the same terms set forth in the Disposition Notice;
provided, that if such sale is not consummated within such 90-day period, then
the provisions of this Section 9 will again apply to the sale of such shares.
e) For purposes of the Agreement, a "Change in Control Event"
shall be deemed to have occurred if (i) any person has acquired beneficial
ownership of more than 50% (excluding the Shares) of the outstanding shares of
Common Stock or (ii) the Grantor shall have entered into an agreement, including
without limitation an agreement in principle, providing for a merger or other
business combination involving the Grantor or the acquisition of 30% or more of
the assets of the Grantor and its subsidiaries, taken as a whole.
9. Repurchase of Shares. If a Change in Control Event has not
occurred prior to the first anniversary of the date on which the Option
terminates pursuant to Section 20 hereof, then beginning on such anniversary
date, and continuing for a period of 30 days thereafter, the Grantor shall have
the right to purchase (the "Repurchase Right") all, but not less than all, of
the Shares at the greater of (i) the Purchase Price, or (ii) the average closing
price of the Common Stock on the NYSE Composite Tape for the five trading days
ending five days prior to the date the Grantor gives written notice of its
intention to exercise the Repurchase Right. If the Grantor does not exercise the
Repurchase Right within the thirty (30) day period following the first
anniversary of the date on which the Option terminates, the Repurchase Right
shall terminate. In the event the Grantor wishes to exercise the Repurchase
Right, the Grantor shall send a written notice to the Grantee specifying a date
(not later than ten (10) business days and not earlier than two business days
following the date such notice is given) for the closing of such purchase.
10. Profit Limitation.
a) Notwithstanding any other provision of this Agreement, in
no event shall the Grantee's Total Profit (as hereinafter defined) exceed
$125,000,000 (the "Profit Limit") and, if it otherwise would exceed such amount,
the Grantee, at its sole election, shall, within five business days, either (i)
deliver to the Grantor for cancellation Shares (valued, for the purposes of this
Section 10(a), at the average closing sales price of the Common Stock on the
NYSE Composite Tape for the twenty consecutive trading days preceding the day on
which the Grantee's Total Profit exceeds $125,000,000) previously purchased by
the Grantee, (ii) pay cash
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or other consideration to the Grantor or refund in cash Liquidation Amounts
previously paid or reduce or waive the amount of any Liquidation Amount payable
pursuant to Section 8.2(b) of the Merger Agreement, or (iii) undertake any
combination thereof, so that Grantee's Total Profit shall not exceed the Profit
Limit after taking into account the foregoing actions.
b) The term "Liquidation Amounts" means the aggregate amount
of any Initial Termination Fee and Additional Termination Fee (each as defined
in the Merger Agreement) payable or paid to Grantee pursuant to Section 8.2 of
the Merger Agreement and not repaid or refunded to the Grantor pursuant to this
Section 10 or otherwise.
c) Notwithstanding any other provision of this Agreement, the
Option may not be exercised for a number of Shares that would, as of the date of
the Exercise Notice, result in a Notional Total Profit (as defined below) of
more than the Profit Limit and, if exercise of the Option otherwise would exceed
the Profit Limit, the Grantee, at its discretion, may increase the Purchase
Price for that number of Shares set forth in the Exercise Notice so that the
Notional Total Profit shall not exceed the Profit Limit; provided, that nothing
in this sentence shall restrict any exercise of the Option permitted hereby on
any subsequent date at the Purchase Price set forth in Section 1(a) hereof.
d) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount of cash
Liquidation Amounts received by Grantee pursuant to Section 8.2(b) of the Merger
Agreement, (ii) (x) the net cash amounts received by Grantee pursuant to the
sale of Shares (or any other securities into which such Shares are converted or
exchanged) to any unaffiliated party, less (y) the Grantee's purchase price for
such Shares.
e) As used herein, the term "Notional Total Profit" with
respect to any number of Shares as to which Grantee may propose to exercise the
Option shall be the Total Profit determined as of the date of the Exercise
Notice assuming that the Option were exercised on such date for such number of
Shares and assuming that such Shares, together with all other Shares held by the
Grantee and its subsidiaries as of such date, were sold for cash at the closing
market price for the Common Stock on the NYSE Composite Tape of the close of
business on the preceding trading day (less customary brokerage commissions).
11. Expenses. Each party hereto shall pay its own expenses incurred
in connection with this Agreement, except as otherwise specifically provided
herein.
12. Specific Performance. The Grantor acknowledges that if the
Grantor fails to perform any of its obligations under this Agreement, immediate
and irreparable harm or injury would be caused to the Grantee for which money
damages would not be an adequate remedy.
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In such event, the Grantor agrees that the Grantee shall have the right, in
addition to any other rights it may have, to specific performance of this
Agreement. Accordingly, if the Grantee should institute an action or proceeding
seeking specific enforcement of the provisions hereof, the Grantor hereby waives
the claim or defense that the Grantee has an adequate remedy at law and hereby
agrees not to assert in any such action or proceeding the claim or defense that
such a remedy at law exists. The Grantor further agrees to waive any
requirements for the securing or posting of any bond in connection with
obtaining any such equitable relief.
13. Notice. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given and made if in writing and if
served by personal delivery upon the party for whom it is intended or delivered
by registered or certified mail, return receipt requested, or if sent by
facsimile transmission, upon receipt of oral confirmation that such transmission
has been received, to the person at the address set forth below, or such other
address as may be designated in writing hereafter, in the same manner, by such
person:
If to the Grantor:
The Learning Company, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Grantee:
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Mattel, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
14. Parties in Interest. This Agreement shall inure to the benefit
of and be binding upon the parties named herein and their respective permitted
successors and assigns; provided, however, that such successor in interest or
assigns shall agree to be bound by the provisions of this Agreement. Except as
set forth in Section 7, nothing in this Agreement, express or implied, is
intended to confer upon any person other than the Grantor or the Grantee, or
their successors or assigns, any rights or remedies under or by reason of this
Agreement.
15. Entire Agreement; Amendments. This Agreement, together with the
Merger Agreement and the other documents referred to therein, contains the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions. This
Agreement may not be changed, amended or modified orally, but may be changed
only by an agreement in writing signed by the party against whom any waiver,
change, amendment, modification or discharge may be sought.
16. Assignment. No party to this Agreement may assign any of its
rights or
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obligations under this Agreement without the prior written consent of the other
party hereto, except that the Grantee may assign its rights and obligations
hereunder to any of its direct or indirect wholly owned subsidiaries, but no
such transfer shall relieve the Grantee of its obligations hereunder if such
transferee does not perform such obligations. Any assignment made in violation
of this Section 16 shall be void.
17. Headings. The section headings herein are for convenience only
and shall not affect the construction of this Agreement.
18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute one and the same document.
19. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware (regardless of the laws
that might otherwise govern under applicable Delaware principles of conflicts of
law).
20. Termination. The right to exercise the Option granted pursuant
to this Agreement shall terminate at the earliest of (i) the Effective Time (as
defined in the Merger Agreement), (ii) the date on which the Grantee realizes a
Total Profit equal to the Profit Limit, (iii) the date on which the Merger
Agreement is terminated if no Initial Termination Fee or Additional Termination
Fee (each as defined in the Merger Agreement) could be payable to Grantor
pursuant to the terms of the Merger Agreement upon the occurrence of certain
events or the passage of time, and (iv) if no Triggering Event shall have
occurred, the date that is twelve months after the termination of the Merger
Agreement, and (v) 180 days following the occurrence of a Triggering Event (the
date referred to in this clause (v) being referred to as the "Option Expiration
Date"); provided, however, that if the Option cannot be exercised or the Shares
cannot be delivered to the Grantee upon such exercise because the conditions set
forth in Section 2(a) or Section 2(b) hereof have not yet been satisfied, the
Option Expiration Date shall be extended for a period of up to an additional
sixty (60) days; and provided, further, that, if at any time the Grantee seeks
to exercise the Option by delivery of a Stock Exercise Notice but is unable to
do so with respect to all of the Shares subject to the Option at the Purchase
Price because of the limitation on profit contained in Section 10(b) hereof, the
Option Termination Date shall be extended for an additional 30 days from the
date of such Stock Exercise Notice (but in no event shall the Option Termination
Date be more than 240 days after the occurrence of a Triggering Event). "Notice
Date" shall mean the date, if any, upon which the Grantee delivers a Stock
Exercise Notice to the Grantor.
All representations and warranties contained in this Agreement shall
survive delivery of and payment for the Shares.
▇-▇▇
▇▇
▇▇. Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
[Signature Page to Follow]
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Signature page for Stock Option Agreement
IN WITNESS WHEREOF, the Grantee and the Grantor have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first written above.
THE LEARNING COMPANY, INC.
________________________________________
By:
Its:
MATTEL, INC.
________________________________________
By:
Its:
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EXHIBIT B
FORM OF STOCKHOLDER SUPPORT AGREEMENT
STOCKHOLDER SUPPORT AGREEMENT, dated as of December 13, 1998 (this
"Agreement"), by the stockholders listed on the signature page(s) hereto
(collectively, "Stockholders" and each individually, a "Stockholder") to and for
the benefit of Mattel, Inc., a Delaware corporation ("Acquiror"). Capitalized
terms used and not otherwise defined herein shall have the respective meanings
assigned to them in the Merger Agreement referred to below.
WHEREAS, as of the date hereof, the Stockholders collectively own of
record and beneficially shares of capital stock of The Learning Company, Inc., a
Delaware corporation (the "Company"), as set forth on Schedule I hereto (such
shares or any other voting or equity of securities of the Company, hereafter
acquired by any Stockholder prior to the termination of this Agreement, being
referred to herein collectively as the "Shares");
WHEREAS, concurrently with the execution of this Agreement, Acquiror
and the Company are entering into an Agreement and Plan of Merger, dated as of
the date hereof (the "Merger Agreement"), pursuant to which, upon the terms and
subject to the conditions thereof, the Company will be merged with and into
Acquiror, and Acquiror will be the surviving corporation (the "Merger"); and
WHEREAS, as a condition to the willingness of the Company and
Acquiror to enter into the Merger Agreement, Acquiror has requested that the
Stockholders agree, and in order to induce Acquiror to enter into the Merger
Agreement, the Stockholders are willing to agree to vote in favor of adopting
the Merger Agreement and approving the Merger, upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereby agree, severally and not jointly, as follows:
Section 1. Voting of Shares. Each Stockholder covenants and agrees
that until the termination of this Agreement in accordance with the terms
hereof, at the Company Stockholder Meeting or any other meeting of the
stockholders of the Company, however called, and in any action by written
consent of the stockholders of the Company, such Stockholder will vote, or cause
to be voted, all of his, her or its respective Shares in favor of adoption of
the Merger Agreement and approval of the Merger contemplated by the Merger
Agreement, as the Merger Agreement may be modified or amended from time to time
in a manner not adverse to the Stockholders. In addition, such Stockholder
agrees that it will, upon request by Acquiror, furnish written confirmation, in
form and substance reasonably acceptable to Acquiror, of such Stockholder's vote
in favor of the Merger Agreement and the Merger. Each Stockholder covenants and
agrees to deliver to Acquiror upon request immediately prior to any vote
contemplated by the first sentence of this Section 1, a proxy substantially in
the form attached
96
hereto as Annex A (a "Proxy"), which Proxy shall be irrevocable during the term
of this Agreement to the extent permitted under Delaware law, and Acquiror
agrees to vote the Shares subject to such Proxy in favor of the approval and
adoption of the Merger Agreement and the Merger. Each Stockholder acknowledges
receipt and review of a copy of the Merger Agreement. Each Stockholder
acknowledges and agrees that this proxy, if and when given, shall be coupled
with an interest, shall constitute, among other things, an inducement for
Acquiror to enter into the Merger Agreement, shall be irrevocable and shall not
be terminated by operation of law or otherwise upon the occurrence of any event
and that no subsequent proxies with respect to such Shares shall be given (and
if given shall not be effective); provided, however, that any such proxy shall
terminate automatically and without further action on behalf of the Stockholders
upon the termination of this Agreement.
Section 2. Transfer of Shares. Each Stockholder covenants and agrees
that such Stockholder will not directly or indirectly, (a) sell, assign,
transfer (including by merger, testamentary disposition, interspousal
disposition pursuant to a domestic relations proceeding or otherwise by
operation of law), pledge, encumber or otherwise dispose of any of the Shares,
(b) deposit any of the Shares into a voting trust or enter into a voting
agreement or arrangement with respect to the Shares or grant any proxy or power
of attorney with respect thereto which is inconsistent with this Agreement or
(c) enter into any contract, option or other arrangement or undertaking with
respect to the direct or indirect sale, assignment, transfer (including by
merger, testamentary disposition, interspousal disposition pursuant to a
domestic relations proceeding or otherwise by operation of law) or other
disposition of any Shares.
Section 3. Treatment of Company Preferred Stock. (a) Subject to the
terms and conditions of this Agreement, each Stockholder agrees that,
immediately prior to the Effective Time, each share of the Series A Convertible
Participating Preferred Stock, par value $.01 per share, of the Company (the
"Company Preferred Stock"), beneficially owned by such Stockholder shall be
converted into shares of Company Common Stock in accordance with the Company's
Certificate of Designation for the Company Preferred Stock, which shares shall
then, in accordance with the terms of the Merger Agreement, be converted in the
Merger into the right to receive shares of Acquiror Common Stock equal to the
product of (i) the Exchange Ratio and (ii) the number of shares of Company
Common Stock issuable upon conversion of such share of Company Preferred Stock
immediately prior to the Effective Time (such conversion by any holder of
Company Common Stock is hereby referred to as the "Company Preferred Stock
Conversion"). Each Stockholder agrees to deliver the certificates evidencing its
Company Preferred Stock to the Company on or prior to the fifth business day
preceding the Effective Time, along with appropriate instructions and
authorization to cause such shares of the Company Preferred Stock to be
converted to Company Common Stock as contemplated hereby.
(b) In the event that any holder of Company Preferred Stock
has not agreed to make a Company Preferred Stock Conversion, as provided above,
or fails to perform the obligations set forth above, each Stockholder hereby
agrees to vote all of its Shares in favor of an amendment to the Certificate of
Designation or to
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97
the Restated Certificate of Incorporation of the Company, as amended as of the
date hereof (the "Certificate of Incorporation"), in order to cause the
conversion of all outstanding Company Preferred Stock in the Merger as
contemplated by Section 2.7(b) of the Merger Agreement.
Section 4. Representations and Warranties of the Stockholders. Each
Stockholder on its own behalf hereby represents and warrants to Acquiror with
respect to itself and its or her ownership of the Shares as follows:
(a) Ownership of Shares. On the date hereof, the Shares are
owned beneficially by Stockholder or its nominee. Stockholder has sole voting
power, without restrictions, with respect to all of the Shares.
(b) Power, Binding Agreement. Stockholder has the legal
capacity, power and authority to enter into and perform all of its obligations
under this Agreement. The execution, delivery and performance of this Agreement
by Stockholder will not violate any material agreement to which Stockholder is a
party, including, without limitation, any voting agreement, stockholders'
agreement, partnership agreement or voting trust. This Agreement has been duly
and validly executed and delivered by Stockholder and constitutes a valid and
binding obligation of Stockholder, enforceable against Stockholder in accordance
with its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(c) No Conflicts. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby 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,
cancellation or acceleration of any obligation or to loss of a material benefit
under, any provision of any loan or credit agreement, note, bond, mortgage,
indenture, lease, or other agreement, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Stockholder or any of its properties or assets, other than such
conflicts, violations or defaults or terminations, cancellations or
accelerations which individually or in the aggregate do not materially impair
the ability of Stockholder to perform its obligations hereunder.
Section 5. No Solicitation. Prior to the termination of this
Agreement in accordance with its terms, each Stockholder agrees, in its
individual capacity as a stockholder of the Company that (i) it will not, nor
will it authorize or permit any of its employees, agents and representatives to,
directly or indirectly, (a) initiate, solicit or encourage any inquiries or the
making of any Acquisition Proposal (as defined in the Merger Agreement), (b)
enter into any agreement with respect to any Acquisition Proposal, or (c)
participate in any discussions or
B-3
98
negotiations regarding, or furnish to any person any information with respect
to, 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
Acquisition Proposal, and (ii) it will notify Acquiror as soon as possible if
any such inquiries or proposals are received by, any information or documents is
requested from, or any negotiations or discussions are sought to be initiated or
continued with, it or any of its affiliates in its individual capacity;
provided, that, notwithstanding the foregoing, each Stockholder shall not be
prohibited from taking any such actions to the extent that the Company or its
Board of Directors is permitted to take such actions under the Merger Agreement,
including without limitation Section 6.3 thereof.
Section 6. Termination. This Agreement shall terminate upon the
earliest to occur of (i) the Effective Time (as such term is defined in the
Merger Agreement) or (ii) any termination of the Merger Agreement in accordance
with the terms thereof; provided that the provisions of Section 9 of this
Agreement shall survive any termination of this Agreement; and provided further
that no such termination shall relieve any party of liability for a willful or
intentional breach hereof prior to termination.
Section 7. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
Section 8. Fiduciary Duties. Each Stockholder is signing this
Agreement solely in such Stockholder's capacity as an owner of his, her or its
respective Shares, and nothing herein shall prohibit, prevent or preclude such
Stockholder from taking or not taking any action in his or her capacity as an
officer or director of the Company, to the extent permitted by the Merger
Agreement.
B-4
99
Section 9. Miscellaneous.
(a) This Agreement constitutes the entire agreement between
the parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, both written and oral, between the parties
with respect thereto. This Agreement may not be amended, modified or rescinded
except by an instrument in writing signed by each of the parties hereto.
(b) 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 a mutually acceptable manner in order that the
terms of this Agreement remain as originally contemplated to the fullest extent
possible.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to the
principles of conflicts of law thereof.
(d) This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which together shall constitute one
and the same instrument.
Section 10. Registration of Shares.
Acquiror shall file with the Securities and Exchange
Commission, as promptly as practicable following the six month anniversary of
the date on which the consolidated results of operations of Acquiror and the
Company, including at least 30 days of combined operations after the Effective
Time, are made available to the public (the "Six Month Date"), a registration
statement on Form S-3 covering the resale to the public by ▇▇▇▇▇▇ ▇. ▇▇▇
Company, ▇▇▇▇▇▇ ▇. ▇▇▇ Equity Fund III, L.P., ▇▇▇▇▇▇ ▇ ▇▇▇ Foreign Fund III,
L.P., ▇▇▇▇ Capital Fund V, L.P., ▇▇▇▇ Capital V-B, L.P., BCIP Associates, L.P.,
BCIP Trust Associates, L.P. of Acquiror Common Stock (the "Stockholder
Registration Statement") issued or issuable pursuant to the Merger (including
shares of Acquiror Common Stock issuable upon exercise of stock options). The
Acquiror shall cause the Stockholder Registration Statement to remain effective
until the earlier of one year after the Six Month Date or such time as all of
the Acquiror Common Stock covered by the Stockholder Registration Statement has
been sold pursuant thereto.
B-5
100
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be signed individually or by its respective duly authorized officer as of the
date first written above.
MATTEL, INC.
By:_________________________________
Name:
Title:
____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
____________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇ COMPANY
By:________________________________
Name:
Title:
▇▇▇▇▇▇ ▇. ▇▇▇ EQUITY FUND III, L.P.
By: THL Equity Advisors III
Limited Partnership
as General Partner
By: THL Equity Trust III,
as General Partner
By:________________________________
Name:
Title:
▇▇▇▇▇▇ ▇. ▇▇▇ FOREIGN FUND III, L.P.
By: THL Equity Advisors III
Limited Partnership
as General Partner
By: THL Equity Trust III,
as General Partner
By:_______________________________
Name:
Title:
▇▇▇▇ CAPITAL FUND V, L.P.
By: ▇▇▇▇ Capital Partners V, L.P.
as General Partner
By: ▇▇▇▇ Capital Investors V, Inc.,
as General Partner
By:_______________________________
Name:
Tile:
▇▇▇▇ CAPITAL FUND V-B, L.P.
By: ▇▇▇▇ Capital Partners V, L.P.
as General Partner
By:_______________________________
Name:
Tile:
BCIP ASSOCIATES, L.P.
By:_______________________________
Name:
Tile:
BCIP TRUST ASSOCIATES, L.P.
By:_______________________________
Name:
Tile:
B-6
101
SCHEDULE I
NUMBER OF SHARES OF
NUMBER OF SHARES OF COMPANY COMPANY SERIES A CONVERTIBLE
COMMON STOCK, PAR VALUE PARTICIPATING PREFERRED STOCK,
Name of Stockholder $.01 PER SHARE PAR VALUE $.01 PER SHARE
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
TOTAL
-------------------------------------------------------------------------------------------
102
ANNEX A
FORM OF PROXY
The undersigned, for consideration received, hereby appoints Mattel, Inc. a
Delaware corporation ("Acquiror"), its proxy to vote the shares of capital stock
of The Learning Company, Inc., a Delaware corporation (the "Company") (the
"Shares"), owned by the undersigned and described on Schedule I to the
Stockholder Support Agreement referred to below and which the undersigned is
entitled to vote at any meeting of stockholders of the Company, and at any
adjournment thereof, to be held for the purpose of considering and voting upon a
proposal to approve and adopt the Agreement and Plan of Merger, dated as of
December 13, 1998 (the "Merger Agreement"), by and among the Company and
Acquiror, providing for the merger (the "Merger") of the Company with and into
Acquiror, FOR such proposal. This proxy is subject to the terms of the
Stockholder Support Agreement, is coupled with an interest and revokes all prior
proxies granted by the undersigned with respect to the Shares, is irrevocable
and shall terminate and be of no further force or effect automatically at such
time as the Stockholder Support Agreement, dated as of December 13, 1998,
between the undersigned and Acquiror, a copy of such Agreement being attached
hereto, terminates in accordance with its terms.
------------------------
NAME:
103
EXHIBIT B
FORM OF STOCKHOLDER SUPPORT AGREEMENT
STOCKHOLDER SUPPORT AGREEMENT, dated as of December 13, 1998 (this
"Agreement"), by the stockholders listed on the signature page(s) hereto
(collectively, "Stockholders" and each individually, a "Stockholder") to and for
the benefit of Mattel, Inc., a Delaware corporation ("Acquiror"). Capitalized
terms used and not otherwise defined herein shall have the respective meanings
assigned to them in the Merger Agreement referred to below.
WHEREAS, as of the date hereof, the Stockholders collectively own of
record and beneficially shares of capital stock of The Learning Company, Inc., a
Delaware corporation (the "Company"), as set forth on Schedule I hereto (such
shares or any other voting or equity of securities of the Company, hereafter
acquired by any Stockholder prior to the termination of this Agreement, being
referred to herein collectively as the "Shares");
WHEREAS, concurrently with the execution of this Agreement, Acquiror
and the Company are entering into an Agreement and Plan of Merger, dated as of
the date hereof (the "Merger Agreement"), pursuant to which, upon the terms and
subject to the conditions thereof, the Company will be merged with and into
Acquiror, and Acquiror will be the surviving corporation (the "Merger"); and
WHEREAS, as a condition to the willingness of the Company and
Acquiror to enter into the Merger Agreement, Acquiror has requested that the
Stockholders agree, and in order to induce Acquiror to enter into the Merger
Agreement, the Stockholders are willing to agree to vote in favor of adopting
the Merger Agreement and approving the Merger, upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereby agree, severally and not jointly, as follows:
Section 1. Voting of Shares. Each Stockholder covenants and agrees
that until the termination of this Agreement in accordance with the terms
hereof, at the Company Stockholder Meeting or any other meeting of the
stockholders of the Company, however called, and in any action by written
consent of the stockholders of the Company, such Stockholder will vote, or cause
to be voted, all of his, her or its respective Shares in favor of adoption of
the Merger Agreement and approval of the Merger contemplated by the Merger
Agreement, as the Merger Agreement may be modified or amended from time to time
in a manner not adverse to the Stockholders. In addition, such Stockholder
agrees that it will, upon request by Acquiror, furnish written confirmation, in
form and substance reasonably acceptable to Acquiror, of such Stockholder's vote
in favor of the Merger Agreement and the Merger. Each Stockholder covenants and
agrees to deliver to Acquiror upon request immediately prior to any vote
contemplated by the first sentence of this Section 1, a proxy substantially in
the form attached
104
hereto as Annex A (a "Proxy"), which Proxy shall be irrevocable during the term
of this Agreement to the extent permitted under Delaware law, and Acquiror
agrees to vote the Shares subject to such Proxy in favor of the approval and
adoption of the Merger Agreement and the Merger. Each Stockholder acknowledges
receipt and review of a copy of the Merger Agreement. Each Stockholder
acknowledges and agrees that this proxy, if and when given, shall be coupled
with an interest, shall constitute, among other things, an inducement for
Acquiror to enter into the Merger Agreement, shall be irrevocable and shall not
be terminated by operation of law or otherwise upon the occurrence of any event
and that no subsequent proxies with respect to such Shares shall be given (and
if given shall not be effective); provided, however, that any such proxy shall
terminate automatically and without further action on behalf of the Stockholders
upon the termination of this Agreement.
Section 2. Transfer of Shares. Each Stockholder covenants and agrees
that such Stockholder will not directly or indirectly, (a) sell, assign,
transfer (including by merger, testamentary disposition, interspousal
disposition pursuant to a domestic relations proceeding or otherwise by
operation of law), pledge, encumber or otherwise dispose of any of the Shares,
(b) deposit any of the Shares into a voting trust or enter into a voting
agreement or arrangement with respect to the Shares or grant any proxy or power
of attorney with respect thereto which is inconsistent with this Agreement or
(c) enter into any contract, option or other arrangement or undertaking with
respect to the direct or indirect sale, assignment, transfer (including by
merger, testamentary disposition, interspousal disposition pursuant to a
domestic relations proceeding or otherwise by operation of law) or other
disposition of any Shares.
Section 3. Treatment of Company Preferred Stock. (a) Subject to the
terms and conditions of this Agreement, each Stockholder agrees that,
immediately prior to the Effective Time, each share of the Series A Convertible
Participating Preferred Stock, par value $.01 per share, of the Company (the
"Company Preferred Stock"), beneficially owned by such Stockholder shall be
converted into shares of Company Common Stock in accordance with the Company's
Certificate of Designation for the Company Preferred Stock, which shares shall
then, in accordance with the terms of the Merger Agreement, be converted in the
Merger into the right to receive shares of Acquiror Common Stock equal to the
product of (i) the Exchange Ratio and (ii) the number of shares of Company
Common Stock issuable upon conversion of such share of Company Preferred Stock
immediately prior to the Effective Time (such conversion by any holder of
Company Common Stock is hereby referred to as the "Company Preferred Stock
Conversion"). Each Stockholder agrees to deliver the certificates evidencing its
Company Preferred Stock to the Company on or prior to the fifth business day
preceding the Effective Time, along with appropriate instructions and
authorization to cause such shares of the Company Preferred Stock to be
converted to Company Common Stock as contemplated hereby.
(b) In the event that any holder of Company Preferred Stock
has not agreed to make a Company Preferred Stock Conversion, as provided above,
or fails to perform the obligations set forth above, each Stockholder hereby
agrees to vote all of its Shares in favor of an amendment to the Certificate of
Designation or to
B-2
105
the Restated Certificate of Incorporation of the Company, as amended as of the
date hereof (the "Certificate of Incorporation"), in order to cause the
conversion of all outstanding Company Preferred Stock in the Merger as
contemplated by Section 2.7(b) of the Merger Agreement.
Section 4. Representations and Warranties of the Stockholders. Each
Stockholder on its own behalf hereby represents and warrants to Acquiror with
respect to itself and its or her ownership of the Shares as follows:
(a) Ownership of Shares. On the date hereof, the Shares are
owned beneficially by Stockholder or its nominee. Stockholder has sole voting
power, without restrictions, with respect to all of the Shares.
(b) Power, Binding Agreement. Stockholder has the legal
capacity, power and authority to enter into and perform all of its obligations
under this Agreement. The execution, delivery and performance of this Agreement
by Stockholder will not violate any material agreement to which Stockholder is a
party, including, without limitation, any voting agreement, stockholders'
agreement, partnership agreement or voting trust. This Agreement has been duly
and validly executed and delivered by Stockholder and constitutes a valid and
binding obligation of Stockholder, enforceable against Stockholder in accordance
with its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(c) No Conflicts. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby 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,
cancellation or acceleration of any obligation or to loss of a material benefit
under, any provision of any loan or credit agreement, note, bond, mortgage,
indenture, lease, or other agreement, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Stockholder or any of its properties or assets, other than such
conflicts, violations or defaults or terminations, cancellations or
accelerations which individually or in the aggregate do not materially impair
the ability of Stockholder to perform its obligations hereunder.
Section 5. No Solicitation. Prior to the termination of this
Agreement in accordance with its terms, each Stockholder agrees, in its
individual capacity as a stockholder of the Company that (i) it will not, nor
will it authorize or permit any of its employees, agents and representatives to,
directly or indirectly, (a) initiate, solicit or encourage any inquiries or the
making of any Acquisition Proposal (as defined in the Merger Agreement), (b)
enter into any agreement with respect to any Acquisition Proposal, or (c)
participate in any discussions or
B-3
106
negotiations regarding, or furnish to any person any information with respect
to, 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
Acquisition Proposal, and (ii) it will notify Acquiror as soon as possible if
any such inquiries or proposals are received by, any information or documents is
requested from, or any negotiations or discussions are sought to be initiated or
continued with, it or any of its affiliates in its individual capacity;
provided, that, notwithstanding the foregoing, each Stockholder shall not be
prohibited from taking any such actions to the extent that the Company or its
Board of Directors is permitted to take such actions under the Merger Agreement,
including without limitation Section 6.3 thereof.
Section 6. Termination. This Agreement shall terminate upon the
earliest to occur of (i) the Effective Time (as such term is defined in the
Merger Agreement) or (ii) any termination of the Merger Agreement in accordance
with the terms thereof; provided that the provisions of Section 9 of this
Agreement shall survive any termination of this Agreement; and provided further
that no such termination shall relieve any party of liability for a willful or
intentional breach hereof prior to termination.
Section 7. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
Section 8. Fiduciary Duties. Each Stockholder is signing this
Agreement solely in such Stockholder's capacity as an owner of his, her or its
respective Shares, and nothing herein shall prohibit, prevent or preclude such
Stockholder from taking or not taking any action in his or her capacity as an
officer or director of the Company, to the extent permitted by the Merger
Agreement.
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107
Section 9. Miscellaneous.
(a) This Agreement constitutes the entire agreement between
the parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, both written and oral, between the parties
with respect thereto. This Agreement may not be amended, modified or rescinded
except by an instrument in writing signed by each of the parties hereto.
(b) 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 a mutually acceptable manner in order that the
terms of this Agreement remain as originally contemplated to the fullest extent
possible.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to the
principles of conflicts of law thereof.
(d) This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which together shall constitute one
and the same instrument.
B-5
108
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be signed individually or by its respective duly authorized officer as of the
date first written above.
MATTEL, INC.
By:_________________________________
Name:
Title:
____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
____________________________________
▇▇▇▇▇ ▇'▇▇▇▇▇
____________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
____________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇
____________________________________
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇-▇▇▇▇▇▇▇
____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
____________________________________
▇▇▇▇ ▇. ▇▇▇▇
CENTRE CAPITAL INVESTORS II, L.P.
CENTRE CAPITAL TAX-EXEMPT
INVESTORS II, L.P.
CENTRE CAPITAL OFFSHORE
INVESTORS II, L.P.
By: Centre Partners II, L.P.,
as General Partner
By: Centre Partners Management LLC,
as Attorney-in-Fact
By:________________________________
Name:
Title:
CENTRE PARALLEL MANAGEMENT
PARTNERS, L.P.
CENTRE PARTNERS COINVESTMENT, L.P.
By: Centre Partners II LLC,
as General Partner
By:________________________________
Name:
Title:
STATE BOARD OF ADMINISTRATION OF
FLORIDA
By: Centre Parallel Management
Partners, L.P.,
as Manager
By: Centre Partners Management LLC,
as Attorney-in-Fact
By:_______________________________
Name:
Title:
B-6
109
SCHEDULE I
NUMBER OF SHARES OF
NUMBER OF SHARES OF COMPANY COMPANY SERIES A CONVERTIBLE
COMMON STOCK, PAR VALUE PARTICIPATING PREFERRED STOCK,
Name of Stockholder $.01 PER SHARE PAR VALUE $.01 PER SHARE
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
TOTAL
-------------------------------------------------------------------------------------------
110
ANNEX A
FORM OF PROXY
The undersigned, for consideration received, hereby appoints Mattel, Inc. a
Delaware corporation ("Acquiror"), its proxy to vote the shares of capital stock
of The Learning Company, Inc., a Delaware corporation (the "Company") (the
"Shares"), owned by the undersigned and described on Schedule I to the
Stockholder Support Agreement referred to below and which the undersigned is
entitled to vote at any meeting of stockholders of the Company, and at any
adjournment thereof, to be held for the purpose of considering and voting upon a
proposal to approve and adopt the Agreement and Plan of Merger, dated as of
December 13, 1998 (the "Merger Agreement"), by and among the Company and
Acquiror, providing for the merger (the "Merger") of the Company with and into
Acquiror, FOR such proposal. This proxy is subject to the terms of the
Stockholder Support Agreement, is coupled with an interest and revokes all prior
proxies granted by the undersigned with respect to the Shares, is irrevocable
and shall terminate and be of no further force or effect automatically at such
time as the Stockholder Support Agreement, dated as of December 13, 1998,
between the undersigned and Acquiror, a copy of such Agreement being attached
hereto, terminates in accordance with its terms.
------------------------
NAME:
111
EXHIBIT C
FORM OF COMPANY AFFILIATE LETTER
Mattel, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may
be deemed to be an "affiliate" of The Learning Company, Inc., a Delaware
corporation (the "Company"), as the term "affiliate" is defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of the
Agreement and Plan of Merger, dated as of December 13, 1998 (the "Agreement"),
between Mercury, a Delaware corporation ("Acquiror"), and the Company, the
Company will be merged with and into Acquiror (the "Merger") and Acquiror will
be the surviving corporation.
As a result of the Merger, I may receive shares of common
stock, par value $1.00 per share, of Acquiror (the "Acquiror Common Stock") in
exchange for shares owned by me of common stock, par value $0.01 per share, of
the Company ("Company Common Stock") or shares of Series A Convertible
Participating Preferred Stock, par value $.01 per shares, of the Company (the
"Company Preferred Stock").
1. Compliance with the Act. I represent, warrant and covenant
to Acquiror that in the event I receive any Acquiror Common Stock as a result of
the Merger:
a) I shall not make any sale, transfer or other disposition of the
Acquiror Common Stock in violation of the Act or the Rules and
Regulations.
b) I have carefully read this letter and the Agreement and discussed
the requirements of such documents and other applicable limitations upon
my ability to sell, transfer or otherwise dispose of the Acquiror Common
Stock to the extent I felt necessary, with my counsel or counsel for the
Company.
c) I have been advised that the issuance of Acquiror Common Stock to
me pursuant to the Merger will be registered with the Commission under the
Act on a Registration Statement on Form S-4. However, I have also been
advised that, since at the time the Merger is submitted for a vote of the
stockholders of the Company, I may be
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deemed to have been an affiliate of the Company and the distribution by me
of the Acquiror Common Stock has not been registered under the Act, I may
not sell, transfer or otherwise dispose of the Acquiror Common Stock
issued to me in the Merger unless (i) such sale, transfer or other
disposition has been registered under the Act, (ii) such sale, transfer or
disposition is made in conformity with Rule 145 promulgated by the
Commission under the Act, or (iii) in the opinion of counsel reasonably
acceptable to Acquiror, or pursuant to a "no action" letter obtained by
the undersigned from the staff of the Commission, such sale, transfer or
other disposition is otherwise exempt from registration under the Act.
d) Except as may be set forth in my Stockholder Support Agreement
with Acquiror, if any, I understand that Acquiror is under no obligation
to register the sale, transfer or disposition of the Acquiror Common Stock
by me or on my behalf under the Act or to take any other action necessary
in order to make compliance with an exemption from such registration
available; provided, however, that Acquiror shall meet the requirements of
paragraph (c) of Rule 144 promulgated under the Act.
e) I also understand that stop transfer instructions will be given
to the Acquiror's transfer agent with respect to the Acquiror Common Stock
and that there will be placed on the Certificates for the Acquiror Common
Stock issued to me, or any substitutions therefor, a legend stating in
substance:
f) "THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933
APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED DECEMBER
13, 1998 BETWEEN THE REGISTERED HOLDER HEREOF AND MATTEL, INC., A COPY OF
WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF MATTEL, INC."
g) I also understand that unless the transfer by me of my Acquiror
Common Stock has been registered under the Act or is a sale made in
conformity with the provisions of Rule 145, Acquiror reserves the right to
put the following legend on the certificates issued to my transferee:
h) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A
PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145
PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN
ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION
WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF
1933 AND MAY
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NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO EFFECTIVE
REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs
E and F above shall be removed by delivery of substitute certificates without
such legend if such legend is not required for purposes of the Act or this
Agreement. It is understood and agreed that such legends and the stop orders
referred to above will be removed if (i) one year shall have elapsed from the
date the undersigned acquired the Acquiror Common Stock received in the Merger
and the provisions of Rule 145(d)(2) are then available to the undersigned, (ii)
two years shall have elapsed from the date the undersigned acquired Acquiror
Common Stock received in the Merger and the provisions of Rule 145(d)(3) are
then available to the undersigned, or (iii) Acquiror has received either an
opinion of counsel, which opinion and counsel shall be reasonably satisfactory
to Acquiror, or a "no action" letter obtained by the undersigned from the staff
of the Commission, to the effect that the restrictions imposed by Rule 145 under
the Act no longer apply to the undersigned.
2. Pooling Requirements. The undersigned will not sell, assign,
transfer or otherwise dispose of or encumber (i) any shares of Company Common
Stock or Company Preferred Stock, whether now owned or hereafter acquired by the
undersigned, (ii) any options, warrants, or other rights to receive such stock,
whether now owned or hereafter acquired by the undersigned, (iii) any shares of
Acquiror Common Stock, whether now owned or hereafter acquired by the
undersigned or (iv) any options, warrants, o other rights to receive such
Acquiror Common Stock, whether now owned or hereafter acquired by the
undersigned, in each of the foregoing cases, from thirty (30) days prior to the
closing of the Merger until the consolidated results of operations of Acquiror
and the Company, including at least thirty (30) days of combined operations
after the Effective Time (as defined in the Agreement), are made available to
the public. The restrictions set forth herein may be waived by the Company to
the extent such waiver, in the opinion of both the Acquiror's and the Company's
independent accountants, does not jeopardize the treatment of the Merger as a
pooling of interests.
3. Certain Tax Matters. The undersigned does not intend to take a
position on any federal or state income tax return that is inconsistent with the
treatment of the Merger as a tax-free reorganization for federal or state income
tax purposes.
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114
Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of the Company as described in the first paragraph
of this letter or as a waiver of any rights I may have to object to any claim
that I am such an affiliate on or after the date of this letter.
Very truly yours,
______________________________
Accepted this ____ day of Signature
December ____, 1998 by
______________________________
Print Name
MATTEL, INC.
By: _____________________
Name:
Title:
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115
EXHIBIT D
FORM OF ACQUIROR AFFILIATE LETTER
The Learning Company, Inc.
One Athenaeum
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of Mattel, Inc., a Delaware corporation ("Acquiror"), as the
term "affiliate" is defined for purposes of paragraphs (c) and (d) of Rule 145
of the rules and regulations of the Securities and Exchange Commission under the
Securities Act of 1933, as amended. Pursuant to the terms of the Agreement and
Plan of Merger, dated as of December 13, 1998 (the "Agreement"), between
Acquiror and The Learning Company, Inc., a Delaware company (the "Company"), the
Company will be merged with and into Acquiror (the "Merger"), with Acquiror
continuing as the surviving corporation after the Merger.
I represent, warrant and covenant to the Company as set forth below and
recognize that the Company and Acquiror are relying on this letter in
consummating the Merger.
1. Pooling Requirements. The undersigned will not sell, assign, transfer
or otherwise dispose of or encumber (i) any shares of common stock, par value
$1.00 per share, of Acquiror, whether now owned or hereafter acquired by the
undersigned, (ii) any options, warrants, or other rights to receive such stock,
whether now owned or hereafter acquired by the undersigned, (iii) any shares of
common stock, par value $0.01 per share, of the Company, whether now owned or
hereafter acquired by the undersigned, or (iv) any options, warrants, or other
rights to receive such stock, whether now owned or hereafter acquired by the
undersigned, in each of the foregoing cases, from thirty (30) days prior to the
closing of the Merger until the consolidated results of operations of Acquiror
and the Company, including at least thirty (30) days of combined operations
after the Effective Time (as defined in the Agreement), are made available to
the public. The restrictions set forth herein may be waived by Acquiror to the
extent such waiver, in the opinion of both the Acquiror's and the Company's
independent accountants, does not jeopardize the treatment of the Merger as a
pooling of interests.
2. Certain Tax Matters. The undersigned does not intend to take a position
on any federal or state income tax return that is inconsistent with the
treatment of the Merger as a tax-free reorganization for federal or state income
tax purposes.
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116
Execution of this letter should not be considered an admission on my part that I
am an "affiliate" of Acquiror as described in the first paragraph of this letter
or as a waiver of any rights I may have to object to any claim that I am such an
affiliate on or after the date of this letter.
Very truly yours,
______________________________
Accepted this ____ day of Signature
December ____, 1998 by
______________________________
Print Name
THE LEARNING COMPANY, INC.
By: ______________________
Name:
Title:
D-2