AGREEMENT AND PLAN OF MERGER
by and among
VDI MultiMedia,
VDI MultiMedia, Inc.,
and
VMM Merger Corp.
Dated as of December 24, 1999
_____________________________________________________________________________
TABLE OF CONTENTS
Page
----
ARTICLE I THE REORGANIZATION MERGER................................................. 2
Section 1.1 The Reorganization Merger................................................. 2
Section 1.2 Reorganization Closing.................................................... 2
Section 1.3 Reorganization Effective Time............................................. 2
Section 1.4 Subsequent Actions........................................................ 3
Section 1.5 Certificate of Incorporation.............................................. 3
Section 1.6 The Bylaws................................................................ 3
Section 1.7 Officers and Directors.................................................... 3
Section 1.8 Employee Benefit Plans.................................................... 3
ARTICLE II CONVERSION OR CANCELLATION OF SHARESIN THE REORGANIZATION MERGER.......... 4
Section 2.1 Conversion or Cancellation of Shares...................................... 4
Section 2.2 Transfer of Company Shares After the Reorganization Effective Time........ 5
Section 2.3 Treatment of Options...................................................... 5
ARTICLE III THE ACQUISITION MERGER.................................................... 5
Section 3.1 The Acquisition Merger.................................................... 5
Section 3.2 Acquisition Closing....................................................... 5
Section 3.3 Acquisition Effective Time................................................ 6
Section 3.4 Subsequent Actions........................................................ 6
Section 3.5 Certificate of Incorporation.............................................. 6
Section 3.6 The Bylaws................................................................ 6
Section 3.7 Officers and Directors.................................................... 6
ARTICLE IV CONVERSION OR CANCELLATION OF SHARES IN THE ACQUISITION MERGER............ 7
Section 4.1 Conversion or Cancellation of Shares...................................... 7
Section 4.2 Payment for Company Sub Shares and Stock Options in the
Acquisition Merger........................................................ 7
Section 4.3 Transfer of Company Sub Shares After the Acquisition Effective Time....... 9
Section 4.4 No Liability.............................................................. 9
Section 4.5 Lost Certificates......................................................... 9
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................. 9
Section 5.1 Organization and Qualification; Subsidiaries.............................. 10
Section 5.2 Charter Documents and Bylaws.............................................. 10
Section 5.3 Capitalization............................................................ 11
Section 5.4 Authority Relative to this Agreement...................................... 12
Section 5.5 No Conflict; Required Filings and Consents................................ 12
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Section 5.6 SEC Filings; Financial Statements......................................... 13
Section 5.7 Absence of Certain Changes or Events...................................... 15
Section 5.8 Intellectual Property..................................................... 16
Section 5.9 Material Contracts........................................................ 17
Section 5.10 Environmental Matters..................................................... 19
Section 5.11 Benefit Plans............................................................. 19
Section 5.12 Tax Matters............................................................... 21
Section 5.13 Litigation................................................................ 22
Section 5.14 Opinion of Financial Advisor.............................................. 23
Section 5.15 Brokers................................................................... 23
Section 5.16 Properties and Assets..................................................... 23
Section 5.17 Compliance with Laws in General........................................... 24
Section 5.18 Labor Matters............................................................. 24
Section 5.19 Insurance................................................................. 24
Section 5.20 Customers and Suppliers................................................... 25
Section 5.21 Company Expenses.......................................................... 25
Section 5.22 Required Company Vote..................................................... 25
Section 5.23 State Takeover Laws....................................................... 26
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF MERGER SUB.............................. 26
Section 6.1 Organization and Qualification; Subsidiaries.............................. 26
Section 6.2 Certificate of Incorporation and Bylaws................................... 26
Section 6.3 Authority Relative to this Agreement...................................... 26
Section 6.4 No Conflict; Required Filings and Consents................................ 27
Section 6.5 Ownership of Merger Sub; No Prior Activities.............................. 28
Section 6.6 Litigation................................................................ 28
Section 6.7 Financing................................................................. 28
Section 6.8 Brokers................................................................... 28
ARTICLE VII COVENANTS................................................................. 28
Section 7.1 Interim Operations of the Company......................................... 28
ARTICLE VIII ADDITIONAL AGREEMENTS..................................................... 31
Section 8.1 Meeting of the Shareholders............................................... 31
Section 8.2 Filings; Other Action..................................................... 32
Section 8.3 Access.................................................................... 33
Section 8.4 Notification of Certain Matters........................................... 33
Section 8.5 Publicity................................................................. 33
Section 8.6 Indemnification........................................................... 34
Section 8.7 Obligations of Merger Sub................................................. 35
Section 8.8 Stock Options............................................................. 35
Section 8.9 Employee Benefit Plans.................................................... 37
Section 8.10 No Solicitation of Transactions........................................... 37
Section 8.11 Third Party Standstill Agreements......................................... 39
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Section 8.12 Consents.................................................................. 39
Section 8.13 SEC Reports............................................................... 39
Section 8.14 Delisting................................................................. 39
Section 8.15 Actions Respecting Commitment Letters; Financing, Notification............ 39
Section 8.16 Financial Statements...................................................... 40
Section 8.17 Shareholders Agreement.................................................... 40
Section 8.18 State Takeover Laws....................................................... 41
ARTICLE IX CONDITIONS................................................................ 41
Section 9.1 Conditions to the Obligations of Each Party............................... 41
Section 9.2 Additional Conditions to the Acquisition Merger........................... 41
Section 9.3 Conditions to the Obligations of Merger Sub............................... 41
Section 9.4 Conditions to the Obligations of the Company and Company Sub.............. 43
ARTICLE X TERMINATION............................................................... 44
Section 10.1 Termination by Mutual Consent............................................. 44
Section 10.2 Termination by Either Merger Sub or the Company........................... 44
Section 10.3 Termination by Merger Sub................................................. 44
Section 10.4 Termination by the Company................................................ 45
Section 10.5 Effect of Termination and Abandonment..................................... 46
ARTICLE XI MISCELLANEOUS; GENERAL.................................................... 46
Section 11.1 Payment of Expenses....................................................... 46
Section 11.2 Survival.................................................................. 47
Section 11.3 Modification or Amendment................................................. 48
Section 11.4 Counterparts.............................................................. 48
Section 11.5 Governing Law............................................................. 48
Section 11.6 Notices................................................................... 48
Section 11.7 Entire Agreement, etc..................................................... 49
Section 11.8 Captions.................................................................. 49
Section 11.9 Certain Definitions....................................................... 49
Section 11.10 No Third Party Beneficiaries.............................................. 49
Section 11.11 Company Disclosure Schedule............................................... 49
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GLOSSARY OF DEFINED TERMS
Defined Term Position of Definition
------------ ----------------------
Acquisition Agreement of Merger (S)3.1
Acquisition Closing (S)3.2
Acquisition Constituent Corporations Preamble
Acquisition Effective Time (S)3.3
Acquisition Merger Recitals
affiliate (S)4.1(a)
Agreement Preamble
▇▇▇▇ Recitals
▇▇▇▇ Commitment Letter Recitals
Benefit Plans (S)5.11(c)
Certificates (S)4.2(b)
Claim (S)8.6(b)
Class A Common (S)4.1(c)
Class L Common (S)4.1(c)
Closing (S)3.2
Code (S)5.11(c)
Commitment Letters (S)6.7
Common Stock Recitals
Company Preamble
Company Disclosure Schedule Article V Preamble
Company Material Adverse Effect (S)5.1
Company Representatives (S)8.10(a)
Company Sub Preamble
Company Sub Common Stock (S)2.1(a)
Company Sub Shares (S)4.1(a)
Company Subsidiary (S)5.1
Competing Transaction (S)8.10(b)
Computer Systems (S)5.8(b)
Confidentiality Agreement (S)8.3
Conversion Schedule (S)4.1(c)
CGCL (S)1.3
COBRA (S)5.11(f)
DGCL (S)1.1
Debt Commitment Letters (S)6.7
Dissenting Shareholder (S)2.1(c)
Dissenting Shares (S)2.1(c)
Effective Time (S)3.3
Environmental Laws (S)5.10
ERISA (S)5.11(b)
Exchange Act (S)5.5(b)
iv
Exchange Fund (S)4.2(a)
Expenses (S)11.1(a)
Financing (S)8.16
Governmental Authority (S)5.5(b)
HSR Act (S)5.5(b)
Indemnified Parties (S)8.6(b)
Intellectual Property (S)5.8(a)
Law (S)5.5(a)
Liens (S)5.5(a)
Material Contracts (S)5.9(b)
Mergers Recitals
Merger Consideration (S)4.1(a)
Merger Sub Preamble
Merger Sub Companies (S)4.1(a)
Merger Sub Material Adverse Effect (S)6.1
Multiemployer Pension Plans (S)5.11(b)
NASDAQ/NMS (S)5.5(b)
Non-Plan Options (S)8.8
Option Consideration (S)8.8(c)
Options (S)5.3(a)
Option Plans (S)5.3(a)
Paying Agent (S)4.2(a)
Payment Fund (S)4.2(a)
Pension Plans (S)5.11(b)
Plan Options (S)8.8(c)
Plans (S)5.3
Proxy Statement (S)8.1(b)
Reorganization Agreement of Merger (S)1.1
Reorganization Closing (S)1.2
Reorganization Constituent Corporations Preamble
Reorganization Effective Time (S)1.3
Reorganization Merger Recitals
Reorganization Surviving Corporation (S)1.1
Representatives (S)8.3
Rollover Shares (S)4.1(a)
Rollover Shareholder Recitals
SEC (S)5.6(a)
SEC Reports (S)5.6(a)
Securities Act (S)5.6(a)
Shares (S)2.1(a)
Shareholders Agreement Recitals
Shareholders Meeting (S)8.1(a)
Substitute Debt Financing (S)8.15(b)
Superior Proposal (S)8.10(c)
v
Surviving Corporation (S)3.1
Terminating Company Breach (S)10.3(a)
Terminating Merger Sub Breach (S)10.4(a)
Transactions Recitals
5% Shareholder (S)5.9(e)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"), dated
as of December 24, 1999, between VDI MultiMedia, a California corporation (the
"Company"), VDI MultiMedia, Inc., a Delaware corporation and wholly-owned
subsidiary of the Company ("Company Sub"), and VMM Merger Corp., a Delaware
corporation ("Merger Sub"); the Company and Company Sub sometimes being
hereinafter collectively referred to as the "Reorganization Constituent
Corporations" and Company Sub and Merger Sub sometimes being hereinafter
collectively referred to as the "Acquisition Constituent Corporations."
RECITALS
WHEREAS, the Company desires that it merge with and into Company Sub, all
upon the terms and subject to the conditions of this Agreement (the
"Reorganization Merger");
WHEREAS, Company Sub desires that, upon the completion of the
Reorganization Merger, Merger Sub merge with and into Company Sub, all upon the
terms and subject to the conditions of this Agreement (the "Acquisition Merger"
and collectively with the Reorganization Merger, the "Mergers");
WHEREAS, the Board of Directors of the Company has, in light of and subject
to the terms and conditions set forth herein, (i) determined that (A) the
Mergers are in the best interests of the Company and its shareholders and (B)
the consideration to be paid for each share of common stock in the Acquisition
Merger is fair to the shareholders of the Company and (ii) resolved to approve
and adopt this Agreement and the transactions contemplated hereby (the
"Transactions") and to recommend approval and adoption by the shareholders of
the Company of this Agreement and the Transactions;
WHEREAS, the Company and Merger Sub desire to make certain representations,
warranties, covenants and agreements in connection with the Mergers;
WHEREAS, those shareholders of the Company that are identified on Schedule
I hereto or as may be added thereto from time to time by Merger Sub prior to the
Effective Time (as defined below), subject to the limitations set forth thereon
(each a "Rollover Shareholder" and collectively, the "Rollover Shareholders"),
shall have certain of their shares of common stock, no par value, of the Company
(the "Common Stock") converted into shares of the capital stock of the Surviving
Corporation (as defined below) in connection with the Mergers as more fully
described herein;
WHEREAS, concurrently with the execution of this Agreement, ▇▇▇▇ Capital
Fund VI, L.P. ("Bain") has entered into an agreement with Merger Sub for the
benefit of the Company in which it has agreed to cause Merger Sub to perform its
obligations at or prior to the Effective Time (as defined below) hereunder and,
subject to the conditions set forth therein, to invest a
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specified amount in Merger Sub at or prior to the Effective Time (the "▇▇▇▇
Commitment Letter"); and
WHEREAS, concurrently with the execution of this Agreement, certain
existing shareholders of the Company have entered into a shareholders agreement
(the "Shareholders Agreement") pursuant to which such shareholders have agreed,
among other things, to vote for the Reorganization Merger and to grant to Merger
Sub a proxy with respect to the voting of their Subject Shares (as defined in
the Shareholders Agreement) under the circumstances set forth in the
Shareholders Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions herein
contained, the parties hereto agree as follows:
ARTICLE I
THE REORGANIZATION MERGER
Section I.1 The Reorganization Merger. Subject to the terms and
conditions of this Agreement and of the Agreement of Merger attached hereto as
Exhibit A (the "Reorganization Agreement of Merger"), at the Reorganization
Effective Time (as defined below), the Company shall be merged with and into
Company Sub and the separate corporate existence of the Company shall thereupon
cease. Company Sub shall be the surviving corporation in the Reorganization
Merger (sometimes hereinafter referred to as the "Reorganization Surviving
Corporation") and shall continue to be governed by the laws of the State of
Delaware, and the separate corporate existence of Company Sub with all its
rights, privileges, immunities and franchises shall continue unaffected by the
Reorganization Merger. The Reorganization Merger shall have the effects
specified in the Delaware General Corporation Law (the "DGCL").
Section I.2 Reorganization Closing. Subject to the conditions contained
in this Agreement, the closing of the Reorganization Merger (the "Reorganization
Closing") shall take place (i) at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, New York, New
York, as promptly as practicable but in no event later than the third business
day after which the last to be fulfilled or waived of the conditions set forth
in Article IX hereof shall be fulfilled or waived in accordance with this
Agreement, at such time as the Company, Company Sub and Merger Sub may agree, or
(ii) at such other place and time and/or on such other date as the Company,
Company Sub and Merger Sub may agree.
Section I.3 Reorganization Effective Time. As soon as practicable
following fulfillment or waiver of the conditions specified in Article IX
hereof, and provided that this Agreement has not been terminated or abandoned
pursuant to Article X hereof, the Company and Company Sub will cause the
Reorganization Agreement of Merger to be executed and filed with the Secretary
of State of the State of Delaware and the Secretary of State of the State of
California, with an officer's certificate of each Reorganization Constituent
Corporation attached, as provided in the DGCL and the California General
Corporate Law (the "CGCL"), as
2
applicable. The Reorganization Merger shall become effective at the time of the
filing of the Reorganization Agreement of Merger with the Secretary of State of
the State of Delaware, and such time is hereinafter referred to as the
"Reorganization Effective Time."
Section I.4 Subsequent Actions. If, at any time after the
Reorganization Effective Time, the Reorganization 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 Reorganization Surviving Corporation its
right, title or interest in, to or under any of the rights, properties or assets
of either of the Reorganization Constituent Corporations acquired or to be
acquired by the Reorganization Surviving Corporation as a result of, or in
connection with, the Reorganization Merger or otherwise to carry out this
Agreement, the officers and directors of the Reorganization Surviving
Corporation shall be authorized to execute and deliver, in the name and on
behalf of each of the Reorganization Constituent Corporations or otherwise, all
such deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of each of the Reorganization Constituent Corporations 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 Reorganization Surviving Corporation or
otherwise to carry out this Agreement.
Section I.5 Certificate of Incorporation. The Certificate of
Incorporation of the Reorganization Surviving Corporation shall be in the form
set forth as Exhibit B hereto.
Section I.6 The Bylaws. The Bylaws of Company Sub in effect at the
Reorganization Effective Time shall be the bylaws of the Reorganization
Surviving Corporation.
Section I.7 Officers and Directors. The directors of the Company and
the officers of the Company at the Reorganization Effective Time shall, from and
after the Reorganization Effective Time, continue as the directors and officers,
respectively, of the Reorganization Surviving Corporation until their successors
have been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Reorganization Surviving
Corporation's Certificate of Incorporation and Bylaws.
Section I.8 Employee Benefit Plans. As of the Reorganization Effective
Time, Company Sub shall assume all obligations of the Company under any and all
Benefit Plans (as defined below) in effect as of said date or with respect to
which employee rights or accrued benefits are outstanding as of said date.
ARTICLE II
CONVERSION OR CANCELLATION OF SHARES
IN THE REORGANIZATION MERGER
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Section II.1 Conversion or Cancellation of Shares. The manner of
converting or canceling shares of the Company and Company Sub in the
Reorganization Merger shall be as follows:
(a) At the Reorganization Effective Time, each share of Common Stock
(the "Shares") issued and outstanding immediately prior to the Reorganization
Effective Time (other than Shares which are held by shareholders exercising
appraisal rights pursuant to Chapter 13 of the CGCL, which shall have the right,
if any, to receive payment from the Reorganization Surviving Corporation of the
"fair market value" of such Shares as determined in accordance with Chapter 13
of the CGCL) shall, by virtue of the Reorganization Merger and without any
action on the part of the holder thereof, be converted into one fully paid and
nonassessable share of common stock, $.01 par value per share, of Company Sub
("Company Sub Common Stock"). The shares of Company Sub Common Stock into which
the outstanding shares of Common Stock shall have been converted pursuant to
this Section 2.1(a) hereof shall be represented and evidenced by the same stock
certificates that previously represented and evidenced such outstanding shares
of Common Stock and the holders of the outstanding shares of Common Stock so
converted shall, at the Reorganization Effective Time, become holders of record
of the shares of Company Sub Common Stock issued in consideration therefor upon
such conversion without any further action on the part of such holders.
(b) At the Reorganization Effective Time, each share of Company Sub
Common Stock issued and outstanding immediately prior to the Reorganization
Effective Time shall, by virtue of the Reorganization Merger and without any
action on the part of the holder thereof, cease to be outstanding, be canceled
and be retired without payment of any consideration therefor and cease to exist.
(c) Notwithstanding anything in this Agreement to the contrary, any
Shares held by a person (a "Dissenting Shareholder") who shall not have voted in
favor of the Reorganization Merger or consented thereto in writing and who shall
have demanded properly in writing appraisal for such Shares (the "Dissenting
Shares") in accordance with Chapter 13 of the CGCL shall not be converted as
described in Section 2.1(a), but shall become the right to receive such
consideration as may be determined to be due to such Dissenting Shareholder
pursuant to the laws of the State of California. If, after the Reorganization
Effective Time, such Dissenting Shareholder withdraws its demand for appraisal
or fails to perfect or otherwise loses its right of appraisal, in any case
pursuant to the CGCL, its Shares shall be deemed to be converted as of the
Reorganization Effective Time into the right to receive an equal number of
shares of Company Sub Common Stock in accordance with Section 2.1(a). If
appraisal rights with respect to the Reorganization Merger are available, the
Company, the Reorganization Surviving Corporation or the Surviving Corporation
shall provide to Dissenting Shareholders the notice and other materials required
by Section 1301(a) of the CGCL. The Company shall give Merger Sub prompt notice
of any demands for appraisal of Shares received by the Company. The Company
shall not, without the prior written consent of Merger Sub, make any payment
with respect to, or settle any such demands.
4
Section II.2 Transfer of Company Shares After the Reorganization
Effective Time. No transfers of Shares shall be made on the stock transfer
books of the Reorganization Surviving Corporation at or after the Reorganization
Effective Time.
Section II.3 Treatment of Options. Upon and as of the Reorganization
Effective Time in connection with the Reorganization Merger, to the fullest
extent permitted by applicable Law, Company Sub shall assume all of the
Company's obligations with respect to any then-outstanding Options (as defined
below) that theretofore shall not have expired or been duly exercised by the
holders thereof and the due exercise of rights under any such Options shall
entitle the holders thereof to acquire, immediately following the Reorganization
Merger, upon the same terms and conditions that were applicable under such
Options immediately prior to the Reorganization Merger, a number of shares of
Company Sub Common Stock identical to the class and number of shares of Common
Stock that were subject to the Options immediately prior to the Reorganization
Merger. The Company and Company Sub agree to take all corporate and other
action as shall be necessary to effectuate the foregoing.
ARTICLE III
THE ACQUISITION MERGER
Section III.1 The Acquisition Merger. Subject to the terms and
conditions of this Agreement and of the Agreement of Merger attached hereto as
Exhibit C (the "Acquisition Agreement of Merger"), at the Acquisition Effective
Time (as defined below), Merger Sub shall be merged with and into Company Sub in
a transaction intended to qualify as a recapitalization for financial accounting
purposes and the separate corporate existence of Merger Sub shall thereupon
cease. Company Sub shall be the surviving corporation in the Acquisition Merger
(sometimes hereinafter referred to as the "Surviving Corporation") and shall
continue to be governed by the laws of the State of Delaware, and the separate
corporate existence of Company Sub with all its rights, privileges, immunities
and franchises shall continue unaffected by the Acquisition Merger. The
Acquisition Merger shall have the effects specified in the DGCL.
Section III.2 Acquisition Closing. Subject to the conditions contained
in this Agreement, the closing of the Acquisition Merger (the "Acquisition
Closing" and collectively with the Reorganization Closing, the "Closing") shall
take place (i) at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, New York, New York, as
promptly as practicable but in no event later than the third business day after
which the last to be fulfilled or waived of the conditions set forth in Article
IX hereof shall be fulfilled or waived in accordance with this Agreement, at
such time as the Company, Company Sub and Merger Sub may agree, or (ii) at such
other place and time and/or on such other date as the Company, Company Sub and
Merger Sub may agree.
Section III.3 Acquisition Effective Time. As soon as practicable
following fulfillment or waiver of the conditions specified in Article IX
hereof, and provided that this Agreement has not been terminated or abandoned
pursuant to Article X hereof and as soon as practicable following the
Reorganization Effective Time, Company Sub and Merger Sub will cause the
Acquisition
5
Agreement of Merger to be executed and filed with the Secretary of State of the
State of Delaware, with an officer's certificate of each Acquisition Constituent
Corporation attached, as provided in the DGCL. The Acquisition Merger shall
become effective at the time of such filing, and such time is hereinafter
referred to as the "Acquisition Effective Time" and, collectively with the
Reorganization Effective Time, the "Effective Time."
Section III.4 Subsequent Actions. 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 either of the Acquisition Constituent
Corporations acquired or to be acquired by the Surviving Corporation as a result
of, or in connection with, the Acquisition Merger or otherwise to carry out this
Agreement, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of each of the
Acquisition Constituent Corporations or otherwise, all such deeds, bills of
sale, assignments and assurances and to take and do, in the name and on behalf
of each of the Acquisition Constituent Corporations 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 this Agreement.
Section III.5 Certificate of Incorporation. The Certificate of
Incorporation of the Surviving Corporation shall be in the form set forth as
Exhibit D hereto.
Section III.6 The Bylaws. Subject to Section 8.6(a), the Bylaws of Merger
Sub in effect at the Acquisition Effective Time shall be the bylaws of the
Surviving Corporation.
Section III.7 Officers and Directors. The directors of Merger Sub and the
officers of Company Sub at the Acquisition Effective Time shall, from and after
the Acquisition Effective Time, continue as the directors and officers,
respectively, of the Surviving Corporation until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's Certificate of
Incorporation and Bylaws.
ARTICLE IV
CONVERSION OR CANCELLATION OF SHARES IN THE ACQUISITION MERGER
Section IV.1 Conversion or Cancellation of Shares. The manner of
converting or canceling shares of Company Sub and Merger Sub in the Acquisition
Merger shall be as follows:
(a) At the Acquisition Effective Time, each share of Company Sub
Common Stock (the "Company Sub Shares") issued and outstanding immediately prior
to the Acquisition Effective Time (other than Company Sub Shares owned by Merger
Sub or any other subsidiary or person that directly or indirectly through one or
more intermediaries controls, is controlled by, or is under common control with
(an "affiliate") the Merger Sub (collectively, the "Merger Sub
6
Companies") or the Rollover Shareholders (the "Rollover Shares")) shall, by
virtue of the Acquisition Merger and without any action on the part of the
holder thereof, be converted into the right to receive the sum of $15.00 in cash
(the "Merger Consideration"). All such Company Sub Shares, by virtue of the
Acquisition Merger and without any action on the part of the holders thereof,
shall no longer be outstanding and shall be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such Company Sub
Shares shall thereafter cease to have any rights with respect to such Company
Sub Shares, except the right to receive the Merger Consideration for such
Company Sub Shares upon the surrender of such certificate in accordance with
Section 4.2.
(b) At the Acquisition Effective Time, each Company Sub Share issued
and outstanding at the Acquisition Effective Time and owned by any of the Merger
Sub Companies, and each Company Sub Share issued and held in Company Sub's
treasury at the Acquisition Effective Time, shall, by virtue of the Acquisition
Merger and without any action on the part of the holder thereof, cease to be
outstanding, be canceled and be retired without payment of any consideration
therefor and cease to exist.
(c) At the Acquisition Effective Time, (i) each Rollover Share and
(ii) each share of common equity of Merger Sub issued and outstanding
immediately prior to the Acquisition Effective Time shall be converted into and
become the number of shares of Class A Common Stock, par value $.01 per share,
of the Surviving Corporation ("Class A Common") and Class L Common Stock, par
value $.01 per share, of the Surviving Corporation ("Class L Common") as are set
forth on a schedule to be attached hereto (the "Conversion Schedule") and
provided to the Company by Merger Sub prior to the Effective Time.
Section IV.2 Payment for Company Sub Shares and Stock Options in the
Acquisition Merger. The manner of making payment for Company Sub Shares and
outstanding options to purchase Company Sub Shares in the Acquisition Merger
shall be as follows:
(a) At or prior to the Acquisition Effective Time, Merger Sub shall
deposit in trust for the benefit of the holders of Company Sub Shares and
options to purchase Company Sub Shares, as the case may be, with a bank or trust
company designated by Merger Sub and approved by Company Sub (the "Paying
Agent"), (i) cash in an aggregate amount equal to the sum of (A) the product of
(1) the number of Company Sub Shares issued and outstanding at the Acquisition
Effective Time (other than Company Sub Shares owned by the Merger Sub Companies)
and (2) the Merger Consideration and (B) the amount necessary for the payment in
full of the Option Consideration (as defined in Section 8.8) (such aggregate
amount being hereinafter referred to as the "Payment Fund") and (ii) shares of
Class A Common and Class L Common to which holders of Rollover Shares shall be
entitled to at the Acquisition Effective Time pursuant to Section 4.1(c) above
(the "Exchange Fund"). The Paying Agent shall, pursuant to irrevocable
instructions, make the payments provided for in Sections 4.1 and 8.8 of this
Agreement out of the Payment Fund and exchange the Rollover Shares for
securities held in the Exchange Fund as provided in Section 4.1(c) out of the
Exchange Fund. Neither the Payment Fund nor the Exchange Fund shall be used for
any other purpose except as provided in this Agreement.
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(b) Promptly after the Acquisition Effective Time, the Paying Agent
shall mail to each record holder (other than the Merger Sub Companies), as of
the Acquisition Effective Time, of an outstanding certificate or certificates
which, immediately prior to the Acquisition Effective Time, represented Company
Sub Shares (the "Certificates") a form letter of transmittal and instructions
for use in effecting the surrender of the Certificates for payment therefor.
Upon surrender to the Paying Agent of a Certificate, together with such letter
of transmittal duly executed, the holder of such Certificate shall be entitled
to receive in exchange therefor either (i) cash in an amount equal to the
product of (A) the number of Company Sub Shares represented by such Certificate
and (B) the Merger Consideration in the case of Company Sub Shares (other than
Rollover Shares), and (ii) the number of shares of Class A Common and Class L
Common set forth on the Conversion Schedule in the case of Rollover Shares, and
such Certificate shall forthwith be canceled. No interest will be paid or
accrued on the cash payable upon the surrender of the Certificates. If payment
is to be made to a person other than the person in whose name the Certificate
surrendered is registered, it may be a condition of payment that the Certificate
so surrendered shall be properly endorsed or otherwise in proper form for
transfer and that the person requesting such payment shall pay any transfer or
other taxes required by reason of the payment to a person other than the
registered holder of the Certificate surrendered of the Merger Consideration or
Class A Common or Class L Common, or that such person shall establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is not
applicable. Until surrendered in accordance with the provisions of this Section
4.2, each Certificate (other than Certificates representing Company Sub Shares
owned by the Merger Sub Companies) shall represent, for all purposes, only the
right to receive either (i) in the case of Certificates representing Company Sub
Shares (other than Rollover Shares), an amount in cash equal to the Merger
Consideration multiplied by the number of Company Sub Shares evidenced by such
Certificate or (ii) in the case of Certificates representing Rollover Shares,
shares of Class A Common and Class L Common set forth on the Conversion Schedule
multiplied by the number of Rollover Shares evidenced by such Certificate,
without any interest or dividends thereon.
(c) Any portion of the Payment Fund or Exchange Fund which remains
unclaimed by the shareholders of the Company for one year after the Acquisition
Effective Time shall be repaid to the Surviving Corporation, upon demand, and
any stockholders of Company Sub who have not theretofore complied with Section
4.2(b) shall thereafter look only to the Surviving Corporation, for payment of
their claim for the Merger Consideration for Company Sub Shares, without any
interest or dividends thereon. The Paying Agent shall retain the right to
invest and reinvest the Payment Fund on behalf of the Surviving Corporation in
securities issued or guaranteed by the United States government or certificates
of deposit of commercial banks that have, or are members of a group of
commercial banks that has, consolidated total assets of not less than
$500,000,000 and the Surviving Corporation shall receive the interest earned
thereon.
Section IV.3 Transfer of Company Sub Shares After the Acquisition
Effective Time. No transfers of Company Sub Shares shall be made on the stock
transfer books of the Surviving Corporation at or after the Acquisition
Effective Time.
8
Section IV.4 No Liability. None of Merger Sub, the Company, Company Sub
or the Paying Agent shall be liable to any person in respect of any cash
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. If any Certificates shall not have been surrendered
prior to seven years after the Acquisition Effective Time (or immediately prior
to such earlier date on which any payment pursuant to this Article IV would
otherwise escheat to or become the property of any governmental entity), the
cash payment in respect of such Certificate shall, unless otherwise provided by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
Section IV.5 Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person (who shall be the record owner of such Certificate) claiming such
Certificate to be lost, stolen or destroyed and, if required by the Surviving
Corporation, the posting by such person of a bond in such reasonable amount as
the Surviving Corporation may direct as indemnity against any claim that may be
made against it with respect to such Certificate, the Paying Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Merger Consideration
or the Class A Common or Class L Common, as applicable, deliverable in respect
thereof pursuant to this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule delivered by the Company to
Merger Sub concurrently with the execution of this Agreement (the "Company
Disclosure Schedule"), the Company hereby represents and warrants to Merger Sub
that:
Section V.1 Organization and Qualification; Subsidiaries. The Company
and each Company Subsidiary (as hereinafter defined) is a corporation or limited
liability company, as the case may be, duly incorporated or formed, as the case
may be, validly existing and in good standing under the laws of the jurisdiction
of its incorporation and has the requisite power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its business as it is now being conducted except where the failure to be in good
standing or to have such governmental approvals would not, individually or in
the aggregate, have a Company Material Adverse Effect or prevent or materially
delay the consummation of the Transactions. The Company and each Company
Subsidiary is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failure to be
so qualified or licensed and in good standing that would not, individually or in
the aggregate, have a Company Material Adverse Effect or prevent or materially
delay the consummation of the Transactions. The term "Company Material Adverse
Effect" means, for all purposes of this Agreement, any effect, circumstance or
change in the business of the Company and the Company Subsidiaries that is or is
reasonably likely to be materially adverse to the business, operations,
properties, financial
9
condition or results of operations of the Company and its subsidiaries, taken as
a whole, provided that none of the following shall constitute a Company Material
Adverse Effect: (i) a change in market price or trading volume of the Common
Stock in and of itself, shall not be a Company Material Adverse Effect; provided
that a change in market price or trading volume of the Common Stock may be used,
as applicable, as evidence that some other effect, circumstance or change has
had or is reasonably likely to have, a Company Material Adverse Effect, (ii)
occurrences due to a disruption of the Company's or its subsidiaries' businesses
as a result of the announcement of the execution of this Agreement or changes
caused by the taking of any action required by this Agreement or (iii) general
changes in economic conditions or any changes affecting the post-production
media service industry in which the Company and its subsidiaries operate which
do not have a materially disproportionate effect on the Company and its
subsidiaries taken as a whole. For purposes of this Agreement, the term "Company
Subsidiary" shall mean a subsidiary of the Company that is identified as such in
Section 5.1 of the Company Disclosure Schedule. Section 5.1 of the Company
Disclosure Schedule sets forth a complete and accurate list of all subsidiaries
of the Company. Except as set forth in Section 5.1 of the Company Disclosure
Schedule, the Company owns directly or indirectly all of the issued and
outstanding shares of capital stock of the Company Subsidiaries. Other than as
set forth in Section 5.1 of the Company Disclosure Schedule, as of the date of
this Agreement the Company has no other equity interest or profit participation
in any other entity.
Section V.2 Charter Documents and Bylaws. The Company has heretofore
furnished to Merger Sub a complete and correct copy of the Restated Articles of
Incorporation and the Bylaws of the Company and the Amended and Restated
Certificate of Incorporation and Bylaws of Company Sub. The Restated Articles
of Incorporation and Bylaws of the Company and the Amended and Restated
Certificate of Incorporation and Bylaws of Company Sub are each in full force
and effect. The Company is not in violation of any of the provisions of its
Restated Articles of Incorporation or Bylaws. Company Sub is not in violation
of any of the provisions of its Amended and Restated Certificate of
Incorporation or Bylaws.
Section V.3 Capitalization.
(a) The authorized capital stock of the Company consists of (i)
50,000,000 shares of Common Stock and (ii) 5,000,000 shares of preferred stock,
no par value. As of December 22, 1999, (i) 9,208,697 shares of Common Stock
were issued and outstanding, all of which are validly issued, fully paid,
nonassessable and free of preemptive rights and (ii) no shares of preferred
stock were issued and outstanding. Except as otherwise permitted or expressly
contemplated by this Agreement and except for options granted pursuant to the
Company's 1996 Stock Incentive Plan or certain non-Plan arrangements described
in Section 5.3 of the Company Disclosure Schedule (collectively, the "Option
Plans") collectively covering an aggregate of 1,489,508 shares of Common Stock
(the "Options"), there are not now, nor will there be at the Effective Time, any
options, warrants, calls, subscriptions or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of the Company or obligating the Company to issue or sell any
shares of capital stock of, or other equity interests in, the Company or any
Company Subsidiary. Section 5.3 of the Company Disclosure Schedule sets forth
the name of each holder of an Option, together with
10
the grant date, vesting schedule, exercise price and number of shares of Common
Stock subject to each such Option. All shares of Common Stock subject to such
Options, upon issuance on the terms and conditions specified in the instruments
pursuant to which they are issuable, will be duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. Except as contemplated
hereby, there are no outstanding contractual obligations of the Company or any
Company Subsidiary to repurchase, redeem or otherwise acquire any shares of
capital stock of, or other equity interests in, the Company or any Company
Subsidiary.
(b) Other than as set forth on Section 5.3 of the Company Disclosure
Schedule and the Shareholders Agreement, there are no shareholder agreements,
voting trusts or other agreements or understandings to which the Company is a
party relating to voting or disposition of any shares of capital stock of the
Company or granting to any person or group of persons the right to elect, or to
designate or nominate for election, a director to the board of directors of the
Company. All of the outstanding shares of capital stock of each of the Company
Subsidiaries have been validly issued and are fully paid, non-assessable and
free of any preemptive rights and, except as set forth in Section 5.1 of the
Company Disclosure Schedule, are owned by the Company free and clear of all
liens, charges, claims or encumbrances. All of the issued and outstanding shares
of capital stock of Company Sub are shares of voting capital stock.
(c) As of the Effective Time, there will be no rights, interests, or
claims whatsoever (whether known, unknown, contingent or otherwise) under any
contract, arrangement, understanding or otherwise to acquire any equity
securities of the Company or any Company Subsidiary, or any options, warrants,
calls, subscriptions or any other rights, agreements, arrangements or
commitments of any character relating to, or securities exercisable for or
convertible into, the issued or unissued capital stock of the Company or any
Company Subsidiary or to issue or sell any shares of capital stock, or other
equity interest in, the Company or any Company Subsidiary in each case in
connection with or as a result of the Company's acquisition of that business
described on Section 5.3(c) of the Company Disclosure Schedule. The information
set forth in Section 5.3(c) of the Company Disclosure Schedule is true and
correct.
Section V.4 Authority Relative to this Agreement.
(a) The Company and Company Sub have all necessary corporate power
and authority to execute and deliver this Agreement, to perform their respective
obligations hereunder and to consummate the Transactions. The execution and
delivery of this Agreement by the Company and Company Sub and the consummation
by the Company and Company Sub of the Transactions have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of the Company or the Company Sub (including on the part of the
shareholders of the Company or the stockholders of Company Sub) are necessary to
authorize this Agreement or to consummate the Transactions (other than, with
respect to the Reorganization Merger, the approval and adoption of this
Agreement by the holders of a majority of the then outstanding shares of Common
Stock, and, with respect to the Mergers, the filing and recordation of
appropriate documents for the Mergers as required by the CGCL and DGCL, as
applicable). This Agreement has been duly and validly executed and delivered by
the Company
11
and Company Sub and, assuming the due authorization, execution and delivery by
Merger Sub, constitutes a legal, valid and binding obligation of the Company and
Company Sub, enforceable against each in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to creditors' rights generally and to general principles of
equity.
(b) The Board of Directors of the Company has (i) approved and
adopted this Agreement and the Transactions, (ii) determined that the Mergers
are in the best interests of the Company and its shareholders and that the terms
of this Agreement are fair to the Company and its shareholders and (iii) subject
to the provisions of Section 8.1(a) hereof, determined and agreed to recommend
that the shareholders of the Company approve and adopt this Agreement. The Board
of Directors of Company Sub has approved and adopted this Agreement and the
Transactions.
(c) The Company in its capacity as the sole stockholder of Company
Sub has approved this Agreement and the Mergers in accordance with the DGCL, the
Company Sub's Certificate of Incorporation and Bylaws.
Section V.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company and
Company Sub do not, and the performance of this Agreement by the Company and
Company Sub and the consummation of the Transactions will not (i) conflict with
or violate the Restated Articles of Incorporation or Bylaws of the Company or
conflict with or violate the Articles of Incorporation or bylaws or equivalent
organizational documents of any Company Subsidiary, (ii) assuming that all
consents, approvals, authorizations and other actions described in subsection
(b) have been obtained and all filings and obligations described in subsection
(b) have been made or complied with, conflict with or violate any foreign or
domestic (federal, state or local) law, statute, ordinance, rule, regulation,
permit, license, injunction, writ, judgment, decree or order ("Law") applicable
to the Company or any Company Subsidiary or by which any asset of the Company or
any Company Subsidiary is bound or affected, or (iii) conflict with, result in
any breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or require any payment
under, or result in the creation of a lien, claim, security interest or other
charge, title imperfection or encumbrance (collectively, "Liens") on any asset
of the Company or any Company Subsidiary pursuant to, any contract, note, bond,
mortgage, indenture, lease, agreement or other instrument or obligation to which
the Company or any Company Subsidiary is a party or by which any asset of the
Company or any Company Subsidiary is bound or affected, except, with respect to
(x) clause (iii), under the Business Loan Agreement (Revolving Credit) and Term
Loan Agreement between the Company and Union Bank (or any amendment, extension,
refinance, renewal or replacement thereof permitted by this Agreement) and the
other agreements listed in Section 5.5 of the Company Disclosure Schedule, and
(y) clauses (ii) and (iii), for any such conflicts, violations, breaches,
defaults, or other occurrences that would not, individually or in the aggregate,
have a Company Material Adverse Effect or prevent or materially delay the
consummation of the Transactions.
12
(b) The execution and delivery of this Agreement by the Company and
Company Sub do not, and the performance of this Agreement by the Company and
Company Sub and the consummation of the Transactions will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any domestic (federal, state or local) or foreign government or
governmental, regulatory or administrative authority, agency, commission, board,
bureau, court or instrumentality or arbitrator of any kind ("Governmental
Authority"), except (i) for applicable requirements, if any, of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the National Association
of Securities Dealers, Inc. Automated Quotation/National Market System
("NASDAQ/NMS"), California and any other applicable takeover laws, the pre-
merger notification requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended, and the rules and regulations thereunder (the "HSR
Act"), and filing and recordation of appropriate documents for the Mergers as
required by the CGCL and DGCL and (ii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not prevent or materially delay consummation of the Transactions or would
not, individually or in the aggregate, have a Company Material Adverse Effect.
Section V.6 SEC Filings; Financial Statements.
(a) Since January 1, 1998, the Company has filed all forms, reports,
statements and other documents required to be filed with the Securities and
Exchange Commission (the "SEC"), including, without limitation, (A) all Annual
Reports on Form 10-K, (B) all Quarterly Reports on Form 10-Q, (C) all proxy
statements relating to meetings of shareholders (whether annual or special), (D)
all Reports on Form 8-K, (E) all other reports or registration statements and
(F) all amendments and supplements to all such reports and registration
statements (collectively, the "SEC Reports"). The SEC Reports, as well as all
forms, reports and documents to be filed by the Company with the SEC after the
date hereof and prior to the Effective Time, (i) were and will be prepared in
all material respects in accordance with the requirements of the Securities Act
of 1933, as amended (the "Securities Act"), the Exchange Act and the published
rules and regulations of the SEC thereunder, each as applicable to such SEC
Reports and (ii) did not and will not as of the time they were filed contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were and will be made, not
misleading. No Company Subsidiary is subject to the periodic reporting
requirements of the Exchange Act. To the knowledge of the Company as of the date
hereof, there is no material unresolved violation of the Exchange Act or the
published rules and regulations of the SEC asserted by the SEC in writing with
respect to the SEC Reports.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the SEC Reports has been prepared in all
material respects in accordance with the published rules and regulations of the
SEC and generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as may be set forth in the notes
thereto) and each fairly presents, in all material respects, the consolidated
financial position, results of operations and cash flows of the Company and its
13
consolidated subsidiaries as at the respective dates thereof and for the
respective periods indicated therein, except as otherwise set forth in the notes
thereto (subject, in the case of unaudited statements, to normal and recurring
year-end adjustments).
(c) Except as set forth in any SEC Report and except as disclosed in
Section 5.6 of the Company Disclosure Schedule, at the date of the most recent
audited financial statements of the Company included in the SEC Reports, neither
the Company nor any of the Company Subsidiaries had, and since such date neither
the Company nor any of the Company Subsidiaries has incurred, any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
which, individually or in the aggregate, would be required to be disclosed in a
balance sheet (or the footnotes thereto) of the Company prepared in accordance
with generally accepted accounting principles except liabilities incurred in the
ordinary and usual course of business and consistent with past practice,
liabilities incurred in connection with the Transactions, and liabilities that
have not had and would not reasonably be expected to have a Company Material
Adverse Effect.
(d) Except in each case as set forth in the SEC Reports or as set
forth in Section 5.6(d) of the Company Disclosure Schedule, none of the Company
or any of the Company Subsidiaries is indebted to any director or officer of the
Company or any of the Company Subsidiaries (except for amounts due as normal
salaries and bonuses, in reimbursement of ordinary business expenses and
directors' fees) and no such person is indebted to the Company or any of the
Company Subsidiaries, and there have been no other transactions of the type
required to be disclosed pursuant to Items 402 or 404 of Regulation S-K
promulgated by the SEC.
(e) None of the information supplied, or to be supplied, by the
Company for inclusion or incorporation by reference in the Proxy Statement or
the Schedule 13E-3, if any, at the respective times that the Proxy Statement or
the Schedule 13E-3, if any, or any amendments or supplements thereto are filed
with the SEC and are first published or sent or given to holders of Shares,
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 V.7 Absence of Certain Changes or Events. From December 31,
1998 to the date hereof, except as contemplated or permitted by this Agreement
or as disclosed in any SEC Report filed since December 31, 1998 and prior to the
execution and delivery of this Agreement or in the Company Disclosure Schedule,
the Company and the Company Subsidiaries have conducted their businesses only in
the ordinary course and in a manner consistent with past practice and there has
not been (other than as described in Section 5.7 of the Company Disclosure
Schedule) (a) any material change by the Company in its accounting methods,
principles or practices except as required by generally accepted accounting
principles and disclosed in any SEC Report filed since December 31, 1998, (b)
any material revaluation by the Company of any material asset (including,
without limitation, any writing down of the value of inventory or writing off of
notes or accounts receivable), other than in the ordinary course of business
consistent with past practice after the date of the most recent SEC Report filed
prior to
14
the date hereof, (c) any entry by the Company or any Company Subsidiary into any
commitment or transaction material to the Company and the Company Subsidiaries
taken as a whole, except in the ordinary course of business and consistent with
past practice, (d) any declaration, setting aside or payment of any dividend or
distribution in respect of any shares of the Company's capital stock or any
redemption, purchase or other acquisition of any of the Company's securities,
(e) any material increase in the benefits under, or the establishment, material
amendment or termination of, any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, or other employee benefit
plan covering employees of the Company or any Company Subsidiary, or any
material increase in the compensation payable or to become payable to or any
other material change in the employment terms for any directors or officers of
the Company or any Company Subsidiary or any other employee earning
noncontingent cash compensation in excess of $100,000 per year, (f) any entry by
the Company or any Company Subsidiary into any employment, consulting,
severance, termination or indemnification agreement with any director or officer
of the Company or any Company Subsidiary or entry into any such agreement with
any other person for a noncontingent cash amount in excess of $100,000 per year
or outside the ordinary course of business, (g) any issuance by the Company or
any Company Subsidiary of any notes, bonds or other debt securities or any
capital stock or other equity securities or any securities convertible,
exchangeable or exercisable into any capital stock or other equity securities,
except for the issuance of any shares of Common Stock pursuant to the exercise
of any stock options and the issuance of any capital stock expressly
contemplated by this Agreement, (h) any agreement by the Company or any Company
Subsidiary to take any of the actions described in this Section 5.7 except as
expressly contemplated by this Agreement, or (i) any event, change or
circumstance that has or is reasonably likely to have a Company Material Adverse
Effect. Item (i) set forth above shall, as of the Effective Time, also apply to
the period beginning on the date hereof and ending immediately prior to the
Effective Time.
Section V.8 Intellectual Property.
(a) Except as set forth in Section 5.8(a) of the Company Disclosure
Schedule, the Company and each of the Company Subsidiaries own and possess free
and clear of any Liens, or have the valid and enforceable right to use, the
licenses, patents, copyrights, know-how (including trade secrets and other
proprietary or confidential information, systems or procedures), trademarks,
service marks, trade names, domain names, inventions, software, data, databases,
specifications, designs, performing rights and literary, dramatic, musical or
artistic rights (collectively, "Intellectual Property") presently employed by
them in connection with the operation of the businesses now operated by them.
Section 5.8(a) of the Company Disclosure Schedule sets forth a complete list in
all material respects of all: (i) patented and registered Intellectual Property,
and pending patent applications or applications for registration of Intellectual
Property, owned or filed by the Company or any Company Subsidiary, (ii) all
trade names and material unregistered trademarks, service marks and copyrights
owned or used by the Company or any Company Subsidiary, and (iii) all licenses
of Intellectual Property to which the Company or any of the Company Subsidiaries
is a party (other than licenses of mass-marketed software acquired or licensed
for a license fee of less than $200,000 per annum). Neither the Company nor any
of the Company Subsidiaries has received any notice of infringement or
misappropriation of or conflict with asserted Intellectual Property rights of
others. To the
15
knowledge of the Company, the use of such Intellectual Property in connection
with the business and operations of the Company and the Company Subsidiaries
does not infringe, in any material respects, on the rights of any person or
entity. To the knowledge of the Company, no material claim by any third party
contesting the validity, enforceability, use or ownership of any of the
Intellectual Property owned or used by the Company or any Company Subsidiary, is
currently outstanding or is threatened. The Company has not received any notices
of, and the Company has no knowledge of any facts which indicate a reasonable
likelihood of, any material infringement or misappropriation by any third party
with respect to the Intellectual Property of the Company or any Company
Subsidiary. All of the Intellectual Property owned or used by the Company or any
Company Subsidiary as of the date hereof will be owned or leased, subject to any
modification of a license agreement agreed upon by the Company in the ordinary
course of business, by the Company or such Company Subsidiary on identical terms
and conditions immediately subsequent to the Closing except for such changes
which, individually or in the aggregate, would not reasonably be expected to
have a Company Material Adverse Effect. The Company and each Company Subsidiary
has taken all reasonable and necessary actions to maintain and protect its
Intellectual Property except for those actions, which the failure to take,
individually or in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect.
(b) To the knowledge of the Company, all computer, network and other
data, video and audio processing hardware, software, systems and technology
(including communication hardware and software), and all computer controlled
facility components (defined as software driven technology and embedded
microchip technology, including programmable thermostats, HVAC controllers,
utility monitoring and control systems, fire detection and suppression systems,
alarms, security systems and any other facilities control systems utilizing
microcomputer or programmable logic controllers) (the foregoing being
collectively referred to as "Computer Systems") owned or used by the Company or
the Company Subsidiaries are as of the date hereof "Year 2000 Compliant" except
where the failure to be so compliant would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
Neither the Company nor any Company Subsidiary has suffered or reasonably
expects that it will at any time hereafter suffer any material interruption of,
or interference with, its business operations or activities by reason of the
failure of any Computer Systems owned or used by any of them or any of their
suppliers or customers to be Year 2000 Complaint except where such interruption
or interference would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect. For purposes of this
Agreement, the term "Year 2000 Compliant" shall mean, with respect to any
Computer Systems owned or used by any person or entity, that such Computer
Systems, without modification, implementation or enhancement, (i) will
correctly, without error or interruption, store, represent and process
(including sort) all dates and related logic (including single and multi-century
formulas and leap year calculations), such that errors will not occur when the
date being used is in the Year 2000, or in a year preceding or following the
Year 2000; and (ii) will operate and will not cause or result in an abnormal
termination or ending or other loss of functionality due to the change in
century.
Section V.9 Material Contracts.
16
(a) Except as disclosed in Section 5.9(a) of the Company Disclosure
Schedule, neither the Company nor any of the Company Subsidiaries is, nor, to
the Company's knowledge, is any other party, in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any Material Contracts (as hereinafter defined) to which it is a
party, except for such defaults which, individually or in the aggregate, would
not reasonably be expected to result in a Company Material Adverse Effect; and,
to the knowledge of the Company, there has not occurred any event that, with the
lapse of time or giving of notice or both, would constitute such a default other
than such events which, individually or in the aggregate, would not reasonably
be expected to have a Company Material Adverse Effect. To the knowledge of the
Company, the Material Contract described in Item 5 under "Material Contracts" in
Section 5.9(b) of the Company Disclosure Schedule is valid, binding and
enforceable against the parties thereto in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to creditors' rights generally and to general principles of
equity.
(b) Section 5.9(b) of the Company Disclosure Schedule sets forth a
list as of the date of this Agreement of (i) all credit agreements, indentures,
and other agreements related to any indebtedness for borrowed money in excess of
$500,000 of the Company or any Company Subsidiaries, (ii) all joint venture or
other similar agreements to which the Company or any Company Subsidiaries are a
party, (iii) all lease agreements to which the Company or any Company
Subsidiaries are party with annual lease payments in excess of $250,000, (iv)
contracts under which the Company or any Company Subsidiary has advanced or
loaned any other person or entity any material amounts, (v) guaranties of any
obligations in excess of $500,000 (other than a guarantee by the Company of a
Company Subsidiary's debts or a guarantee by a Company Subsidiary of the
Company's debts or another Company Subsidiary's debts), (vi) contracts or groups
of related contracts with the same party or group of parties the performance of
which involves annual consideration in excess of $500,000 which are not
cancellable by the Company on 30-days-or-less notice without premium or penalty,
(vii) warranty agreements with respect to the Company's or the Company
Subsidiaries' services rendered or products sold or leased, other than pursuant
to the Company's standard warranty, a true and complete copy of which has
heretofore been provided or made available to Merger Sub, (viii) agreements
under which the Company has granted any person or entity registration rights
(including, without limitation, demand and piggy-back registration rights), and
(ix) all other contracts and agreements which are material (as hereinafter
defined) to the Company and the Company Subsidiaries taken as a whole
(collectively, the "Material Contracts"). The Company has made available to
Merger Sub a correct and complete copy of each agreement listed in Section
5.9(b) of the Company Disclosure Schedule. For purposes of this Section 5.9(b),
except as otherwise expressly set forth in this Section 5.9(b), an agreement
shall be deemed "material" if the Company reasonably expects that the Company or
any Company Subsidiary would, pursuant to the terms thereof, (x) recognize
during the current fiscal year of the Company net revenues after the payment of
third party shares in excess of $500,000 or (y) incur during the current fiscal
year of the Company liabilities or obligations in excess of $500,000.
17
(c) Except as set forth in Section 5.5 of the Company Disclosure
Schedule, no Material Contract will, by its terms, terminate as a result of the
Transactions or require any consent from any party thereto in order to remain in
full force and effect immediately after the Effective Time, except for any
Material Contracts which, if terminated, would not have a Company Material
Adverse Effect.
(d) Except as set forth in Section 5.9(d) of the Company Disclosure
Schedule, the Company has not granted any right of first refusal or similar
right in favor of any third party with respect to any material portion of its
properties or assets or, except in the ordinary course of business, entered into
any non-competition agreement or similar agreement restricting its ability to
engage in any business.
(e) Section 5.9(e) of the Company Disclosure Schedule sets forth a
list, as of the date of this Agreement, of all agreements of the Company with
any shareholder who, to the Company's knowledge, beneficially owns 5% or more of
the outstanding Common Stock (a "5% Shareholder") or any executive officer or
director of the Company (other than pursuant to the Shareholders Agreement).
Section 5.9(e) of the Company Disclosure Schedule sets forth a list, as of the
date of this Agreement, of all agreements, arrangements or understandings, to
the knowledge of the Company, between a 5% Shareholder and any officer, director
or employee of the Company related in any manner to the Company, its business,
the Transactions or the Merger Consideration. Except as set forth in Section
5.9(e) of the Company Disclosure Schedule, no officer or director of the
Company, or any "associate" (as such term is defined in Rule 14a-1 under the
Exchange Act) of any such officer or director, has any interest in any contract
or property (real or personal, tangible or intangible), used in, or pertaining
to the business of the Company or any of the Company Subsidiaries which interest
would be required to be disclosed pursuant to Item 404(a) of Regulation S-K
promulgated by the SEC.
Section V.10 Environmental Matters. Except as set forth in Section 5.10
of the Company Disclosure Schedule, neither the Company nor any of the Company
Subsidiaries has violated in any material respects any environmental, safety or
similar law or regulation applicable to its business or property relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or waste, pollutants or contaminants ("Environmental Laws"), lacks
any material permits, licenses or other approvals required of them under
applicable Environmental Laws or is violating in any material respects any term
or condition of any such permit, license or approval. Except as set forth in
Section 5.10 of the Company Disclosure Schedule, neither the Company nor any of
the Company Subsidiaries has received any written notice or report regarding any
violation of, in any material respect, or any material or potentially material
liability under, any Environmental Laws, with respect to their operations,
properties or facilities. The Company and the Company Subsidiaries have made
available to Merger Sub all material environmental audits, reports and other
material environmental documents relating to their properties, facilities or
operations which are in their possession or reasonable control. Neither the
Company, nor any of the Company Subsidiaries has treated, stored, disposed of,
arranged for or permitted the disposal of, handled, or released any substance,
or owned or operated its business or any property or facility (and no such
property or facility is, to the knowledge of the Company, currently contaminated
by any such substance)
18
in a manner that has given or would reasonably be expected to give rise to any
Company Material Adverse Effect.
Section V.11 Benefit Plans.
(a) Except as disclosed in the SEC Reports or in Section 5.11 of the
Company Disclosure Schedule or as expressly contemplated by this Agreement,
there exist no employment, consulting, severance or termination agreements,
arrangements or understandings between the Company or any of the Company
Subsidiaries and any individual current or former employee, officer or director
of the Company or any of the Company Subsidiaries with respect to which the
annual cash, noncontingent payments thereunder exceed $100,000.
(b) Section 5.11 of the Company Disclosure Schedule contains a list
of all (i) "employee pension benefit plans" (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
(sometimes referred to herein as "Pension Plans"), including any such Pension
Plans that are "multiemployer plans" (as such term is defined in Section
4001(a)(3) of ERISA) (collectively, the "Multiemployer Pension Plans"), (ii)
"employee welfare benefit plans" (as defined in Section 3(1) of ERISA) and all
other benefit plans and (iii) other bonus, deferred compensation, severance pay,
pension, profit-sharing, retirement, insurance, stock purchase, stock option, or
other fringe benefit plan, arrangement or practice maintained, or contributed
to, by the Company or any of the Company Subsidiaries for the benefit of any
current or former employees, officers or directors of the Company or any of the
Company Subsidiaries (collectively, the "Benefit Plans"). The Company has
delivered or made available to Merger Sub correct and complete copies of (i)
each Benefit Plan, (ii) the most recent annual report on Form 5500 filed with
the Internal Revenue Service with respect to each Benefit Plan (if any such
report was required), (iii) the most recent summary plan description for each
Benefit Plan for which such summary plan description is required and (iv) each
trust agreement and group annuity contract relating to any Benefit Plan.
(c) Except as disclosed in the Company Disclosure Schedule, all
Pension Plans intended to be qualified plans have been the subject of
determination letters from the Internal Revenue Service to the effect that such
Pensions Plans are qualified and exempt from Federal income taxes under Section
401(a) and 501(a), respectively, of the Internal Revenue Code of 1986, as
amended (the "Code"), and no such determination letter has been revoked. To the
knowledge of the Company as of the date hereof, there is no reasonable basis for
the revocation of any such determination letter.
(d) None of the Benefit Plans is, and none of the Company or any of
the Company Subsidiaries has ever maintained or had an obligation to contribute
to (i) a "single employer plan" (as such term is defined in Section 4001(a)(15)
of ERISA) subject to Section 412 of the Code or Title IV of ERISA, (ii) a
"multiple employer plan" (as such term is defined in ERISA), or (iii) a funded
welfare benefit plan (as such term is defined in Section 419 of the Code).
There are no unpaid contributions due prior to the date hereof with respect to
any Benefit Plan that are required to have been made under the terms of such
Benefit Plan, any related insurance contract or any applicable law. None of the
Company or any of the Company
19
Subsidiaries has incurred any liability or taken any action, and the Company
does not have any knowledge of, any action or event that could reasonably be
expected to cause any one of them to incur any liability (i) under Section 412
of the Code or Title IV of ERISA with respect to any "single-employer plan" (as
such term is defined in Section 4001(a)(15) of ERISA), (ii) on account of a
partial or complete withdrawal (as such term is defined in Sections 4203 and
4205 of ERISA, respectively) with respect to any Multiemployer Pension Plan, or
(iii) on account of unpaid contributions to any Multiemployer Pension Plan,
which, in the case of clauses (i), (ii) or (iii), would result in a Company
Material Adverse Effect.
(e) None of the Company nor any of the Company Subsidiaries has
engaged in a "prohibited transaction" (as such term is defined in Section 406 of
ERISA and Section 4975 of the Code) or any other breach of fiduciary
responsibility with respect to any Benefit Plan subject to ERISA that reasonably
could be expected to subject the Company or any of the Company Subsidiaries to
(x) any material tax or penalty on prohibited transactions imposed by Section
4975 or (y) any liability under Section 502(i) or Section 502(l) of ERISA except
in each case as to (y) as would not, individually or in the aggregate, result in
a Company Material Adverse Effect. As of the date of this Agreement, except as
disclosed in the Company Disclosure Schedule, with respect to any Benefit Plan:
(i) no filing, application or other matter is pending with the Internal Revenue
Service, the Pension Benefit Guaranty Corporation, the United States Department
of Labor or any other governmental body, and (ii) there is no action, suit or
claim pending, other than routine claims for benefits.
(f) Except as disclosed in the Company Disclosure Schedule, none of
the Company or any of the Company Subsidiaries has any obligation to provide any
material health benefits or other non-pension benefits to retired or other
former employees, except as specifically required by Part 6 of Title I of ERISA
("COBRA").
Section V.12 Tax Matters. Except as set forth in Section 5.12 of the
Company Disclosure Schedule:
(a) Except where the failure to do so has not had, and would not
reasonably be expected to have, a Material Adverse Effect: (i) the Company and
each of the Company Subsidiaries has filed all federal income Tax Returns and
all other material Tax Returns required to be filed by it prior to the date
hereof, and each such Tax Return has been prepared in compliance in all material
respects with all applicable laws and regulations and is true and correct in all
material respects; (ii) the Company and each of the Company Subsidiaries has
paid (or the Company has paid on the Company Subsidiaries' behalf) all Taxes
shown as due on such returns and all other material Taxes due and payable prior
to the date hereof except such Taxes as are currently being contested in good
faith and for which adequate reserves, as applicable, have been established in
the Company's financial statements in accordance with generally accepted
accounting principles, and the most recent financial statements contained in the
SEC Reports reflect an adequate reserve for all material Taxes payable by the
Company and the Company Subsidiaries for all taxable periods and portions
thereof through the date of such financial statements; and (iii) neither the
Company nor any Company Subsidiary has incurred any material
20
liability for Taxes subsequent to the date of such most recent financial
statement other than in the ordinary course of such Company's or Company
Subsidiary's business.
(b) Except as set forth in the Company Disclosure Schedule: (i) no
material Tax Return of the Company or any of the Company Subsidiaries is under
audit or examination by any taxing authority, and no written notice of such an
audit or examination or any other audit or examination with respect to Taxes has
been received by the Company or any of the Company Subsidiaries; (ii) each
material deficiency resulting from any audit or examination relating to Taxes by
any taxing authority has been paid, except for deficiencies currently being
contested in good faith and for which adequate reserves, as applicable, have
been established in the Company's financial statements in accordance with
generally accepted accounting principles; (iii) there are no material liens for
Taxes upon the assets of the Company or any Company Subsidiary except liens
relating to current Taxes not yet due and payable; (iv) except for amounts which
are not material, all Taxes which the Company or any Company Subsidiary are
required by law to withhold or to collect for payment have been duly withheld
and collected; (v) none of the Company or the Company Subsidiaries has consented
to extend the time, in which any material Tax may be assessed or collected by
any taxing authority; and (vi) to the knowledge of the Company, no written claim
has been made by any taxing authority in a jurisdiction where the Company and
the Company Subsidiaries do not file Tax Returns that the Company or Company
Subsidiary is or may be subject to taxation in that jurisdiction, other than
such claims which would not reasonably be expected to have a Company Material
Adverse Effect.
(c) Except as previously disclosed to Merger Sub, there is no
contract or arrangement, plan or agreement by or with the Company or any Company
Subsidiary covering any person that, individually or collectively, could give
rise to the payment of any amount by the Company or a Company Subsidiary that
would not be deductible by the Company or such Company Subsidiary by reason of
Section 280G of the Code.
(d) Each of the Company and the Company Subsidiaries has made
available to Merger Sub true, correct and complete copies of all federal income
Tax Returns, and all other material Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by any of the Company
or the Company Subsidiaries that have been filed by any of the Company or the
Company Subsidiaries for the taxable years ending December 31, 1996, 1997 and
1998.
(e) None of the Company or the Company 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), (B) is a party
to or bound by any Tax allocation or Tax sharing agreement with any person or
entity other than the Company and the Company Subsidiaries, (C) has any
liability for the Taxes of any Person (other than any of the Company or the
Company Subsidiaries) under Treas. Reg. (S) 1. 1502-6 (or any similar provision
of state, local, or foreign law), as a transferee or successor, by contract, or
otherwise or (D) has any material liability for the Taxes of any Person other
than the Company, one of the Company Subsidiaries or in connection with the
acquisition, directly or indirectly, of any Person acquired by the Company or
any Company Subsidiary.
21
(f) As used in this Section 5.12, the terms (i) "Tax" (and, with
correlative meaning, "Taxes") means: (A) any federal, state, local or foreign
net income, gross income, gross receipts, windfall profit, severance, property,
production, sales, use, license, excise, franchise, employment, payroll,
withholding, alternative or add-on minimum, ad valorem, value added, transfer,
stamp, or environmental tax, or any other tax of any kind whatsoever, together
with any interest or penalty, addition to tax or additional amount imposed by
any governmental authority; and (B) any liability of the Company or any Company
Subsidiary for the payment of amounts with respect to payments of a type
described in clause (A) as a result of any obligation of the Company or any
Company Subsidiary under any tax sharing agreement or tax indemnity agreement;
and (ii) "Tax Return" means any return, report or similar statement required to
be filed with respect to any Tax.
Section V.13 Litigation. Except as set forth in Section 5.13 of the
Company Disclosure Schedule, there is no suit, claim, action, proceeding or
investigation pending, or, to the knowledge of the Company, threatened against
the Company or any of the Company Subsidiaries, at law or in equity, that,
individually or in the aggregate, would reasonably be expected to have a Company
Material Adverse Effect or prevent or materially delay the consummation of the
Transactions (it being understood that the mere filing, or mere existence, by or
on behalf of shareholders of the Company, of litigation that challenges or
otherwise seeks damages with respect to the Transactions shall not in and of
itself be deemed to have such effect). Neither the Company nor any of the
Company Subsidiaries is subject to any outstanding order, writ, injunction or
decree that would reasonably be expected to have a Company Material Adverse
Effect or prevent or materially delay the consummation of the Transactions.
Section V.14 Opinion of Financial Advisor. The Company has received the
opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated on or prior to the date of this
Agreement to the effect that the Merger Consideration to be received in the
Acquisition Merger by the Company's shareholders is fair to the Company's
shareholders from a financial point of view and the Company has delivered a copy
of such opinion to Merger Sub.
Section V.15 Brokers. No broker, finder or investment banker (other than
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated) is entitled to any brokerage, finder's or
other fee or commission in connection with the Transactions based upon
arrangements made by, or on behalf of, the Company or any Company Subsidiary.
Prior to the execution hereof, the Company has made available to Merger Sub a
complete and correct copy of all agreements between the Company and ▇▇▇▇▇▇
▇▇▇▇▇▇▇ & Co. Incorporated pursuant to which such firm would be entitled to any
payment relating to the Transactions.
Section V.16 Properties and Assets. The Company and the Company
Subsidiaries have good and valid title to, or, in the case of leased properties
and assets, valid leasehold interests in, all of their material tangible
properties and assets, real and personal, used or held for use in their
businesses located on their premises or shown on the consolidated balance sheet
of the Company and the Company Subsidiaries as of September 30, 1999 or acquired
thereafter, free and clear of any Liens, except (i) as set forth in the SEC
Reports or Section 5.16 of the Company ▇▇▇▇▇▇▇▇▇▇
▇▇
▇▇▇▇▇▇▇▇, (▇▇) for Liens for taxes not yet due and payable and for which
adequate reserves, as applicable, have been established in the Company's
financial statements in accordance with generally accepted accounting
principles, (iii) Liens which do not, individually or in the aggregate,
materially interfere with or materially impair the conduct of the business of
the Company or any Company Subsidiary and (iv) for Liens which would not
reasonably be expected to result in a Company Material Adverse Effect. Neither
the Company nor any Company Subsidiary owns any real property. The real property
listed in Section 5.16 of the Company Disclosure Schedule constitutes all of the
real property used or occupied by the Company or any Company Subsidiary as of
the date hereof. The Company's and each Company Subsidiary's material buildings,
equipment and other tangible assets are in good operating condition (normal wear
and tear excepted) and are fit for use in the ordinary course of their
respective business except where the failure to be in good operating condition
and fit for use would not be reasonably expected to have a Company Material
Adverse Effect.
Section V.17 Compliance with Laws in General. Except as set forth in
Section 5.17 of the Company Disclosure Schedule, (i) the Company has not
received any notices of, nor to its knowledge have there been any, violations of
any federal, state and local laws, regulations and ordinances relating to its
business and operations that, individually or in the aggregate, would reasonably
be expected to have a Company Material Adverse Effect and (ii) the Company and
the Company Subsidiaries possess all permits, licenses, certifications, and
other governmental or regulatory authorizations and approvals necessary to
enable the Company and the Company Subsidiaries to carry on their businesses as
presently conducted, except for such failure to possess such permits, licenses,
certifications and other governmental authorizations and approvals which would
not be reasonably expected to have a Company Material Adverse Effect. To the
knowledge of the Company, all such permits, licenses, certifications and
regulatory authorizations and approvals are in full force and effect and there
exists no material default thereunder.
Section V.18 Labor Matters. Except as set forth in Section 5.18 of the
Company Disclosure Schedule, (i) there is no labor strike, dispute, slowdown,
stoppage or lockout actually pending, or to the knowledge of the Company,
threatened against or affecting the Company or any of the Company Subsidiaries,
(ii) neither the Company nor any of the Company Subsidiaries is a party to or
bound by any collective bargaining or similar agreement with any labor
organization, or work rules or practices agreed to with any labor organization
or employee association in each case applicable to employees of the Company or
any of the Company Subsidiaries, (iii) none of the employees of the Company or
any of the Company Subsidiaries is represented by any labor organization and, to
the knowledge of the Company, there are not any union organizing activities with
respect to the Company or the Company Subsidiaries and (iv) neither the Company
nor any of the Company Subsidiaries has received any notice that it is not in
compliance, in all material respects, with all applicable Laws respecting
employment and employment practices, terms and conditions of employment, wages,
hours of work, equal opportunity and occupational safety and health, except in
each case where the foregoing would not, individually or in the aggregate,
reasonably be expected to result in a Company Material Adverse Effect. To the
knowledge of the Company as of the date hereof, no executive officer or other
key employee of the Company or any Company Subsidiary is subject to any
noncompete,
23
nonsolicitation, nondisclosure, confidentiality, employment, consulting or
similar agreement relating to, affecting or in conflict with the present and
proposed business activities of the Company and the Company Subsidiaries, except
agreements between the Company or a Company Subsidiary and its present and
former officers or employees.
Section V.19 Insurance. Except as set forth in Section 5.19 of the
Company Disclosure Schedule, the Company and each of the Company Subsidiaries
have policies of insurance and bonds of the type and in amounts customarily
carried by persons conducting businesses or owning assets similar to those of
the Company and the Company Subsidiaries. All premiums due and payable under all
such policies and bonds have been paid and the Company and the Company
Subsidiaries are otherwise in compliance in all material respects with the terms
of such policies and bonds. As of the date hereof, neither the Company nor any
of the Company Subsidiaries maintains any material self-insurance or co-
insurance programs. As of the date hereof, neither the Company nor any of the
Company Subsidiaries has any disputed claim or claims aggregating $500,000 or
more with any insurance provider relating to any claim for insurance coverage
under any policy of insurance maintained by the Company or any Company
Subsidiary.
Section V.20 Customers and Suppliers. Section 5.20 of the Company
Disclosure Schedule lists, as of the date of this Agreement, the ten largest
customers for the fiscal year ended December 31, 1998 and the ten largest
suppliers of the Company and the Company Subsidiaries (on a consolidated basis)
for the period January 1, 1999 through October 31, 1999 and sets forth opposite
the name of each such customer and supplier the dollar volume and percentage of
consolidated net sales or purchases attributable to such customer or supplier.
The party to that certain Material Contract set forth in Item 5 under "Material
Contracts" in Section 5.9(b) of the Company Disclosure Schedule has not informed
the Company that it is stopping, or materially decreasing the rate of,
purchasing products or services from the Company or any Company Subsidiary which
would reasonably be expected to result in a Company Material Adverse Effect.
Merger Sub acknowledges that a material portion of the sales of the Company and
the Company Subsidiaries are made pursuant to purchase orders and in the
ordinary course of business of the Company and the Company Subsidiaries
customers may threaten to reduce or discontinue business with the Company in
connection with negotiations of the terms of ongoing business with the Company.
Subject to the foregoing none of the customers listed in Section 5.20 of the
Company Disclosure Schedule has informed the Company that it intends to stop, or
materially decrease the rate of, purchasing materials, products or services from
the Company or any Company Subsidiary which would reasonably be expected to
result in a Company Material Adverse Effect.
Section V.21 Company Expenses. Section 5.21 of the Company Disclosure
Schedule sets forth, as of the Effective Time, the amount of the Expenses (as
defined below) incurred or which may be incurred by the Company or Company Sub
in connection with the Transactions including those incurred or which may be
incurred by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated and ▇▇▇▇, Scholer, Fierman, ▇▇▇▇ &
Handler, LLP (other than Expenses incurred in connection with any litigation
with respect to, arising from or related to any Transaction or Expenses
reasonably incurred in connection with Sections 8.3, 8.10(a), 8.16, 8.18 or
9.4(c)).
24
Section V.22 Required Company Vote.
(a) The approval of this Agreement at the Shareholders Meeting (as
defined below) by holders of a majority of the issued and outstanding Shares
entitled to vote at the Shareholders Meeting is the only vote of the holders of
any class or series of the Company's securities necessary to approve this
Agreement, the Reorganization Merger and the other Transactions.
(b) The approval of this Agreement by the Company as the sole
stockholder of Company Sub is the only vote of the holders of any class or
series of Company Sub's securities necessary to approve this Agreement, the
Mergers and the other Transactions.
Section V.23 State Takeover Laws. The Company has taken, or will take,
such actions as it reasonably determines as necessary such that "fair price,"
"business combination" or "control share acquisition" statutes or other similar
statutes or regulations of the State of California and the State of Delaware, as
applicable, and, to the knowledge of the Company, any other applicable state
that applies in material respect to the Mergers, this Agreement or any of the
Transactions.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF MERGER SUB
Merger Sub hereby represents and warrants to the Company that:
Section VI.1 Organization and Qualification; Subsidiaries. Merger Sub is
a corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the requisite power and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to be in good standing or to have such governmental approvals
would not, individually or in the aggregate, have a Merger Sub Material Adverse
Effect (as defined below). Merger Sub is duly qualified or licensed as a
foreign corporation to do business, and is in good standing in each jurisdiction
where the character of the properties owned, leased or operated by it or the
nature of its business makes such qualification or licensing necessary, except
for such failure to be so qualified or licensed and in good standing that would
not, individually or in the aggregate, have a Merger Sub Material Adverse
Effect. The term "Merger Sub Material Adverse Effect" means, for all purposes of
this Agreement, any effect, circumstance or change in the business of Merger Sub
that is materially adverse to the business, operations, properties, financial
condition or results of operations of Merger Sub. Merger Sub has no
subsidiaries.
Section VI.2 Certificate of Incorporation and Bylaws. Merger Sub
heretofore has provided the Company a complete and correct copy of its
Certificate of Incorporation and the Bylaws. The Certificate of Incorporation
and Bylaws of Merger Sub so provided are in full force
25
and effect. Merger Sub is not in violation of any of the provisions of its
Certificate of Incorporation or Bylaws.
Section VI.3 Authority Relative to this Agreement.
(a) Merger Sub has all necessary corporate power and authority
to execute and deliver this Agreement, to perform its obligations hereunder and
to consummate the Transactions. The execution and delivery of this Agreement by
Merger Sub and the consummation by Merger Sub of the Transactions have been duly
and validly authorized by all necessary corporate action and no other corporate
proceedings on the part Merger Sub (including on the part of the stockholder of
Merger Sub) are necessary to authorize this Agreement or to consummate the
Transactions (other than the filing and recordation of appropriate merger
documents as required by the DGCL). This Agreement has been duly and validly
executed and delivered by Merger Sub and, assuming the due authorization,
execution and delivery by the Company and Company Sub, constitutes a legal,
valid and binding obligation of Merger Sub, enforceable against Merger Sub in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
generally and to general principles of equity.
(b) The Board of Directors of Merger Sub has approved and
adopted this Agreement and the Transactions in accordance with the DGCL and
Merger Sub's Certificate of Incorporation and Bylaws. No approval of the
stockholders of Merger Sub is required to approve this Agreement, the
Acquisition Merger and the Transactions pursuant to the DGCL and Merger Sub's
Certificate of Incorporation and Bylaws.
Section VI.4 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Merger Sub
does not, and the performance of this Agreement by Merger Sub and the
consummation of the Transactions will not, (i) conflict with or violate the
Certificate of Incorporation or Bylaws or equivalent organizational documents of
Merger Sub, (ii) assuming that all consents, approvals, authorizations and other
actions described in subsection (b) have been obtained and all filings and
obligations described in subsection (b) have been made or complied with,
conflict with or violate any Law applicable to Merger Sub or by which any asset
of Merger Sub is bound or affected, or (iii) conflict with, result in any breach
of or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or require any payment under or
result in the creation of a Lien on any asset of Merger Sub pursuant to, any
contract, note, bond, mortgage, indenture, lease, agreement, or other instrument
or obligation to which Merger Sub is a party or by which any asset of Merger Sub
is bound or affected, except, with respect to clauses (ii) and (iii), for any
such conflicts, violations, breaches, defaults, or other occurrences which would
not, individually or in the aggregate, have a Merger Sub Material Adverse
Effect.
(b) The execution and delivery of this Agreement by Merger Sub
does not, and the performance of this Agreement by Merger Sub and the
consummation of the
26
Transactions will not, require any consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Authority, except (i)
for applicable requirements, if any, of the Exchange Act, NASDAQ/NMS, Delaware
and any other applicable takeover laws, the pre-merger notification requirements
of the HSR Act, and the filing and recordation of appropriate merger documents
as required by the DGCL and (ii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications
would not prevent or delay consummation of the Merger, or otherwise prevent
either Merger Sub from performing its obligations under this Agreement, and
would not, individually or in the aggregate, have a Merger Sub Material Adverse
Effect.
Section VI.5 Ownership of Merger Sub; No Prior Activities. Merger Sub
was formed solely for the purpose of engaging in the transactions contemplated
by this Agreement. Merger Sub (i) has not conducted, and will not prior to the
Effective Time conduct, any business and (ii) has no, and prior to the Effective
Time will have no, assets or liabilities, except, in either case, in connection
with the Transactions. As of the Effective Time, a majority of the outstanding
capital stock of Merger Sub will be owned directly by ▇▇▇▇ or related investment
funds which are affiliates of ▇▇▇▇.
Section VI.6 Litigation. There is no suit, claim, action, proceeding or
investigation pending, or, to the best knowledge of Merger Sub, threatened
against Merger Sub, at law or in equity, that, individually or in the aggregate,
could reasonably be expected to prevent or materially delay the consummation of
the Transactions (it being understood that the mere filing, or mere existence,
by or on behalf of shareholders of the Company, of litigation that challenges or
otherwise seeks damages with respect to the Transactions shall not in and of
itself be deemed to have such effect). Merger Sub is not subject to any
outstanding order, writ, injunction or decree that could reasonably be expected
to have a Merger Sub Material Adverse Effect or prevent or materially delay the
consummation of the Transactions.
Section VI.7 Financing. Merger Sub has provided the Company with
commitment letters from Credit Suisse First Boston (the "Debt Commitment
Letters") and the ▇▇▇▇ Commitment Letters, dated December 23, 1999 and December
24, 1999, respectively, in favor of Merger Sub or ▇▇▇▇ (collectively, the
"Commitment Letters"). The equity investment by ▇▇▇▇ under the ▇▇▇▇ Commitment
Letter is not subject to any condition other than the fulfillment in accordance
with the terms hereof of the conditions of Merger Sub's obligations to
consummate the Merger set forth in Article IX. The Commitment Letters are in
full force and effect as of the date hereof.
Section VI.8 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by, or on behalf of, ▇▇▇▇ or Merger
Sub.
ARTICLE VII
COVENANTS
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Section VII.1 Interim Operations of the Company. The Company covenants
and agrees that during the period from the date of this Agreement to the
Effective Time (unless Merger Sub shall otherwise agree in writing and except as
otherwise expressly contemplated or permitted by this Agreement or the Company
Disclosure Schedule):
(a) the business of the Company and the Company Subsidiaries
shall be conducted only in the ordinary and usual course and each of the Company
and the Company Subsidiaries shall use commercially reasonable efforts to
preserve its business organization intact and maintain its existing relations
with customers, employees and business associates;
(b) the Company shall not (i) sell, transfer or pledge or agree
to sell, transfer or pledge any stock owned by it in any of the Company
Subsidiaries (except for the pledge of such stock for collateral purposes in
connection with its bank working capital facility); (ii) except as expressly
contemplated by this Agreement, amend its Restated Articles of Incorporation or
Bylaws or the similar organizational documents of any of the Company
Subsidiaries; (iii) split, combine or reclassify the outstanding Shares; or (iv)
declare, set aside or pay any dividend or distribution payable in cash, stock or
property with respect to the Shares or any other capital stock of the Company;
(c) neither the Company nor any of the Company Subsidiaries
shall (i) issue, deliver or sell or authorize or propose the issuance, delivery
or sale of, any shares of, or debt or equity securities convertible or
exchangeable for, or options, warrants, calls, commitments or rights of any kind
to acquire, capital stock or other equity interests of any class of the Company
or the Company Subsidiaries other than Shares issuable pursuant to the
agreements or arrangements described in Section 5.3(a) of the Company Disclosure
Schedule (other than any Options as to which a Rollover Shareholder has entered
into a binding agreement with Merger Sub to rollover into options of the
Surviving Corporation, which agreement has been provided to the Company prior to
the time such Shares are to otherwise be issued) or (ii) repurchase, redeem or
otherwise acquire, or permit any Company Subsidiary to repurchase, redeem or
otherwise acquire, any shares of capital stock or other equity interests of the
Company or any Company Subsidiary (including, without limitation, securities
exchangeable for, or options, warrants, calls, commitments or rights of any kind
to acquire, capital stock or other equity interests of the Company or any
Company Subsidiary);
(d) neither the Company nor any of the Company Subsidiaries
shall (i) grant or agree to any increase in the compensation of any director,
officer or employee earning in excess of $100,000 in cash, noncontingent
compensation per year except for increases contemplated by or required under
employment agreements listed in Section 5.7 of the Company Disclosure Schedule
and bonuses payable in the ordinary course under the Company's existing annual
bonus plan, (ii) enter into any new or materially amend any existing employment,
severance or termination agreement with any such director, officer or employee
or (iii) except as may be required to comply with applicable Law and, except as
provided under Section 8.8, become obligated under any Benefit Plan that was not
in existence on the date hereof or amend
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or modify any Benefit Plan in existence on the date hereof to materially enhance
the benefits thereunder;
(e) acquire or agree to acquire, including without limitation,
by merging or consolidating with, or purchasing all or substantially all the
assets or capital stock or other equity interest of, any business, other than
any such acquisition or acquisitions approved by Merger Sub (which approval will
not be unreasonably withheld or delayed);
(f) the Company shall not, and shall not permit any of the
Company Subsidiaries to, sell, lease, license, encumber or otherwise dispose of,
or agree to sell, lease, license, encumber or otherwise dispose of, any of its
material assets outside the ordinary course of business other than (i)
dispositions listed in Section 7.1(f) of the Company Disclosure Schedule, (ii)
assets with an aggregate book value not in excess of $250,000 or (iii) pursuant
to existing contracts or commitments described in Section 7.1(f) of the Company
Disclosure Schedule;
(g) the Company shall not, and shall not permit any of the
Company Subsidiaries to, incur or enter into any agreement to incur any
indebtedness for borrowed money or guarantee any such indebtedness or issue or
sell any debt securities or warrants or rights to acquire any debt securities of
the Company or any Company Subsidiary, except (i) in the ordinary course of
business consistent with past practice, provided that such borrowings are made
under the Company's existing credit agreements in an aggregate amount not to
exceed $30.0 million in total borrowings under such credit agreements (other
than borrowings to finance any obligations of the Company hereunder) the
Effective Time; provided, however, that the aggregate amount of such borrowing
shall not exceed $31.4 million at any time outstanding, (ii) any indebtedness
for borrowed money or guarantees of indebtedness for borrowed money acquired in
any acquisition permitted by Section 7.1(e) above or (iii), subject to the
limitations set forth in clause (i) above, any extensions, refinancing, renewal
or replacement of any permitted indebtedness or guarantee;
(h) the Company shall not, and shall not permit any of the
Company Subsidiaries to, make any loans or advances to, guarantees for the
benefit of, or investments in, any person or entity (other than an existing
subsidiary or an entity which becomes, after the date hereof, a subsidiary in
accordance with Section 7.1(e) of this Agreement) except in the ordinary course
of business;
(i) neither the Company nor any of the Company Subsidiaries
shall merge or consolidate with any person or entity except for the Mergers or
an acquisition permitted in accordance with Section 7.1(e) of this Agreement;
(j) neither the Company nor any Company Subsidiary shall
liquidate, dissolve or effect a recapitalization or reorganization in any form
of transaction;
(k) the Company shall not, and shall not permit any of the
Company Subsidiaries to, enter into, amend, modify or supplement any Material
Contract or agreement
29
(i) outside of the ordinary course of business and consistent with past practice
(except as may be necessary for the Company to comply with its obligations
hereunder) or (ii) restricting in any way the conduct of the respective
businesses of the Company and the Company Subsidiaries;
(l) the Company shall not, and shall not permit any of the
Company Subsidiaries to, make any capital expenditures (other than pursuant to
commitments prior to the date hereof and set forth on Section 7.1(l) of the
Company Disclosure Schedule) in excess of $500,000 (other than an acquisition
permitted in accordance with Section 7.1(e) of this Agreement);
(m) the Company and the Company Subsidiaries shall comply in all
material respects with its obligations under the Material Contracts as such
obligations become due and applicable Law;
(n) the Company and the Company Subsidiaries shall continue in
force with good and responsible insurance companies adequate insurance covering
risks of such types and in such amounts as are consistent with the Company's
past practices;
(o) the Company shall not, and shall not permit any of the
Company Subsidiaries to, enter into, amend, modify or supplement any material
agreement, transaction, commitment or arrangement with any officer, director or
other affiliate (or any affiliate of any of the foregoing) other than
agreements, transactions, commitments and arrangements (i) permitted by Section
7.1(d) hereof or (ii) as contemplated by this Agreement or the Transactions;
(p) the Company shall not, and shall not permit any of the
Company Subsidiaries to, establish or acquire, other than in accordance with
Section 7.1(e) of this Agreement, (i) any subsidiary other than wholly-owned
subsidiaries or (ii) subsidiaries organized outside of the United States and its
territorial possessions; and
(q) neither the Company nor any of the Company Subsidiaries will
enter into an agreement to do any of the foregoing.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section VIII.1 Meeting of the Shareholders.
(a) So long as the Board of Directors of the Company shall not
have withdrawn, modified or changed their recommendation in accordance with the
provisions of the next succeeding sentence, the Company will take all action
reasonably necessary in accordance with applicable Law and its Restated Articles
of Incorporation and Bylaws to convene a special meeting of its shareholders to
consider and vote upon the approval of this Agreement, the Reorganization Merger
and such other matters as may be necessary to effectuate the Transactions (the
"Shareholders Meeting") as promptly as practicable following the execution and
delivery of
30
this Agreement. The Board of Directors of the Company shall recommend such
approval and take all lawful action to solicit such approval; provided, however,
-------- -------
that the Board of Directors of the Company may at any time prior to shareholder
approval of the Reorganization Merger withdraw, modify or change any such
recommendations to the extent that the Board of Directors of the Company
determines in good faith after consultation with independent legal counsel that
the failure to so withdraw, modify or change its recommendation would cause the
Board of Directors of the Company to breach its fiduciary duties to the
Company's shareholders under applicable Law (which withdrawal, modification or
change shall not constitute a breach by the Company of this Agreement). The
Merger Sub Companies will vote all Shares over which they exercise voting
control in favor of this Agreement and the Mergers.
(b) As soon as practicable after the date of this Agreement and
in connection with the Shareholders Meeting, the Company shall file with the SEC
a proxy statement (the "Proxy Statement") and form of proxy relating to the
Mergers and the other Transactions, which shall comply as to form with all
applicable Laws. The Company shall obtain and furnish the information required
to be included in the Proxy Statement and shall respond promptly to any comments
made by the SEC with respect to the Proxy Statement and cause the Proxy
Statement and form of proxy to be mailed to the Company's shareholders at the
earliest practicable date. Merger Sub shall cooperate in the preparation of the
Proxy Statement and shall as soon as practicable following the date hereof
furnish the Company with all information for inclusion in the Proxy Statement as
shall be reasonably requested by the Company. The Company agrees, as to
information with respect to the Company, its officers, directors, shareholders
and subsidiaries contained in the Proxy Statement or Schedule 13E-3, if any, and
Merger Sub agrees, as to information with respect to Merger Sub, its officers,
directors, shareholders and subsidiaries contained in the Proxy Statement or
Schedule 13E-3, if any, that such information, at the date the Proxy Statement
is mailed and (as then amended or supplemented) at the time of the Shareholders
Meeting, will not be false or misleading with respect to any material fact, or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. Merger Sub and its counsel shall be
given an opportunity to review the Proxy Statement, and all amendments or
supplements thereof, prior to their being filed with the SEC and the Company
shall not make any such filing without the approval of Merger Sub (which shall
not be unreasonably withheld or delayed). The Company will advise Merger Sub,
promptly after it receives notice thereof, of the time when the Proxy Statement
has been cleared by the SEC or any request by the SEC for amendment of the Proxy
Statement or comments thereon and proposed responses thereto or requests by the
SEC for additional information. The Company, on the one hand, and Merger Sub, on
the other hand, agree to promptly correct any information provided by either of
them for use in the Proxy Statement or Schedule 13E-3, if any, if and to the
extent that it shall have become false or misleading, and the Company further
agrees to take all steps reasonably necessary to cause the Proxy Statement as so
corrected to be filed with the SEC and to be disseminated to the Company's
shareholders, in each case, as and to the extent required by applicable Laws.
The Company shall cooperate in the preparation of a Schedule 13E-3, if any, and
shall as soon as practicable following the date hereof furnish Merger Sub with
all information for inclusion in the Schedule 13E-3, if any, as shall be
reasonably requested by Merger Sub.
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Section VIII.2 Filings; Other Action. Subject to the terms and conditions
of this Agreement, the Company and Merger Sub shall: (a) if required by
applicable Law, promptly make their respective filings and thereafter make any
other required submissions under the HSR Act with respect to the Mergers and the
other Transactions; and (b) use their reasonable best efforts promptly to take,
or cause to be taken, all other action and do, or cause to be done, all other
things necessary, proper or appropriate to consummate and make effective the
Transactions, as soon as practicable.
Section VIII.3 Access. Subject to restrictions contained in
confidentiality agreements to which the Company is subject, upon reasonable
notice the Company shall (and shall cause each of the Company Subsidiaries to)
afford Merger Sub's officers, counsel, accountants, investors, financing sources
and other authorized representatives ("Representatives") reasonable access,
during normal business hours during the period prior to the Effective Time, to
its properties, books, contracts and records and appropriate individuals as it
may reasonably request (including employees, attorneys, accountants and other
professionals), and during such period, the Company shall (and shall cause each
of its subsidiaries to) furnish promptly to Merger Sub such information
concerning its business, properties and personnel as Merger Sub may reasonably
request. Merger Sub will not, and will cause its Representatives not to, use any
information obtained pursuant to this Section 8.3 for any purpose unrelated to
the consummation of the Transactions. Except as otherwise agreed to by the
Company, and notwithstanding termination of this Agreement, the terms and
provisions of the Confidentiality Agreement, dated August 30, 1999, between ▇▇▇▇
Capital, Inc. and the Company (the "Confidentiality Agreement") shall apply to
all information furnished thereunder or hereunder.
Section VIII.4 Notification of Certain Matters. The Company shall give
prompt written notice to Merger Sub of any notice of, or other communication
relating to, a default or event which, with notice or lapse of time or both,
would become a default, received by the Company or any of its subsidiaries
subsequent to the date of this Agreement and prior to the Effective Time, under
any contract material to the financial condition, properties, businesses or
results of operations of the Company and its subsidiaries taken as a whole to
which the Company or any of its subsidiaries is a party or is subject. Each of
the Company and Company Sub, on the one hand, and Merger Sub, on the other hand,
shall give prompt written notice to the other party of (a) any notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with the Transactions or (b) any Company
Material Adverse Effect or Merger Sub Material Adverse Effect, as the case may
be. The Company and Company Sub shall give prompt written notice to Merger Sub,
and Merger Sub shall give prompt written notice to the Company, of (i) any
claims, actions, proceedings or governmental investigations commenced or, to its
knowledge, threatened, involving or affecting the Company or any of its
subsidiaries or any of their property or assets, (ii) the occurrence, or failure
to occur, of any event that would be likely to cause any representation or
warranty made by such party contained in this Agreement to be untrue or
inaccurate in any material respect, and (iii) any material failure of the
Company, Company Sub or Merger Sub, as the case may be, or of any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder.
Notwithstanding anything in this
32
Agreement to the contrary, no such notification shall affect the
representations, warranties or covenants of the parties or the conditions to the
obligations of the parties hereunder.
Section VIII.5 Publicity. Except as otherwise required by Law, the Company
and Merger Sub shall consult with each other in issuing any press releases or
otherwise making public statements with respect to the Transactions and in
making any filings with any federal or state governmental or regulatory agency
or with NASDAQ/NMS or any national securities exchange with respect thereto.
Section VIII.6 Indemnification.
(a) The Certificate of Incorporation and Bylaws of the
Surviving Corporation shall contain provisions with respect to indemnification,
advancement of expenses and director exculpation as are set forth in the Amended
and Restated Certificate of Incorporation of Company Sub as set forth in Exhibit
B and the Bylaws of Company Sub as of the date hereof (to the extent not in
violation of applicable law), which provisions shall not be amended, repealed or
otherwise modified for a period of six years after the Acquisition Effective
Time in any manner that would adversely affect the rights thereunder of persons
who at any time prior to the Acquisition Effective Time were entitled to
indemnification, advancement of expenses or exculpation under the Amended and
Restated Certificate of Incorporation or Bylaws of Company Sub in respect of
actions or omissions occurring at or prior to the Acquisition Effective Time
(including, without limitation, the Transactions), unless otherwise required by
applicable law.
(b) From and after the Effective Time, the Surviving Company
shall indemnify, defend and hold harmless the present and former officers,
directors and employees of the Company and its subsidiaries (collectively, the
"Indemnified Parties") against all losses, expenses, claims, damages,
liabilities or amounts that are paid in settlement of, or otherwise in
connection with, any claim, action, suit, proceeding or investigation (a
"Claim"), to which any such person is or may become a party by virtue of his or
her service as a present or former director, officer or employee of the Company
or any of its subsidiaries and arising out of actual or alleged events, actions
or omissions occurring or alleged to have occurred at or prior to the Effective
Time (including, without limitation, the Transactions), in each case to the
fullest extent permitted under the DGCL (and shall pay expenses in advance of
the final disposition of any such action or proceeding to each Indemnified Party
to the fullest extent permitted under the DGCL, upon receipt from the
Indemnified Party to whom expenses are advanced of the undertaking to repay such
advances contemplated by Section 145(e) of the DGCL).
(c) Any Indemnified Party wishing to claim indemnification
under this Section 8.6, upon learning of any such Claim, shall notify the
Surviving Corporation (although the failure so to notify the Surviving
Corporation shall not relieve the Surviving Corporation from any liability that
the Surviving Corporation may have under this Section 8.6, except to the extent
such failure materially prejudices such party). The Surviving Corporation shall
have the right to assume the defense thereof and the Surviving Corporation shall
not be liable to such Indemnified Parties for any legal expenses of other
counsel or any other expenses subsequently incurred by such Indemnified Parties
in connection with the defense thereof, except that if the
33
Surviving Corporation elects not to assume such defense or if there is an actual
or potential conflict of interest between, or different defenses exist for the
Surviving Corporation and the Indemnified Parties, the Indemnified Parties may
retain counsel satisfactory to them and the Surviving Corporation shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided however, that (i) the
-------- -------
Surviving Corporation shall not, in connection with any one such action or
proceeding or separate but substantially similar actions or proceedings arising
out of the same general allegations, be liable for the fees and expenses of more
than one separate firm of attorneys in addition to any appropriate local counsel
at any time for all Indemnified Parties, (ii) the Surviving Corporation and the
Indemnified Parties will cooperate in the defense of any such matter and (iii)
the Surviving Corporation shall not be liable for any settlement effected
without its prior written consent, which consent will not be unreasonably
withheld or delayed, and provided further, that the Surviving Corporation shall
not have any obligation hereunder to any Indemnified Party when and if a court
of competent jurisdiction shall ultimately determine, and such determination
shall have become final and not subject to further appeal, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable Law.
(d) The Surviving Corporation shall cause to be maintained in
effect for not less than six years after the Effective Time (except to the
extent not generally available in the market) directors' and officers' liability
insurance and fiduciary liability insurance that is substantially equivalent in
coverage to the Company's current insurance, with an amount of coverage of not
less than 100% of the amount of coverage maintained by the Company as of the
date of this Agreement with respect to matters occurring prior to the Effective
Time; provided, however, that during such period, the Surviving Corporation
shall not be required to maintain any coverage in excess of the amount that can
be obtained for the remainder of such period for an annual premium of 200% of
the current annual premium paid by the Company for its existing coverage.
(e) This Section 8.6 shall survive the consummation of the
Mergers and is intended to be for the benefit of, and shall be enforceable by,
the Indemnified Parties referred to herein, their heirs and personal
representatives and shall be binding on Merger Sub and the Surviving Corporation
and its successors and assigns.
(f) If the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its properties
and assets to any Person, then, and in each case, to the extent necessary,
proper provision shall be made so that the successors and assigns of the
Surviving Corporation shall assume the obligations set forth in this
Section 8.6.
Section VIII.7 Obligations of Merger Sub. Merger Sub shall take all action
reasonably necessary to perform its obligations under this Agreement and to
consummate the Mergers on the terms and subject to conditions set forth in this
Agreement.
34
Section VIII.8 Stock Options. As part of the Transactions, (i) Options
granted under the 1996 Plan ("Plan Options") and (ii) Options granted under
certain arrangements outside the 1996 Plan (the "Non-Plan Options") shall be
treated as follows:
(a) Immediately prior to the Acquisition Effective Time, all
then outstanding but theretofore unvested and non-exercisable Plan Options and
Non-Plan Options shall become immediately vested and exercisable in full (unless
the Company is otherwise notified in writing by the holder of any such Plan
Option or Non-Plan Option that such Plan Option or Non-Plan Option shall not
become immediately vested and exercisable in full).
(b) At the Acquisition Effective Time, all then outstanding Plan
Options and Non-Plan Options as to which the holder has executed and delivered
to the Company an agreement containing terms consistent with the terms set forth
in Schedule 8.8(b) shall be converted into options to acquire shares of common
stock of the Surviving Corporation on such terms and conditions as are set forth
in Schedule 8.8(b).
(c) At the Acquisition Effective Time, all then outstanding Plan
Options and Non-Plan Options as to which the holder has theretofore executed and
delivered to the Company an agreement containing terms consistent with the terms
set forth in Schedule 8.8(c) shall be canceled and in lieu thereof, each holder
of such an Option shall, upon the execution and delivery of such agreement,
receive from the Payment Fund or, if the Payment Fund is insufficient to pay
such amount, from the Surviving Corporation an amount in cash equal to the
product of (i) the excess, if any, of the per share Merger Consideration over
the per share exercise price of such option and (ii) the number of shares of
Company Common Stock subject to such option, net of any applicable withholding
taxes (the "Option Consideration"). In the event the holder does not, prior to
the Effective Time execute and deliver an agreement consistent with the terms
specified in either Schedule 8.8(b) or (c), such Option shall be adjusted to
reflect the capital structure of the Surviving Corporation to the extent of, and
in accordance with, the terms of the applicable Plan Options and Non-Plan
Options and related agreements and plan documents in effect immediately prior to
the Effective Time.
(d) Each of the Company and Merger Sub covenants that prior to
the Effective Time it will take all actions necessary under that certain SEC no-
action letter, dated January 12, 1999, to Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇,
to provide that the cancellation and cash-out and conversion of Options pursuant
to this Section 8.8 will qualify for exemption under Rule 16b-3(d) or (e), as
applicable, under the Exchange Act.
(e) The Company shall cooperate with Merger Sub and use
reasonable efforts to obtain a written agreement substantially in the form
described in Schedule 8.8(b) or Section 8.8(c) prior to the Effective Time from
each holder of an Option, and prior to the Effective Time, the Company shall
take such other lawful action in respect of the Options as may be reasonably
necessary or appropriate to give effect to the transactions contemplated by this
Section 8.8.
(f) Except as otherwise provided herein or agreed by the parties
or as may be necessary to administer Options remaining outstanding following the
Effective Time, the Option
35
Plans shall terminate effective as of the Acquisition Effective Time and the
Company shall use commercially reasonable efforts to cause the provisions in any
other plan, program or arrangement providing for the issuance or grant of any
other interest in respect of the capital stock of the Company or any Company
Subsidiary to be canceled as of the Acquisition Effective Time.
(g) Subsections (a)-(c) of this Section 8.8 shall survive the
consummation of the Mergers and are intended to be for the benefit of, and shall
be enforceable by, the holders of Options referred to herein, their heirs and
personal representatives and shall be binding on Merger Sub and the Surviving
Corporation and their respective successors and assigns.
Section VIII.9 Employee Benefit Plans. Subject to Section 8.8, the
Surviving Corporation (and any successor thereto) shall honor, without
modification, all employment, consulting, severance, termination or
indemnification agreements, arrangements or understandings between the Company
or any of its subsidiaries and any current or former employee, officer or
director of the Company or any of its subsidiaries as set forth in the SEC
Reports or in the Company Disclosure Schedule in effect on the date hereof
except as may be otherwise mutually agreed by Merger Sub or the Surviving
Corporation and a current or former employee, officer or director covered by
such an agreement. The Surviving Corporation and its successors shall pay or
provide all benefits vested as of the Acquisition Effective Time under any
Benefit Plan (as defined in Section 5.11) in accordance with the terms of such
plans. For a period of at least 12 months following the Acquisition Effective
Time, the Surviving Corporation and its successors shall maintain for all
employees of the Surviving Corporation Benefit Plans (other than any stock
option or stock purchase plan and the bonus plan described in item 8 of Section
5.7 of the Company Disclosure Schedule) which, in the aggregate, provide
substantially equivalent benefits to such employees as the benefit plans in
effect for employees of the Company immediately prior to the Acquisition
Effective Time, provided that employees covered by collective bargaining
agreements shall be provided the benefits required under such agreements. For
purposes of their participation in the Surviving Corporation's employee and
fringe benefit plans, programs, policies and practices, the Surviving
Corporation shall credit each Company employee with full credit for all service
credited under the comparable plan, program, policy or practice of the Company
(including service with the Company prior to the Effective Time and, where
applicable, service with prior or predecessor employers to the extent credit is
given for such service under the comparable Company plans) for purposes of
eligibility to participate and receive benefits and for purposes of vesting.
Notwithstanding anything in this Section 8.9 to the contrary, nothing in this
Section 8.9 shall be deemed to limit or otherwise affect the right of the
Surviving Corporation to terminate employment or change the place of work,
responsibilities, status or designation of any employee or group of employees as
the Surviving Corporation may determine in the exercise of its business judgment
and in compliance with (a) applicable laws and (b) the agreements, arrangements
and understandings described in the first sentence of this Section 8.9.
Section VIII.10 No Solicitation of Transactions.
36
(a) The Company and its subsidiaries will not, and the Company will
instruct its and its subsidiaries' officers, directors, employees, investment
bankers, financial advisors, attorneys, accountants and other representatives,
agents or affiliates ("Company Representatives") not to, (i) initiate, solicit
or encourage (including by way of furnishing information or assistance) 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, a Competing Transaction
(as defined below), (ii) enter into or maintain discussions or negotiate with
any person or entity in furtherance of or relating to or to obtain a Competing
Transaction, or (iii) agree to or endorse any Competing Transaction, and the
Company shall cause its subsidiaries and the Company Representatives not to take
any such action in the foregoing clauses (i) through (iii); provided, however,
that nothing contained in this Section 8.10 shall prohibit the Board of
Directors of the Company prior to shareholder approval of the Mergers at the
Shareholders Meeting or any adjournment or postponement thereof from (A)
furnishing information to, or engaging in discussions or negotiations with, any
person that makes an unsolicited proposal (believed by the Board of Directors to
be bona fide) regarding a potential Competing Transaction if (1) the Board of
Directors of the Company, after consultation with independent legal counsel,
determines in good faith that such action is required for the Board of Directors
of the Company to comply with its fiduciary duties to shareholders under
applicable law, (2) such Competing Transaction is or is reasonably likely to
result in a Superior Proposal, and (3) prior to furnishing such information to
such person or entity, the Company receives from such person or entity an
executed confidentiality agreement with terms materially no less favorable to
the Company than those contained in the Confidentiality Agreement; or (B)
complying with Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act or
Section 1203 of the CGCL (including, without limitation, the making of public
disclosure as may be necessary or advisable under applicable securities laws)
and provided further that the foregoing actions described in this provision
shall not constitute a breach by the Company of this Agreement. The Company
shall promptly advise Merger Sub if any such proposal or offer, or any inquiry
or contact is made with any person or entity with respect thereto, and shall
inform Merger Sub of the material terms and conditions of such proposal or offer
for a Competing Transaction and the identity of such person or entity (if
disclosure of such identity is not prohibited by the terms of such proposal).
The Company shall, and shall cause its subsidiaries and the Company
Representatives to, cease immediately and cause to be terminated all activities,
discussions and negotiations, if any, with any person or entity conducted prior
to the date of this Agreement with respect to a Competing Transaction.
(b) For purposes of this Agreement "Competing Transaction" shall mean
any of the following involving the Company or any of its subsidiaries: (a) any
merger, consolidation, share exchange, business combination, recapitalization,
reclassification or other similar transaction or any issuance or purchase of
securities which results in the shareholders of the Company immediately prior to
such transaction (excluding any shareholders that may be proposing the Competing
Transaction to the Company) beneficially owning shares representing less than a
majority of the voting power or common equity after such transaction; (b) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition of 30% or
more of the fair market value of the assets of the Company and its subsidiaries,
taken as a whole, in a single transaction or series of transactions; (c) any
tender offer or exchange offer for more than 45% of the
37
outstanding Shares of the Company; or (d) any public announcement of an
agreement, proposal, plan or intention to do any of the foregoing.
(c) For purposes of this Agreement "Superior Proposal," shall mean
any bona fide proposal relating to a Competing Transaction that the Company's
board of directors has determined in good faith, after having received the
advice of its legal counsel and independent financial advisor of nationally
recognized reputation, is (i) on terms which are more favorable from a financial
point of view to the Company's shareholders than the Mergers and the other
Transactions, and (ii) reasonably capable of being consummated in a timely
manner and for which financing, to the extent required, is then committed or
reasonably capable (in the good faith judgment of the Board of Directors) of
being financed by such third party.
Section VIII.11 Third Party Standstill Agreements. During the period
from the date of this Agreement through the Effective Time, the Company shall
not terminate, amend, modify or waive any material provision of any
confidentiality or standstill agreement to which the Company is a party (other
than any involving ▇▇▇▇ (or its affiliates) or Merger Sub). During such period,
the Company agrees to enforce, to the fullest extent permitted under applicable
law, the provisions of any such agreements, including, but not limited to,
seeking injunctions to prevent any breaches of such agreements and to enforce
specifically the terms and provisions thereof in a court in the United States or
any state thereof having jurisdiction.
Section VIII.12 Consents. The Company, Company Sub and Merger Sub shall
use reasonable efforts to obtain promptly all consents, waivers, approvals,
authorizations or permits of, or registrations or filings with or notifications
to any Governmental Authority or third party necessary for the consummation of
the Transactions.
Section VIII.13 SEC Reports. From the date of this Agreement to the
Effective Time, the Company shall file on a timely basis all SEC Reports
required to be filed by it with the SEC under the Exchange Act, the Securities
Act and the published rules and regulations of the SEC under either of the
foregoing applicable to such SEC Reports, which SEC Reports shall comply in all
material respects with the requirements of the Exchange Act, the Securities Act
and the published rules and regulations of the SEC thereunder, each as
applicable to such SEC Reports.
Section VIII.14 Delisting. Each of the parties agrees to cooperate with
each other in taking, or causing to be taken, all actions reasonably necessary
to delist the Shares from NASDAQ/NMS and to terminate registration under the
Exchange Act, provided that such delisting and termination shall not be
effective until after the Effective Time of the Merger.
Section VIII.15 Actions Respecting Commitment Letters; Financing,
Notification.
(a) Merger Sub and its affiliates agree to perform all obligations
required to be performed by it in accordance with and pursuant to the Commitment
Letters and not to amend, terminate or waive any provisions under such
Commitment Letters if the effect thereof would be reasonably likely to prevent
or materially delay the consummation of the Transactions.
38
(b) Merger Sub shall use all commercially reasonable efforts to
cause the financing necessary for satisfaction of the condition set forth in
Section 9.3(c) to be obtained on the terms set forth in the Debt Commitment
Letters as soon as reasonably practicable; provided however, that Merger Sub
-------- -------
shall be entitled to obtain, in its sole discretion, substitute debt financing
with other nationally recognized financial institutions ("Substitute Debt
Financing"), to provide, subject only to customary conditions and on terms not
materially less favorable in the aggregate to the Company, the financing
required by Section 9.3(c) and in any event providing for the payment of the
Merger Consideration in accordance with this Agreement provided that such
Substitute Debt Financing does not materially delay the consummation of the
Transactions. If Merger Sub shall seek Substitute Debt Financing, Merger Sub
shall use all commercially reasonable efforts to cause the financing necessary
for satisfaction of the condition set forth in Section 9.3(c) to be obtained on
the terms set forth for the Substitute Debt Financings.
(c) Merger Sub agrees to provide prompt written notice to the
Company of (i) ▇▇▇▇'▇ refusal or intended refusal to provide the financing
described in the ▇▇▇▇ Commitment Letter and (ii) following its receipt of
notification by a potential lender under a Debt Commitment Letter or in
connection with the Substitute Debt Financing, of its refusal or intended
refusal to provide the financing described in the applicable Debt Commitment
Letter and, in each case, the stated reasons therefor.
Section VIII.16 Financial Statements. During the period prior to the
Effective Time, the Company shall provide to Merger Sub consolidated monthly
"flash reports" no later than the twentieth business day following the end of
each calendar month following the date of this Agreement. Further, the Company
shall provide, and shall cause the Company Subsidiaries and Company
Representatives to provide, at Merger Sub's cost, all reasonable cooperation in
connection with the arrangement of any financing to be obtained by Merger Sub or
the Surviving Corporation in connection with the Transactions contemplated by
this Agreement (the "Financing") including, without limitation, (a) promptly
providing to Merger Sub's financing sources all material financial information
in their possession with respect to the Company and the Transactions reasonably
requested by Merger Sub, including but not limited to information and
projections prepared by the Company relating to the Company and the
Transactions, (b) making the Company's senior officers and other Company
Representatives reasonably available to Merger Sub's financing sources in
connection with such Financing, to reasonably participate in due diligence
sessions and to reasonably participate in presentations related to the
Financing, including, without limitation, presentations to rating agencies, and
(c) reasonably assisting in the preparation of one or more appropriate offering
documents and assisting Merger Sub's financing sources in preparing other
appropriate marketing materials, in each case to be used in connection with the
Financing. Subject to Section 9.3(c), nothing herein shall imply that the
completion of any such syndication, securities offerings or other financing is a
condition to the obligation of Merger Sub to consummate the Mergers.
Section VIII.17 Shareholders Agreement. The Company agrees to comply
with the provisions of the Shareholders Agreement with respect to transfers of
record ownership of shares of Common Stock, and agrees to notify the Company's
transfer agent that there is a limitation on the transferability of the Subject
Shares (as defined in the Shareholders Agreement) and to do all
39
other things as are reasonably necessary to effect the transfer limitation
provisions of the Shareholders Agreement.
Section VIII.18 State Takeover Laws. The Company and Company Sub shall,
upon the request of Merger Sub, take all reasonable steps to assist in any
challenges by Merger Sub to the validity or applicability to the Transactions,
including the Mergers, of any state takeover law.
ARTICLE IX
CONDITIONS
Section IX.1 Conditions to the Obligations of Each Party. The
obligations of the Company, Company Sub and Merger Sub to consummate the Mergers
are subject to the satisfaction of the following conditions:
(a) Company Shareholder Approval. This Agreement and the
Reorganization Merger shall have been approved and adopted by the shareholders
of the Company in accordance with the CGCL, the Company's Restated Articles of
Incorporation and its Bylaws.
(b) HSR. Any waiting period (and any extension thereof) applicable to
the consummation of the Acquisition Merger under the HSR Act shall have expired
or been terminated.
(c) No Order. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, executive order or
decree, judgment, injunction, ruling or other order, whether temporary,
preliminary or permanent (collectively, "Order"), that is then in effect and has
the effect of prohibiting the consummation of the Mergers or otherwise imposing
material limitations on the ability of Merger Sub effectively to acquire or hold
the business of the Company and the Company Subsidiaries.
Section IX.2 Additional Conditions to the Acquisition Merger. The
obligations of Company Sub and Merger Sub to effect the Acquisition Merger are
subject to the Reorganization Merger having become effective in accordance with
the DGCL.
Section IX.3 Conditions to the Obligations of Merger Sub. The
obligations of the Merger Sub to consummate the Acquisition Merger are subject
to the satisfaction of the following additional conditions, unless waived by
Merger Sub in writing:
(a) Representations and Warranties. The representations and
warranties of the Company set forth herein shall be true and correct as of the
date of this Agreement and as of the Effective Time except for (i) changes
specifically contemplated by this Agreement and (ii) those representations and
warranties that address matters only as of a particular date (which shall remain
true and correct as of such date) and in each case except where failure of such
representation and warranty to be so true and correct would not reasonably be
expected to have a
40
Company Material Adverse Effect (other than representations and warranties that
are already so qualified or that are qualified as to the prevention or delay of
the consummation of any of the Transactions or representations and warranties as
to the performance by the Company of its obligations under this Agreement and
the representations and warranties set forth in Section 5.3(a) (provided that it
shall not constitute a breach by the Company of its representations and
warranties set forth therein if the issued and outstanding shares of Common
Stock and the number of Options change from those set forth in Section 5.3(a),
so long as the aggregate of such two items do not exceed 10,698,205 shares of
Common Stock), Section 5.3(c) and Section 5.21, which in each such case shall be
true and correct as written).
(b) Covenants and Agreements. The Company shall have performed
all obligations and complied with all agreements and covenants of the Company to
be performed or complied with by it under the Agreement prior to the Effective
Time in each case in all material respects (other than the covenants set forth
in Section 7.1(b)(iv) and 7.1(g), which in each case shall be complied with as
written).
(c) Financing. Merger Sub or Company Sub, as the case may be,
shall have received the debt financing proceeds described in the Debt Commitment
Letters or, if applicable, an equal amount of proceeds from the Substitute Debt
Financing; provided, however, that if the failure to receive such financing is
solely the result of, or solely caused by, Merger Sub's or ▇▇▇▇'▇ breach in any
material respect of any representation, warranty, covenant or agreement made by
Merger Sub or ▇▇▇▇ in any Debt Commitment Letter (unless such breach was solely
the result of, or solely caused by, a breach of a representation, warranty,
covenant or agreement made by the Company or Company Sub in this Agreement),
then in such event Merger Sub's obligation to consummate the Merger shall not be
subject to the satisfaction of this condition.
(d) Consents. The Company shall have obtained all material consents
and approvals from Governmental Authorities necessary or required for the
consummation of the Transactions and all consents and approvals from the third
parties identified on Schedule 9.3(d) attached hereto, all on terms and
conditions reasonably satisfactory to Merger Sub.
(e) Officers' Certificate. At the Closing, the Company shall deliver
an Officers' Certificate, duly executed by the Company's Chief Executive Officer
and Chief Financial Officer, stating that the conditions to Closing set forth in
Sections 9.3(a) and (b) above have been satisfied.
(f) Certified Copies.
(i) At the Closing, the Company shall deliver certified
copies of (A) the resolutions duly adopted by the Company's board of directors
authorizing the execution, delivery and performance of this Agreement and the
other agreements contemplated hereby applicable to it and the Transactions, (B)
the resolutions duly adopted by the Company's stockholder approving this
Agreement and the Transactions and (C) the Restated Articles of Incorporation
and the Bylaws of the Company.
41
(ii) At the Closing, Company Sub shall deliver certified copies
of (A) the resolutions duly adopted by Company Sub's board of directors
authorizing the execution, delivery and performance of this Agreement and the
other agreements contemplated hereby applicable to it and the Transactions, (B)
the resolutions duly adopted by Company Sub's stockholder approving this
Agreement and the Transactions and (C) the Amended and Restated Certificate of
Incorporation, and the Bylaws of Company Sub.
(g) Non-compete Agreements; Termination Agreement; Escrow
Agreement. The enforceability of non-compete agreements entered into between
Merger Sub, on the one hand, and R. ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, on the
other hand, each dated the date hereof, shall not have been challenged by either
of Messrs ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇. The termination agreement entered into between
Merger Sub and R. ▇▇▇▇ ▇▇▇▇▇▇▇▇ dated the date hereof, shall be valid, binding
and enforceable and in full force and effect. The escrow agreement between
Merger Sub, R. ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and the escrow agent named therein
(who shall be reasonably acceptable to all of the parties thereto) substantially
in the form attached as Exhibit 9.3(g) attached hereto shall have been executed
and delivered by R. ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and the escrow agent.
Section IX.4 Conditions to the Obligations of the Company and Company
Sub. The obligations of the Company and Company Sub to consummate the Mergers
are subject to the satisfaction of the following additional conditions, unless
waived by the Company in writing:
(a) Representations and Warranties. The representations and
warranties of Merger Sub set forth herein shall be true and correct as of the
date of this Agreement and as of the Effective Time except for (i) changes
specifically contemplated by this Agreement and (ii) those representations and
warranties that address matters only as of a particular date (which shall remain
true and correct as of such date) and in each case except where failure of such
representation and warranty to be so true and correct would not have a Merger
Sub Material Adverse Effect (other than representations and warranties that are
already so qualified or that are qualified as to the prevention or delay of the
consummation of any of the Transactions or as to the performance by Merger Sub
of its obligations under this Agreement, which in each such case shall be true
and correct as written).
(b) Covenants and Agreements. Merger Sub shall have performed all
obligations and complied with all respective agreements and covenants of Merger
Sub to be performed or complied with by it under the Agreement in each case in
all material respects.
(c) Solvency Opinion. Prior to the Effective Time, Merger Sub shall
have delivered to the Company and Company Sub an opinion from ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇, or another nationally recognized valuation firm reasonably
satisfactory to the Company, which opinion is reasonably satisfactory to the
Company, to the effect that as of the Effective Time, and taking into account
the Transactions (including, without limitation, the financing necessary to
consummate the Transactions):
42
(i) The fair market going concern value of all of the assets
(including goodwill) of the Surviving Corporation will be greater than the
total amount of liabilities, including contingent, subordinated, absolute,
fixed, matured or unmatured and liquidated or unliquidated liabilities, of
the Surviving Corporation.
(ii) The present fair market going concern value of the assets of
the Surviving Corporation (including goodwill) is sufficient to pay the
probable liability of the Surviving Corporation on its debts as such debts
become absolute and matured.
(d) Officers' Certificate. At the Closing, Merger Sub shall deliver
an Officers' Certificate, duly executed by Merger Sub's Chief Executive Officer
and Chief Financial Officer, stating that the conditions to Closing set forth in
Sections 9.4(a) and (b) above have been satisfied.
(e) Certified Copies. At the Closing, Merger Sub shall deliver
certified copies of (i) the resolutions duly adopted by the Merger Sub's board
of directors authorizing the execution, delivery and performance of this
Agreement and the other agreements contemplated hereby applicable to it and the
Transactions, (ii) if approval of Merger Sub's stockholders is required by
applicable law, the resolutions duly adopted by Merger Sub's stockholders
approving this Agreement and the Transactions, and (iii) the Certificate of
Incorporation and the bylaws of Merger Sub.
ARTICLE X
TERMINATION
Section X.1 Termination by Mutual Consent. This Agreement may be
terminated and the Mergers and the other Transactions may be abandoned at any
time prior to the Effective Time, before or after the approval by holders of
Common Stock, by the mutual consent of Merger Sub and the Company, by action of
their respective Boards of Directors.
Section X.2 Termination by Either Merger Sub or the Company. This
Agreement may be terminated and the Mergers and the other Transactions may be
abandoned by action of the Board of Directors of either Merger Sub or the
Company if (a) the Mergers shall not have been consummated on or before the
earlier of (i) April 30, 2000 or (ii) the date which is 90 days after the Proxy
Statement is filed with the SEC (or if the Mergers shall not have occurred by
such date because of the failure of a condition set forth in Section 9.1(b) or
(c), May 30, 2000), unless the failure to consummate the Mergers is the result
of a material breach of this Agreement by the party seeking to terminate this
Agreement, or (b) there shall be any Law that makes consummation of the Mergers
illegal or otherwise prohibited or any Order that is final and nonappealable
preventing the consummation of the Mergers, or (c) if the Shareholder Approval
shall not have been obtained by reason of the failure to obtain the required
vote at the Shareholders Meeting or any adjournment or postponement thereof.
43
Section X.3 Termination by Merger Sub. This Agreement may be terminated
and the Mergers and the other Transactions may be abandoned at any time prior to
the Effective Time, before or after approval of the holders of Common Stock, by
action of the Board of Directors of Merger Sub:
(a) if, prior to the Effective Time there has been a breach of any
representation, warranty, covenant or agreement on the part of the Company or
Company Sub set forth in this Agreement such that any of the conditions set
forth in clause (a) or (b) of Section 9.3 hereof would not be satisfied (a
"Terminating Company Breach"); provided, however, that, if such Terminating
-------- -------
Company Breach is curable by the Company or Company Sub through the exercise of
its reasonable best efforts and for so long as the Company or Company Sub
continues to exercise such reasonable best efforts (but in no event longer than
twenty days after Merger Sub's written notification to the Company of the
occurrence of such Terminating Company Breach), Merger Sub may not terminate
this Agreement under this Section 10.3(a); or
(b) if prior to shareholder approval of the Reorganization Merger
(i) the Board of Directors of the Company withdraws, modifies or changes its
recommendation of this Agreement or the Reorganization Merger or other
Transactions in a manner adverse to Merger Sub or (ii) the Board of Directors of
the Company shall have approved or recommended to the shareholders of the
Company any proposal involving a Competing Transaction or (iii) the Board of
Directors of the Company fails to reconfirm such recommendation within ten days
after a reasonable written request by Merger Sub to do so or (iv) the Company or
the Board of Directors of the Company resolves to do any of the foregoing.
Section X.4 Termination by the Company. This Agreement may be terminated
and the Mergers and the other Transactions may be abandoned at any time prior to
the Effective Time, before or after the approval by holders of Common Stock, by
action of the Board of Directors of the Company:
(a) if prior to the Effective Time there has been a breach of any
material representation, warranty, covenant or agreement on the part of Merger
Sub set forth in this Agreement or by ▇▇▇▇ in the ▇▇▇▇ Commitment Letter
("Terminating Merger Sub Breach"); provided, however, that, if such Terminating
-------- -------
Merger Sub Breach is curable by Merger Sub through the exercise of its
reasonable best efforts and for so long as Merger Sub continues to exercise such
reasonable best efforts (but in no event longer than twenty days after the
Company's written notification to Merger Sub of the occurrence of such
Terminating Merger Sub Breach), the Company may not terminate this Agreement
under this Section 10.4(a); or
(b) if prior to shareholder approval of the Reorganization Merger
(i) the Board of Directors of the Company withdraws, modifies or changes its
recommendation of this Agreement or the Reorganization Merger or other
Transactions or (ii) the Board of Directors of the Company shall have approved
or recommended to the shareholders of the Company any proposal involving a
Competing Transaction, or resolved to do either of the foregoing after
consultation with independent legal counsel, having determined in good faith
that such action is required for the Board of Directors of the Company to comply
with its fiduciary duties to
44
shareholders under applicable law; provided, that any termination of this
Agreement by the Company pursuant to this Section 10.4(b) shall not be effective
until the close of business on the second full business day after notice of such
termination to Merger Sub.
Section X.5 Effect of Termination and Abandonment. Except as set forth
in Section 11.1, in the event of termination of this Agreement and abandonment
of the Mergers pursuant to this Article X, no party hereto (or any of its
directors or officers) shall have any liability or further obligation to any
other party to this Agreement, except that nothing herein will relieve the
Company, Company Sub or Merger Sub from liability for any breach of this
Agreement.
ARTICLE XI
MISCELLANEOUS; GENERAL
Section XI.1 Payment of Expenses. (a) Except as otherwise set forth in
this Section 11.1, whether or not the Mergers shall be consummated, each party
hereto shall pay its own Expenses incident to preparing for, entering into and
carrying out this Agreement and the consummation of the Merger; provided, that
effective as of the Acquisition Effective Time, the Surviving Corporation shall
pay all of the Expenses paid by or on behalf of Merger Sub. "Expenses" as used
in this Agreement shall include all reasonable out-of-pocket expenses
(including, without limitation, all fees and expenses of outside counsel,
investment bankers, experts and consultants to a party hereto) incurred by a
party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement and all
other matters relating to the closing of the Transactions.
(b) The Company agrees that (i) if Merger Sub shall terminate this
Agreement pursuant to Section 10.3(b) or (ii) if the Company shall terminate
this Agreement pursuant to Section 10.4(b) or (iii) either Merger Sub or the
Company shall terminate this Agreement under Section 10.2(c), the Company shall
reimburse Merger Sub for its reasonably documented Expenses up to an aggregate
amount not to exceed $1,000,000, provided, however, that if such termination
shall occur more than 45 days after the date of execution and delivery of this
Agreement, the Company shall reimburse Merger Sub for its reasonably documented
Expenses (inclusive of Expenses incurred prior to such date 45 days after the
execution and delivery of this Agreement) up to an aggregate amount not to
exceed $1,500,000, in each case, with such payment to be made on or prior to the
day which is 20 business days after the date of such termination (or, earlier,
upon the date of consummation of a Competing Transaction or the entering into of
a legally binding definitive agreement with respect thereto). If Merger Sub
terminates this Agreement under Section 10.3(b) or the Company terminates this
Agreement under Section 10.4(b), (i) the Company shall also pay Merger Sub
$2,250,000 in cash (or $4,500,000 in cash in the event that (x) the Agreement is
terminated by Merger Sub under Section 10.3(b)(i) or by the Company under
Section 10.4(b)(i) and (y) at the time of such termination there is no proposal
or offer for a Competing Transaction) on or prior to the day which is 20
business days after the date of such termination (or, earlier, upon the date of
consummation of a Competing Transaction or the entering into of a legally
binding definitive
45
agreement with respect thereto) and (ii) if a Competing Transaction (A) which is
the basis for such termination is consummated, or a legally binding definitive
agreement with respect thereto is entered into, within nine months of such
termination date or (B) which is not the basis for such termination is
consummated, or a legally binding definitive agreement with respect thereto is
entered into, within six months of such termination date, the Company shall also
pay Merger Sub $2,250,000 in cash (unless the Company has already paid
$4,500,000 to Merger Sub pursuant to the preceding clause (i), in which case no
additional payment shall be due) concurrently with the consummation of such
Competing Transaction. If, however, Merger Sub or the Company terminates this
Agreement under Section 10.2(c) and at the time of such termination under
Section 10.2(c) there was a proposal for a Competing Transaction in existence,
and such Competing Transaction is consummated (or a legally binding definitive
agreement with respect thereto is entered into) within nine months of such
termination date, the Company shall pay Merger Sub the full $4,500,000 in cash
termination fee concurrently with the consummation of such Competing
Transaction.
(c) Merger Sub agrees that nothing in this Section 11.1 shall
limit the liability of Merger Sub for a Terminating Merger Sub Breach resulting
in the Company terminating this Agreement pursuant to Section 10.4(a).
(d) The Company agrees that nothing in this Section 11.1 shall
limit the liability of the Company for a Terminating Company Breach resulting in
Merger Sub terminating this Agreement pursuant to Section 10.3(a).
(e) Notwithstanding anything to the contrary herein, the failure
of any representation or warranty by the Company or Merger Sub, as the case may
be, to be true and correct on and as of the Effective Time shall not give rise
to any liability on the part of the Company pursuant to Section 11.1(d) or by
Merger Sub pursuant to Section 11(c), as the case may be, unless such
representation and warranty was not true and correct in all material respects as
of the date hereof or unless such failure also constitutes a material breach by
the Company or by Merger Sub, as the case may be, of its covenants and
agreements hereunder (other than Sections 7.1(b)(iv) or 7.1(g) as to which such
failure shall only be required to constitute a breach thereof by the Company).
(f) The Company and Merger Sub each agree that the payments
provided for in Section 11.1(b) shall be the sole and exclusive remedy of Merger
Sub against the Company and its Representatives, on the one hand, and the
Company against Merger Sub and its Representatives, on the other hand, upon a
termination of this Agreement pursuant to Sections 10.3(b) or 10.4(b), as
applicable, and such remedy shall be limited to the payments stipulated in
Sections 11.1(b), regardless of the circumstances (including willful or
deliberate conduct) giving rise to such termination.
Section XI.2 Survival. The representations, warranties and agreements in
this Agreement and in any certificate delivered pursuant hereto shall terminate
at the Effective Time or upon the termination of this Agreement pursuant to
Article X, as the case may be, except that the agreements set forth in Articles
I , II, III and IV and Sections 8.6, 8.8, 8.9 and Article XI and
46
the agreements described in Section 9.3(g) shall survive the Effective Time and
those set forth in Sections 8.3 (regarding confidentiality) and 10.5 and Article
XI shall survive termination.
Section XI.3 Modification or Amendment. This Agreement may not be
amended except by an instrument in writing signed by the parties hereto.
Section XI.4 Counterparts. For the convenience of the parties hereto,
this Agreement may be executed in any number of counterparts, each such
counterpart being deemed to be an original instrument, and all such counterparts
shall together constitute the same agreement.
Section XI.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California without giving
effect to the principles of conflict of laws thereof.
Section XI.6 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 received if so given) by delivery in person, by
facsimile transmission, by registered or certified mail (postage prepaid, return
receipt requested) or courier service providing proof of delivery to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
11.6):
If to Merger Sub: VMM Merger Corp.
c/o Bain Capital, Inc.
Two ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company
or Company Sub: c/o VDI MultiMedia
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
47
with a copy to: ▇▇▇▇, Scholer, Fierman, ▇▇▇▇ & Handler, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Section XI.7 Entire Agreement, etc. This Agreement and the agreements
referenced herein or contemplated hereby (a) constitute the entire agreement,
and supersede all other prior agreements and understandings, both written and
oral, among the parties, with respect to the subject matter hereof, and (b)
shall not be assignable by operation of law or otherwise except that Merger Sub
may assign, in its sole discretion, any or all of its rights, interests and
obligations hereunder to any direct or indirect wholly-owned newly formed
Delaware subsidiary of Merger Sub. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
Section XI.8 Captions. The Article, Section and paragraph captions
herein are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof.
Section XI.9 Certain Definitions. For purposes of this Agreement, the
term:
(a) "subsidiary" of any person means any corporation,
partnership, joint venture or other legal entity of which such person (either
alone or through or together with any subsidiary) owns, directly or indirectly,
more than 50% of the stock or other equity or beneficial interests, the holders
of which are generally entitled to vote for the election of the board of
governors or other governing body of such corporation or other legal entity; and
(b) "knowledge" means, with respect to any matter in question
with respect to the Company, if any of R. ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇ has actual knowledge of such matter.
Section XI.10 No Third Party Beneficiaries. Except as provided in Section
8.6 and Section 8.8 hereof, this Agreement is not intended to be for the benefit
of, and shall not be enforceable by, any person or entity not a party hereto.
Section XI.11 Company Disclosure Schedule. Any disclosure made with
reference to one or more sections of the Company Disclosure Schedule shall be
deemed disclosed only with respect to such section unless such disclosure is
made in such a way as to make its relevance to the information called for by
another Section of such schedule readily apparent in which case, such disclosure
shall be deemed to have been included in such other Section, notwithstanding the
omission of a cross reference thereto.
48
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto on the date first hereinabove
written.
VDI MULTIMEDIA
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
______________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: President
VDI MULTIMEDIA, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
______________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: President
VMM MERGER CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
______________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
EXHIBIT A
THIS AGREEMENT OF MERGER (this "Agreement") is entered into as of this
_____ day of _______________, 2000, by and between VDI MultiMedia, a California
corporation (the "Company") and VDI MultiMedia, Inc., a Delaware corporation
("Company Sub").
RECITALS:
I. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of California.
II. Company Sub is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and a wholly-owned
subsidiary of the Company.
III. The Company and Company Sub desire to consummate the merger of the
Company with and into Company Sub pursuant to Section 251 of the Delaware
General Corporation Law (the "DGCL"), upon consummation of which Company Sub
shall be the surviving corporation (the "Merger").
IV. Each of the Boards of Directors of the Company and Company Sub and, to
the extent required by applicable law, their respective shareholders and
stockholders, has approved this Agreement and the consummation of the Merger;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
agreements and covenants contained herein, the parties agree as follows:
1. The Merger. At the Effective Time (as hereinafter defined), the
----------
Company shall merge with and into Company Sub in accordance with section 251 of
the DGCL, whereupon the separate corporate existence of the Company shall cease
and Company Sub shall be the surviving corporation of the Merger (sometimes
referred to herein as the "Surviving Corporation"). Company Sub as the Surviving
Corporation shall continue its existence as a corporation under the laws of the
State of Delaware.
2. Effective Time. The Merger shall become effective immediately upon
--------------
the filing of this Agreement, together with appropriate certificates of approval
and adoption executed by authorized representatives of the Company and Company
Sub. The date and time of such filing are sometimes referred to herein as the
"Effective Time."
3. Effect of the Merger. At the Effective Time, the Merger shall have
--------------------
the effects set forth in the applicable provisions of the DGCL.
4. Certificate of Incorporation. The Certificate of Incorporation of the
----------------------------
Company in the form attached hereto as Exhibit A shall, as of and after the
Effective Time, be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended as provided by law.
A-1
5. Bylaws. The Bylaws of the Company in effect immediately prior to the
------
Effective Time shall be the Bylaws of the Surviving Corporation, unless and
until amended or repealed in accordance with such Bylaws, the Certificate of
Incorporation of the Surviving Corporation, and applicable law.
6. Conversion of Securities. At the Effective Time, by virtue of the
------------------------
Merger and without any action on behalf of the holders thereof:
a. Each share of common stock of the Company (collectively, the
"Shares") issued and outstanding immediately prior to the Effective Time (other
than Shares held by shareholders who perfect their rights as dissenting
shareholders under California law) shall be converted into and exchanged for one
share of common stock of the Surviving Corporation.
b. Each share of common stock of Company Sub outstanding immediately
prior to the merger shall be cancelled and retired and cease to exist, without
any conversion thereof and no payment shall be made with respect thereto.
7. Dissenting Shares. Anything to the contrary in this Agreement
-----------------
notwithstanding, Shares which are issued and outstanding immediately prior to
the Effective Time and which are held by shareholders who have not voted such
Shares in favor of the Merger and who (a) shall be entitled to and shall have
validly exercised rights of appraisal in the manner provided in Chapter 13 of
the California General Corporation Law (the "CGCL") (the "Dissenters' Rights
Provisions") and (b) as of the Effective Time, shall not have effectively
withdrawn or lost such right to appraisal ("Dissenting Shares"), shall not be
converted into or represent a right to receive shares of the Surviving
Corporation pursuant to Section 6(a) hereof, but the holders thereof shall be
entitled only to such rights as are granted by the Dissenters' Rights
Provisions. Each holder of Dissenting Shares who become entitled to payment for
such Shares pursuant to the Dissenters' Rights Provisions shall receive payment
therefor from the Surviving Corporation in accordance therewith; provided,
however, that if (i) any such Dissenting Shares shall not become "dissenting
shares" pursuant to Section 1300(b) of the CGCL, (ii) any such Dissenting Shares
shall lose their status as "dissenting shares" pursuant to Section 1309 thereof,
or (iii) any holder of Dissenting Shares shall have lost its status as a
"dissenting shareholder" pursuant to such Section 1309, then the right to
appraisal with respect to such Shares shall be lost and each such Share shall
thereupon be deemed to have been converted, as of the Effective Time, into and
shall thereupon represent only the right to receive payment from the Surviving
Corporation of the Merger Consideration, without interest or dividend thereon,
as provided in Section 6 hereof.
8. Termination or Abandonment. This Agreement may be terminated and the
--------------------------
Merger may be abandoned at any time prior to the Effective Time by mutual
written consent of the Boards of Directors of each of the Company and Company
Sub. In the event of termination of this Agreement as herein provided, neither
the Company nor Company Sub nor their respective Boards of Directors or
shareholders shall be liable to the other or its directors or shareholders.
A-2
9. Other Provisions.
----------------
a. Governing Law. This Agreement shall be governed in all respects
by the laws of the State of Delaware without giving effect to any conflict of
law provisions hereof.
b. Entire Agreement. This Agreement contains the entire agreement
of the parties hereto and supersedes any prior or written or oral agreements
between them concerning the subject matter contained herein or therein.
c. This Agreement may be executed in counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized officers as of the date first above written.
VDI MULTIMEDIA
By:_______________________________
Name:
Title:
VDI MULTIMEDIA, INC.
By:________________________________
Name:
Title:
A-3
EXHIBIT B
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
VDI MULTIMEDIA, INC.
VDI MultiMedia, Inc., a corporation organized and existing under the laws
of the State of Delaware hereby certifies as follows:
1. The original Certificate of Incorporation of the Corporation to which
this Amended and Restated Certificate of Incorporation relates was filed with
the Secretary of State of Delaware on April 30, 1990.
2. This Amended and Restated Certificate of Incorporation has been
unanimously approved by the Board of Directors of the Corporation and has been
approved by the sole stockholder of the Corporation in the manner and by the
vote prescribed by Sections 242 and 245 of the General Corporation law of the
State of Delaware.
3. The Certificate of Incorporation of this Corporation is amended and
restated to read as follows:
FIRST: The name of this Corporation is VDI MultiMedia, Inc.
SECOND: The address of the Corporation's registered office in Delaware is
Corporation Trust Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
of New Castle. The Corporation Trust Company is the corporation's registered
agent at that address.
THIRD: The purpose of this Corporation is to engage any lawful act or
activity for which a corporation may be organized under the Delaware General
Corporation Law.
FOURTH: The aggregate number of shares of capital stock that the
Corporation is authorized to issue is fifty-five million (55,000,000) shares,
consisting of (i) fifty million (50,000,000) shares of Common Stock, $.01 par
value per share and (ii) five million (5,000,000) shares of Preferred Stock,
$.01 par value per share. All cross references in each subdivision of this
ARTICLE FOURTH refer to other paragraphs in such subdivision unless otherwise
indicated.
A. COMMON STOCK
1. The Board of Directors may, in its discretion, out of funds legally
available for the payment of dividends and at such times and in such
manner as determined by the Board Directors, declare and pay dividends
on the Common Stock.
B-1
2. In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, after there shall have been paid to
or set aside for the holders of shares of Preferred Stock the full
preferential amounts to which they are entitled, if any, the holders
of outstanding shares of Common Stock shall be entitled to receive pro
rata, according to the number of shares held by each, the remaining
assets of the Corporation available for distribution.
3. Except as otherwise provided by law and except as may be determined by
the Board of Directors with respect to the Preferred Stock pursuant to
Section B of this ARTICLE FOURTH, only the holders of Common Stock
shall be entitled to vote for the election of Directors of the
Corporation and for all other corporate purposes. Upon any such vote
the holders of Common Stock shall, except as otherwise provided by
law, be entitled to one vote for each share of Common Stock held by
them respectively.
B. PREFERRED STOCK. The Preferred Stock may be issued from time to time
in one or more series in any manner permitted by law and the provisions of the
Amended and Restated Certificate of Incorporation of the Corporation, as
determined from time to time by the Board of Directors and stated in the
resolution or resolutions providing for the issuance thereof, prior to the
issuance of any shares thereof. Unless otherwise provided in the resolution
establishing a series of Preferred Stock, prior to the issue of any shares of a
series so established or to be established, the Board of Directors may, by
resolution, amend the relative rights an preferences of the shares of such
series, and, after the issue of shares of a series whose number has been
designated by the Board of Directors, the resolution establishing the series may
be amended by the Board of Directors to increase (but not above the total
authorized shares of the class) or to decrease (but not below the number of
shares of such series then outstanding) the number of shares of that series.
The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, of each class of stock
shall be governed by the following provisions:
1. The Board of Directors is expressly authorized at any time, and from
time to time, to provide for the issuance of shares of Preferred Stock
in one or more series, with such voting powers, full or limited, or
without voting powers and with such designations, preferences and
relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as shall be
stated and expressed in the resolution or resolutions providing for
the issue thereof adopted by the Board of Directors, except if such
resolution or resolutions conflict with the provisions of the Amended
and Restated Certificate of Incorporation of the Corporation. Said
resolution or resolutions may provide for (but not limiting the
generally thereof) the following:
a. The number of shares to constitute each such series, and the
designation of each such series.
B-2
b. The dividend rate of each such series, the conditions and dates
upon which such dividends shall be payable, the relation which
such dividends shall bear to the dividends payable on any other
class or classes or on any other series of any class or classes
of stock, and whether such dividends shall be cumulative or non-
cumulative.
c. Whether the shares of each such series shall be subject to
redemption by the Corporation and if made subject to such
redemption, the times, prices and other terms and conditions of
such redemption.
d. The terms and amount of any sinking fund provided for the
purchase or redemption of the shares of each such series.
e. Whether or not the shares of each such series shall be
convertible into or exchangeable for shares of any other class or
classes or any other series of any other class or classes of
stock of the Corporation, and, if provision be made for
conversion or exchange, the times, prices, rates of exchange,
adjustments, and other terms and conditions of such conversion or
exchange.
f. The extent, if any, to which the holders of the shares of each
such series shall be entitled to vote with respect to the
election of Directors or otherwise.
g. The restrictions, if any, on the issue or reissue of any
additional Preferred Stock.
h. The rights of the holders of the shares of each such series upon
the dissolution of, or upon the distribution of the assets of,
the Corporation.
2. Except as otherwise required by law and except for such voting powers
with respect to the election of Directors or other matters as may be
stated in the resolutions of the Board of Directors creating any
series of Preferred Stock, the holders of any such series shall have
no voting powers whatsoever. Any amendment of the Amended and Restated
Certificate of Incorporation of the Corporation which shall increase
or decrease the number of authorized shares of any class or classes of
stock may be adopted by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote. Together
with holders of stock generally entitled to vote, holders of a class
of stock are entitled to vote on an amendment to increase or decrease
the number of authorized shares of such class (as provided for in the
Delaware General Corporation Law).
FIFTH: The Corporation shall have perpetual existence.
SIXTH:
B-3
Part 1. Right to Indemnification. The Corporation shall indemnify to the
------------------------
fullest extent permitted by Section 145 of the General Corporation Law of
Delaware, as amended from time to time, each person that such Section grants the
Corporation the power to indemnify.
Part 2. Limitation of Liability. To the fullest extent permitted by the
-----------------------
Delaware General Corporation Law (including, without limitation, Section
102(b)(7)), as amended from time to time, no director of the Corporation shall
be liable to the Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director.
Any repeal or amendment of this Article SIXTH or adoption of any provision
of the Amended and Restated Certificate of Incorporation inconsistent with this
Article SIXTH shall have prospective effect only and shall not adversely affect
the liability of a director of the Corporation with respect to any act or
omission occurring at or before the time of such repeal, amendment or adoption
of an inconsistent provision.
SEVENTH: For so long as a class of the Corporation's stock is registered
pursuant to the Securities Exchange Act of 1934, as amended, shareholder action
shall be taken only at an annual meeting or special meeting of the shareholders
and shall not be taken by written consent.
EIGHTH: The Corporation elects not to be governed by Section 203 of the
Delaware General Corporation Law.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed on its behalf by its President as of this ____ day of _______________,
2000.
VDI MULTIMEDIA, INC.
By: _______________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President
B-4
EXHIBIT C
THIS AGREEMENT OF MERGER (this "Agreement") is entered into as of the ___
day of _______________, 2000, by and between VDI MultiMedia, Inc., a Delaware
corporation (the "Company"), and VMM Merger Corp., a Delaware corporation (the
"Merger Sub").
RECITALS
I. Merger Sub is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware.
II. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware.
III. Their respective Boards of Directors of Merger Sub and the Company
deem advisable for the mutual benefit of Merger Sub and the Company, and their
respective shareholders, that Merger Sub be merged with and into the Company
(the "Merger") upon the terms and subject to the conditions set forth herein and
in the Agreement and Plan of Merger among the parties hereto and VDI MultiMedia,
a California corporation, dated as of December 6, 1999 (the "Plan of Merger"),
and in accordance with the General Corporation Law of the State of Delaware
("DGCL").
IV. Merger Sub and the Company and their respective Boards of Directors
and, to the extent required by applicable law, their respective shareholders,
have approved this Agreement and the Plan of Merger.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained herein, the parties agree as follows:
1. The Merger. At the Effective Time (as hereinafter defined), Merger
----------
Sub shall be merged with and into the Company in accordance with the DGCL and
the separate corporate existence of Merger Sub shall cease. (Merger Sub and the
Company are herein sometimes referred to as the "Constituent Corporations," and
the Company, in its capacity as the corporation surviving the Merger, is
sometimes referred to herein as the "Surviving Corporation").
2. Effective Time. The Merger shall become effective immediately upon
--------------
the filing of this Agreement, together with appropriate certificates of approval
and adoption executed by authorized representatives of each of the Constituent
Corporations, with the Secretary of State of the State of Delaware in accordance
with Section 251 of the DGCL. The date and time of such filing are sometimes
referred to herein as the "Effective Time."
3. Effect of the Merger. The Merger shall have the effects set forth in
--------------------
Section 259 of the DGCL.
C-1
4. Certificate of Incorporation. The Amended and Restated Certificate of
----------------------------
Incorporation of the Company in the form attached hereto as Exhibit A shall as
---------
of and after the Effective Time be the Certificate of Incorporation of the
Surviving Corporation until thereafter amended as provided by law.
5. By-Laws. The By-Laws of Merger Sub in effect immediately prior to the
-------
Effective Time shall as of and after the Effective Time be the By-Laws of the
Surviving Corporation, until thereafter amended as provided by law.
6. Conversion of Securities. At the Effective Time, by virtue of the
------------------------
Merger and without any action on the part of Merger Sub, the Company or the
holders thereof:
(a) Each share of the common stock, no par value per share, of the
Company (collectively, the "Shares") issued and outstanding immediately prior to
the Effective Time (other than Shares to be canceled as provided in Section 6(b)
below and Shares to be converted into shares of Surviving Corporation's common
equity as provided in Section 6(c) below) shall be canceled and extinguished and
shall automatically be converted into the right to receive cash equal to $15.00
per Share (the "Merger Consideration").
(b) Each Share issued and outstanding immediately prior to the
Effective Time which is (i) held by Merger Sub or (ii) held in the treasury of
the Company or by any direct or indirect subsidiary of the Company, shall be
canceled and retired and cease to exist, without any conversion thereof, and no
payment shall be made with respect thereto.
(c) Each Share issued and outstanding immediately prior to the
Effective Time held by the persons identified on Schedule I attached hereto
shall be converted into and exchanged for the number and type of the Surviving
Corporation's common equity described on Schedule I attached hereto.
(d) Each share of common stock, par value $.01 per share, of Merger
Sub issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for the number and type of the Surviving
Corporation's common equity described on Schedule I attached hereto.
7. Termination or Abandonment. This Agreement may be terminated and the
--------------------------
Merger abandoned at any time prior to the Effective Time by the mutual written
consent of the respective Boards of Directors of the Constituent Corporations.
In the event of termination of this Agreement as herein provided, neither the
Company nor Merger Sub nor their respective Boards of Directors or shareholders
shall be liable to the other or its directors or shareholders except as provided
in the Plan of Merger.
8. Other Provisions.
----------------
(a) Governing Law. This Agreement shall be governed in all respects
by the laws of the State of Delaware without giving effect to any conflict of
law provisions hereof.
C-2
(b) Entire Agreement. This Agreement and the Plan of Merger contain
the entire agreement of the parties hereto and supersede any prior or written or
oral agreements between them concerning the subject matter contained herein or
therein.
(c) Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized officers of the date first above written.
VMM MERGER CORP.
By:___________________________
Name:
Title:
VDI MULTIMEDIA, INC.
By:___________________________
Name:
Title:
C-3