Exhibit 99(d)(1)
CONFORMED COPY
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AGREEMENT AND PLAN OF MERGER
Dated as of June 1, 2001
By and Among
VIVENDI UNIVERSAL,
SORAYA MERGER INC.
And
HOUGHTON MIFFLIN COMPANY
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TABLE OF CONTENTS
PAGE
ARTICLE I
THE OFFER AND THE MERGER
SECTION 1.01. The Offer.....................................................2
SECTION 1.02. Target Actions................................................4
SECTION 1.03. The Merger....................................................5
SECTION 1.04. Closing.......................................................6
SECTION 1.05. Effective Time................................................6
SECTION 1.06. Effects of the Merger.........................................6
SECTION 1.07. Articles of Organization and By-laws..........................6
SECTION 1.08. Board of Directors and Officers...............................7
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01. Effect on Capital Stock.......................................7
(a) Capital Stock of Sub...................................7
(b) Cancelation of Treasury Stock and Parent-Owned Stock...8
(c) Conversion of Target Common Stock......................8
(d) Dissenting Shares......................................8
SECTION 2.02. Exchange of Certificates......................................9
(a) Paying Agent...........................................9
(b) Exchange Procedures....................................9
(c) No Further Ownership Rights in Target Common Stock.....10
(d) No Liability...........................................11
(e) Lost Certificates......................................11
(f) Withholding Rights.....................................11
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of Target......................12
(a) Organization, Standing and Corporate Power.............12
(b) Subsidiaries...........................................13
(c) Capital Structure......................................13
(d) Authority; Noncontravention............................15
(e) SEC Documents; Undisclosed Liabilities.................17
(f) Information Supplied...................................18
(g) Absence of Certain Changes or Events...................19
(h) Litigation.............................................21
(i) Compliance with Applicable Laws........................21
(j) Absence of Changes in Benefit Plans....................23
(k) ERISA Compliance; Excess Parachute Payments............24
(l) Taxes..................................................30
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Contents, p. 2
PAGE
(m) Voting Requirements....................................32
(n) State Takeover Statutes................................32
(o) Brokers................................................32
(p) Opinion of Financial Advisor...........................33
(q) Intellectual Property..................................33
(r) Contracts..............................................34
(s) State Adoption Contracts...............................36
(t) Rights Agreement.......................................36
SECTION 3.02. Representations and Warranties of Parent and Sub..............37
(a) Organization, Standing and Corporate Power.............37
(b) Authority; Noncontravention............................37
(c) Information Supplied...................................39
(d) Interim Operations of Sub..............................39
(e) Capital Resources......................................39
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.01. Conduct of Business...........................................40
(a) Conduct of Business by Target..........................40
(b) Advice of Changes......................................44
(c) Certain Tax Matters....................................44
SECTION 4.02. No Solicitation by Target.....................................45
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Preparation of the Proxy Statement;
Target Stockholders Meeting..................................49
SECTION 5.02. Access to Information; Confidentiality........................50
SECTION 5.03. Reasonable Efforts............................................51
SECTION 5.04. Stock Options.................................................52
SECTION 5.05. Employee Matters..............................................53
SECTION 5.06. Indemnification, Exculpation and Insurance....................54
SECTION 5.07. Fees and Expenses.............................................56
SECTION 5.08. Public Announcements..........................................58
SECTION 5.09. Litigation....................................................58
SECTION 5.10. U.S. Corporate Headquarters...................................58
SECTION 5.11. Target Name...................................................58
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SECTION 5.12. Resignation of Directors......................................59
SECTION 5.13. Rights Agreement..............................................59
SECTION 5.14. Directors.....................................................59
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01. Conditions to Each Party's Obligation To Effect the Merger....61
(a) Stockholder Approval...................................61
(b) HSR Act................................................61
(c) No Restraints..........................................61
(d) Purchase of Shares in the Offer........................62
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. Termination...................................................62
SECTION 7.02. Effect of Termination.........................................65
SECTION 7.03. Amendment.....................................................65
SECTION 7.04. Extension; Waiver.............................................65
SECTION 7.05. Procedure for Termination, Amendment, Extension or Waiver.....66
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. Nonsurvival of Representations and Warranties.................66
SECTION 8.02. Notices.......................................................66
SECTION 8.03. Definitions...................................................68
SECTION 8.04. Interpretation................................................69
SECTION 8.05. Counterparts..................................................70
SECTION 8.06. Entire Agreement; No Third-Party Beneficiaries................70
SECTION 8.07. Governing Law.................................................70
SECTION 8.08. Assignment....................................................70
SECTION 8.09. Enforcement...................................................71
SECTION 8.10. Severability..................................................71
Exhibit A Conditions of the Offer.......................................73
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Annex I Index of Defined Terms........................................A-1
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AGREEMENT AND PLAN OF MERGER (this
"Agreement") dated as of June 1, 2001, among VIVENDI
UNIVERSAL, a societe anonyme organized under the laws
of France ("Parent"), SORAYA MERGER INC., a
Massachusetts corporation and a wholly owned
subsidiary of Parent ("Sub"), and HOUGHTON MIFFLIN
COMPANY, a Massachusetts corporation ("Target").
WHEREAS the respective Boards of Directors of Parent, Sub and
Target have approved, and the Boards of Directors of Sub and Target have
declared advisable the acquisition of Target by Parent upon the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, in furtherance of such acquisition, Parent proposes
to cause Sub to make a tender offer (as it may be amended from time to time as
permitted under this Agreement, the "Offer") to purchase all the outstanding
shares of common stock, par value $1.00 per share, of Target (together with the
associated Rights) ("Target Common Stock"), at a price per share of Target
Common Stock of $60.00, net to the seller in cash without interest, upon the
terms and subject to the conditions set forth in this Agreement;
WHEREAS, the respective Boards of Directors of Parent, Sub and
Target have approved, and the Boards of Directors of Sub and Target have
declared advisable the merger of Sub with and into Target (the "Merger"), upon
the terms and subject to the conditions set forth in this Agreement, whereby
each issued and outstanding share of Target Common Stock, other than shares
owned by Parent, Sub or Target, and other than Dissenting Shares, will be
converted into the right to receive the price per share paid pursuant to the
Offer;
WHEREAS the respective Boards of Directors of Parent, Sub and
Target have each determined that the Offer, the Merger and the other
transactions contemplated hereby are consistent with, and in furtherance of,
their respective business strategies and goals; and
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WHEREAS Parent, Sub and Target desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, the parties
agree as follows:
ARTICLE I
THE OFFER AND THE MERGER
SECTION 1.01. THE OFFER. (a) Subject to the conditions of this
Agreement, as promptly as practicable but in no event later than five business
days after the date of the public announcement of this Agreement, Sub shall, and
Parent shall cause Sub to, commence the Offer within the meaning of the
applicable rules and regulations of the Securities and Exchange Commission (the
"SEC"). The obligations of Sub to, and of Parent to cause Sub to, commence the
Offer and accept for payment, and pay for, any shares of Target Common Stock
tendered pursuant to the Offer are subject to the conditions set forth in
Exhibit A. Sub expressly reserves the right to waive any condition to the Offer
or amend or modify the terms of the Offer, except that, without the consent of
Target, Sub shall not (i) reduce the number of shares of Target Common Stock
subject to the Offer, (ii) reduce the price per share of Target Common Stock to
be paid pursuant to the Offer, (iii) waive the Minimum Tender Condition, add to
the conditions set forth in Exhibit A or modify any condition set forth in
Exhibit A in any manner adverse to the holders of Target Common Stock, (iv)
except as provided in the next sentence, extend the Offer, (v) change the form
of consideration payable in the Offer or (vi) otherwise amend the Offer in any
manner adverse to the holders of Target Common Stock. Notwithstanding the
foregoing, Sub may, without the consent of Target, (A) extend the Offer, if at
the scheduled expiration date of the Offer any of the conditions to Sub's
obligation to purchase shares of Target Common Stock are not satisfied, until
such time as such conditions are satisfied or waived, (B) extend the Offer for
any period required by any rule, regulation, interpretation or position of the
SEC or the staff thereof applicable to
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the Offer and (C) extend the Offer for any reason on one or more occasions for a
period of not more than five business days beyond the latest expiration date
that would otherwise be permitted under clause (A) or (B) of this sentence.
Parent and Sub agree that if all of the conditions to the Offer are not
satisfied on any scheduled expiration date of the Offer then, PROVIDED that all
such conditions are reasonably capable of being satisfied, Sub shall extend the
Offer from time to time until such conditions are satisfied or waived, PROVIDED
that Sub shall not be required to extend the Offer beyond the Outside Date. On
the terms and subject to the conditions of the Offer and this Agreement, Sub
shall, and Parent shall cause Sub to, pay for all shares of Target Common Stock
validly tendered and not withdrawn pursuant to the Offer that Sub becomes
obligated to purchase pursuant to the Offer as soon as practicable after the
expiration of the Offer.
(b) On the date of commencement of the Offer, Parent and Sub
shall file with the SEC a Tender Offer Statement on Schedule TO with respect to
the Offer, which shall contain an offer to purchase and a related letter of
transmittal and summary advertisement (such Schedule TO and the documents
included therein pursuant to which the Offer will be made, together with any
supplements or amendments thereto, the "Offer Documents"). Parent and Sub agree
that the Offer Documents shall comply as to form in all material respects with
the Securities Exchange Act of 1934 (the "Exchange Act"), and the rules and
regulations promulgated thereunder and the Offer Documents, on the date first
published, sent or given to Target's stockholders, shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation or warranty is made by Parent or Sub with respect to information
supplied by Target or any of its stockholders specifically for inclusion or
incorporation by reference in the Offer Documents. Each of Parent, Sub and
Target shall promptly correct any information provided by it for use in the
Offer Documents if and to the extent that such information shall have become
false or misleading in any material respect, and
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each of Parent and Sub shall take all steps necessary to amend or supplement the
Offer Documents and to cause the Offer Documents as so amended or supplemented
to be filed with the SEC and the Offer Documents as so amended or supplemented
to be disseminated to Target's stockholders, in each case as and to the extent
required by applicable Federal securities laws. Target and its counsel shall be
given reasonable opportunity to review and comment upon the Offer Documents
prior to their filing with the SEC or dissemination to the stockholders of
Target. Parent and Sub shall provide Target and its counsel in writing with any
comments Parent, Sub or their counsel may receive from the SEC or its staff with
respect to the Offer Documents promptly after the receipt of such comments.
(c) Parent shall provide or cause to be provided to Sub on a
timely basis the funds necessary to purchase any shares of Target Common Stock
that Sub becomes obligated to purchase pursuant to the Offer.
SECTION 1.02. TARGET ACTIONS. (a) Target hereby approves of
and consents to the Offer, the Merger and the other transactions contemplated by
this Agreement.
(b) On the date the Offer Documents are filed with the SEC,
Target shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended or
supplemented from time to time, the "Schedule 14D-9") describing the
recommendation of the Board of Directors of Target to Target's Stockholders that
they accept the Offer, tender their shares pursuant to the Offer and approve
this Agreement and shall mail the Schedule 14D-9 to the holders of Target Common
Stock. The Schedule 14D-9 shall comply as to form in all material respects with
the requirements of the Exchange Act and the rules and regulations promulgated
thereunder and, on the date filed with the SEC and on the date first published,
sent or given to Target's stockholders, shall not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation or warranty is made by Target with respect to information
supplied by Parent or Sub specifically for inclusion in the Schedule 14D-9. Each
of Target, Parent and
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Sub shall promptly correct any information provided by it for use in the
Schedule 14D-9 if and to the extent that such information shall have become
false or misleading in any material respect, and Target shall take all steps
necessary to amend or supplement the Schedule 14D-9 and to cause the Schedule
14D-9 as so amended or supplemented to be filed with the SEC and disseminated to
Target's stockholders, in each case as and to the extent required by applicable
Federal securities laws. Parent and its counsel shall be given reasonable
opportunity to review and comment upon the Schedule 14D-9 prior to its filing
with the SEC or dissemination to stockholders of Target. Target shall provide
Parent and its counsel in writing with any comments Target or its counsel may
receive from the SEC or its staff with respect to the Schedule 14D-9 promptly
after the receipt of such comments.
(c) In connection with the Offer and the Merger, Target shall
cause its transfer agent to furnish Sub promptly with mailing labels containing
the names and addresses of the record holders of Target Common Stock as of a
recent date and of those persons becoming record holders subsequent to such
date, together with copies of all lists of stockholders, security position
listings and computer files and all other information in Target's possession or
control regarding the beneficial owners of Target Common Stock, and shall
furnish to Sub such information and assistance (including updated lists of
stockholders, security position listings and computer files) as Parent may
reasonably request in communicating the Offer to Target's stockholders. Subject
to the requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Offer, the Merger and the other transactions contemplated by
this Agreement, Parent and Sub shall hold in confidence the information
contained in any such labels, listings and files, shall use such information
only in connection with the Offer and the Merger and, if this Agreement shall be
terminated, shall, upon request, deliver to Target all copies of such
information then in their possession.
SECTION 1.03. THE MERGER. Upon the terms and
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subject to the conditions set forth in this Agreement, and in accordance with
the Massachusetts Business Corporation Law (the "MBCL"), Sub shall be merged
with and into Target at the Effective Time. Following the Effective Time, Target
shall be the surviving corporation (the "Surviving Corporation") and shall
succeed to and assume all the rights and obligations of Sub in accordance with
the MBCL and the purpose of the Surviving Corporation shall be as set forth in
Article 2 of its articles of organization.
SECTION 1.04. CLOSING. The closing of the Merger (the
"Closing") will take place at 10:00 a.m. on a date to be specified by the
parties (the "Closing Date"), which shall be no later than the second business
day after satisfaction or waiver of the conditions set forth in Article VI
(other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the satisfaction or waiver of those conditions), unless
another time or date is agreed to by the parties hereto. The Closing will be
held at such location in the City of New York as is agreed to by the parties
hereto.
SECTION 1.05. EFFECTIVE TIME. Subject to the provisions of
this Agreement, as soon as practicable on or after the Closing Date, the parties
shall file articles of merger or other appropriate documents (in any such case,
the "Articles of Merger") executed in accordance with the relevant provisions of
the MBCL and shall make all other filings or recordings required under the MBCL.
The Merger shall become effective at such time as the Articles of Merger is duly
filed with the Secretary of the Commonwealth of the Commonwealth of
Massachusetts, or at such subsequent date or time as Parent and Target shall
agree and specify in the Articles of Merger (the time the Merger becomes
effective being hereinafter referred to as the "Effective
Time").
SECTION 1.06. EFFECTS OF THE MERGER. The Merger shall have the
effects set forth in Section 80 of the MBCL.
SECTION 1.07. ARTICLES OF ORGANIZATION AND BY-LAWS. (a) The
restated articles of organization of Target, as in effect immediately prior to
the Effective Time, shall be amended as of the Effective Time so that Section 3
of such restated articles of organization reads in its entirety as follows: "The
total number of shares of all classes of
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stock which the Corporation shall have authority to issue is 1,000 shares of
common stock, par value $1.00 per share.", and, as so amended, such restated
articles of organization shall be the articles of organization of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law. The purpose of the Surviving Corporation shall be as set forth
in the restated articles of organization of Target.
(b) The by-laws of Target, as in effect immediately prior to
the Effective Time, shall be the by-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law; PROVIDED
that the by-laws of the Surviving Corporation shall be amended as of the
Effective Time in order to eliminate the requirement that the Board of Directors
of the Surviving Corporation be classified.
SECTION 1.08. BOARD OF DIRECTORS AND OFFICERS. (a) The
directors of Sub immediately prior to the Effective Time shall be the directors
of the Surviving Corporation until the earlier of their resignation or removal
or until their respective successors are duly elected and qualified, as the case
may be.
(b) The officers of Target immediately prior to the Effective
Time shall be the officers of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01. EFFECT ON CAPITAL STOCK. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any shares of Target Common Stock or any shares of capital stock of Sub:
(a) CAPITAL STOCK OF SUB. Each issued and
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outstanding share of capital stock of Sub shall be converted into one
fully paid and nonassessable share of common stock, par value $1.00 per
share, of the Surviving Corporation.
(b) CANCELATION OF TREASURY STOCK AND PARENT-OWNED STOCK.
Each share of Target Common Stock that is owned by Target, Sub or
Parent shall automatically be canceled and shall cease to exist, and no
consideration shall be delivered or deliverable in exchange therefor.
(c) CONVERSION OF TARGET COMMON STOCK. Each issued and
outstanding share of Target Common Stock (other than shares to be
canceled in accordance with Section 2.01(b) and the Dissenting Shares)
shall be converted into the right to receive in cash, without interest,
the price per share paid in the Offer (the "Merger Consideration"). As
of the Effective Time, all such shares of Target Common Stock shall no
longer be outstanding and shall automatically be canceled and shall
cease to exist, and each holder of a certificate representing any such
shares of Target Common Stock shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration
to be issued in consideration therefor upon surrender of such
certificate in accordance with Section 2.02, without interest.
(d) DISSENTING SHARES. (i) Notwithstanding anything in this
Agreement to the contrary and unless otherwise provided by applicable
law, shares of Target Common Stock that are issued and outstanding
immediately prior to the Effective Time and that are owned by
stockholders who have properly perfected their rights of appraisal in
accordance with the provisions of Sections 86 through 98 of the MBCL
(the "Dissenting Shares") shall not be converted into the right to
receive the Merger Consideration, unless and until such stockholders
shall have failed to perfect or shall have effectively withdrawn or
lost their right of payment under applicable law, but, instead, the
holders thereof shall be entitled to payment of the appraised value of
such Dissenting Shares in accordance with the provisions of the MBCL.
If any such holder shall have failed to perfect or shall have
effectively withdrawn
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or lost such right of appraisal, each share of Target Common Stock held
by such stockholder shall thereupon be deemed to have been converted
into the right to receive and become exchangeable for, at the Effective
Time, the Merger Consideration in the manner provided in Section
2.01(c).
(ii) Target shall give Parent (A) prompt notice of any
objections filed pursuant to the MBCL received by Target, withdrawals
of such objections and any other instruments served in connection with
such objections pursuant to the MBCL and received by Target and (B) the
opportunity to direct all negotiations and proceedings with respect to
objections under the MBCL consistent with the obligations of Target
thereunder. Target shall not, except with the prior written consent of
Parent, (x) make any payment with respect to any such objection, (y)
offer to settle or settle any such objection or (z) waive any failure
to timely deliver a written objection in accordance with the MBCL.
SECTION 2.02. EXCHANGE OF CERTIFICATES. (a) PAYING AGENT. As
of the Effective Time, Parent shall enter into an agreement with such bank or
trust company in the United States as may be designated by Parent (the "Paying
Agent"), which shall provide that Parent shall from time to time after the
Effective Time, cause the Surviving Corporation to make available to the Paying
Agent funds in amounts and at the times necessary for the payment of the Merger
Consideration pursuant to Section 2.01(c) upon surrender of certificates
representing shares of Target Common Stock, it being understood that any and all
interest earned on funds made available to the Paying Agent pursuant to this
Agreement shall be turned over to Parent.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable
after the Effective Time, the Paying Agent shall mail to each holder of record
of a certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Target Common Stock (the "Certificates") whose
shares were converted into the right to receive the Merger Consideration
pursuant to Section 2.01, (i) a letter of transmittal (which shall
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specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent and shall be in such form and have such other provisions as Parent and
Target may reasonably specify) and (ii) instructions for use in surrendering the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancelation to the Paying Agent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Paying Agent, the holder of such Certificate shall receive in
exchange therefor the amount of cash into which the shares formerly represented
by such Certificate shall have been converted pursuant to Section 2.01(c), and
the Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Target Common Stock which is not registered in the
transfer records of Target, payment may be made to a person other than the
person in whose name the Certificate so surrendered is registered if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such issuance shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of such Certificate or establish to the satisfaction of Parent that such
tax has been paid or is not applicable. Until surrendered as contemplated by
this Section 2.02(b), each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive the Merger Consideration
to be issued in consideration therefor upon surrender of such Certificate in
accordance with this Section 2.02. No interest shall be paid or will accrue on
the cash payable to holders of Certificates pursuant to the provisions of this
Article II.
(c) NO FURTHER OWNERSHIP RIGHTS IN TARGET COMMON STOCK. All
cash paid upon the surrender of Certificates in accordance with the terms of
this Article II shall be deemed to have been paid in full satisfaction of all
rights pertaining to the shares of Target Common Stock theretofore represented
by such Certificates, SUBJECT, HOWEVER, to the Surviving Corporation's
obligation to pay any dividends or make any other distributions with a record
date prior to the Effective Time which may have been declared or made by Target
on such shares of Target Common Stock which remain unpaid at the Effective Time,
and there shall be no further registration of transfers on the stock transfer
books of the
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Surviving Corporation of the shares of Target Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation or the Paying
Agent for any reason, they shall be canceled and exchanged as provided in this
Article II, except as otherwise provided by law.
(d) NO LIABILITY. None of Parent, Sub, Target or the Paying
Agent shall be liable to any person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Certificate shall not have been surrendered prior to one year after the
Effective Time (or immediately prior to such date on which any amounts payable
pursuant to this Article II would otherwise escheat to or become the property of
any Governmental Entity), any such amounts shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
(e) LOST CERTIFICATES. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent, the posting by such person of a bond in such reasonable
amount as Parent may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Paying Agent shall issue in
exchange for such lost, stolen or destroyed Certificate the applicable Merger
Consideration with respect thereto pursuant to this Agreement.
(f) WITHHOLDING RIGHTS. Parent, Sub or the Paying Agent shall
be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Target Common Stock such
amounts as Parent, Sub or the Paying Agent is required to deduct and withhold
with respect to the making of such payment under the Internal Revenue Code of
1986, as amended (the "Code"), or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld and paid over to the appropriate
taxing authority by Parent, Sub
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or the Paying Agent, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the shares of Target Common
Stock in respect of which such deduction and withholding was made by Parent, Sub
or the Paying Agent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF TARGET. Except
as disclosed in the Target Filed SEC Documents or as set forth on the disclosure
schedule (each section of which qualifies the correspondingly numbered
representation and warranty to the extent specified therein and such other
representations and warranties to the extent a matter in such section is
disclosed in such a way as to make its relevance to the information called for
by such other representation and warranty readily apparent) delivered by Target
to Parent prior to the execution of this Agreement (the "Target Disclosure
Schedule"), Target represents and warrants to Parent and Sub as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of Target
and its subsidiaries is a corporation or other legal entity duly
organized, validly existing and in good standing (with respect to
jurisdictions which recognize such concept) under the laws of the
jurisdiction in which it is organized and has the requisite corporate
or other power, as the case may be, and authority to carry on its
business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power and
authority is not reasonably likely to have a material adverse effect on
Target. Each of Target and its subsidiaries is duly qualified or
licensed to do business and is in good standing (with respect to
jurisdictions which recognize such concept) in each jurisdiction in
which the nature of its business or the ownership, leasing, licensing,
exploitation or operation of its assets makes such qualification or
licensing necessary, except for those jurisdictions where the failure
to be so qualified or licensed or to be in good standing, individually
or in the aggregate, is not reasonably likely to have a material
adverse
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effect on Target. Target has made available to Parent prior to the
execution of this Agreement complete and correct copies of its restated
articles of organization and by-laws, as amended to the date of this
Agreement.
(b) SUBSIDIARIES. Section 3.01(b) of the Target Disclosure
Schedule sets forth a true and complete list of each of Target's
subsidiaries. All the outstanding shares of capital stock of, or other
equity interests in, each subsidiary of Target have been validly
issued, are fully paid and nonassessable and are owned directly or
indirectly by Target, free and clear of all pledges, claims, liens,
charges, encumbrances, mortgages and security interests of any kind or
nature whatsoever (collectively, "Liens") and free of any restriction
on the right to vote, sell or otherwise dispose of such capital stock
or other ownership interests except restrictions under applicable law.
(c) CAPITAL STRUCTURE. The authorized capital stock of Target
consists of 70,000,000 shares of Target Common Stock and 500,000 shares
of preferred stock, par value $1.00 per share, of Target ("Target
Authorized Preferred Stock"). As of April 30, 2001, (i) 28,877,784
shares of Target Common Stock were issued and outstanding; (ii)
3,085,609 shares of Target Common Stock were held by Target in its
treasury; (iii) no shares of Target Authorized Preferred Stock were
issued and outstanding; (iv) 1,824,322 shares of Target Common Stock
were subject to outstanding stock options (collectively, "Target Stock
Options") granted under the Target Stock Plans (as defined below); and
(v) 5,000 shares of Series A Junior Participating Preferred Stock were
reserved for issuance in connection with the rights (the "Rights") to
purchase shares of Series A Junior Participating Preferred Stock issued
pursuant to the Renewed Rights Agreement dated as of July 30, 1997 (the
"Rights Agreement") between Target and BankBoston, N.A. Except as set
forth above and except for shares of Target Common Stock issued upon
the exercise of stock options referenced above subsequent to the close
of business on April 30, 2001 and prior to the date
13
of this Agreement, as of the date of this Agreement, no shares of
capital stock or other voting securities of Target were issued,
reserved for issuance or outstanding. There are no outstanding stock
appreciation rights ("SARs") or rights (other than the Target Stock
Options, restricted shares and restricted units) to receive shares of
Target Common Stock on a deferred basis or other rights linked to the
value of shares of Target Common Stock granted under the stock plans
listed in Section 3.01(c) of the Target Disclosure Schedule (such
plans, collectively, the "Target Stock Plans"). Outstanding Target
Stock Options, are evidenced by stock option agreements and restricted
stock purchase agreements in forms provided to Parent prior to the date
of this Agreement, and no stock option agreement or restricted stock
purchase agreement contains terms that are inconsistent with such
forms. No bonds, debentures, notes or other indebtedness of Target
having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which
stockholders of Target or any of its subsidiaries may vote are issued
or outstanding or subject to issuance. All outstanding shares of
capital stock of Target are, and all shares which may be issued will
be, when issued, duly authorized, validly issued, fully paid and
nonassessable and will be delivered free and clear of all Liens (other
than Liens created by or imposed upon the holders thereof) and not
subject to preemptive rights. Except as set forth in this Section
3.01(c) (including pursuant to the conversion or exercise of the
securities referred to above), (x) there are not issued, reserved for
issuance or outstanding (A) any shares of capital stock or other voting
securities of Target or any of its subsidiaries (other than shares of
capital stock or other voting securities of such subsidiaries that are
directly or indirectly owned by Target), (B) any securities of Target
or any of its subsidiaries convertible into or exchangeable or
exercisable for shares of capital stock or other voting securities of,
or other ownership interests in, Target or any of its subsidiaries or
(C) any warrants, calls, options or other rights to acquire from Target
or any of its subsidiaries, and no obligation of Target or any of its
subsidiaries to issue, any capital stock or other voting securities of,
or other ownership interests in, or any securities
14
convertible into or exchangeable or exercisable for any capital stock
or other voting securities of, or other ownership interests in, Target
or any of its subsidiaries and (y) there are not any outstanding
obligations of Target or any of its subsidiaries to repurchase, redeem
or otherwise acquire any such securities or to issue, deliver or sell,
or cause to be issued, delivered or sold, any such securities. Target
is not a party to any voting agreement with respect to the voting of
any such securities. Other than the capital stock of, or other equity
interests in, its subsidiaries, Target does not directly or indirectly
beneficially own any securities or other beneficial ownership interests
in any other entity.
(d) AUTHORITY; NONCONTRAVENTION. Target has all requisite
corporate power and authority to enter into this Agreement and, subject
to the Target Stockholder Approval, to consummate the transactions
contemplated by this Agreement. The execution and delivery of this
Agreement by Target and the consummation by Target of the transactions
contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of Target, subject, in the case
of the Merger, to the Target Stockholder Approval. This Agreement has
been duly executed and delivered by Target and, assuming the due
authorization, execution and delivery by each of the other parties
thereto, constitutes a legal, valid and binding obligation of Target,
enforceable against Target in accordance with its terms. The execution
and delivery of this Agreement does not, and the consummation of the
transactions contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of amendment, renegotiation,
termination, cancelation or acceleration of any obligation or to the
loss of a benefit under or to the increase of obligations under, or
result in the creation of any Lien upon any of the properties or
assets owned by, or licensed to, or leased by Target or any of its
subsidiaries under, (i) the restated
15
articles of organization or by-laws of Target or the comparable
organizational documents of any of its subsidiaries, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other
contract, agreement, obligation, commitment, arrangement,
understanding, instrument, permit, concession, franchise, license or
similar authorization (each, a "Contract") applicable to Target or any
of its subsidiaries or their respective properties or assets or (iii)
subject to the governmental filings and other matters referred to in
the following sentence, (A) any judgment, order or decree or (B) any
statute, treaty, convention, directive, law, ordinance, rule,
regulation, order or restriction, in each case applicable to Target or
any of its subsidiaries or their respective owned, licensed or leased
properties or assets, other than, in the case of clauses (ii) and
(iii), any such conflicts, violations, defaults, rights, losses or
Liens that, individually and in the aggregate, are not reasonably
likely to (x) have a material adverse effect on Target, (y) impair the
ability of Target to perform its obligations under this Agreement or
(z) prevent or materially delay the consummation of the transactions
contemplated by this Agreement. No consent, approval, order or
authorization of, action by or in respect of, or registration,
recordation, declaration or filing with, any Federal, state, local or
foreign government, any court, administrative, regulatory or other
governmental agency, commission or authority or any non-governmental
self-regulatory agency, commission or authority (each a "Governmental
Entity") is required by or with respect to Target or any of its
subsidiaries in connection with the execution and delivery of this
Agreement by Target or the consummation by Target of the transactions
contemplated by this Agreement, except for (1) the filing of a
premerger notification and report form by Target under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and any applicable filings and approvals under similar
foreign antitrust or competition laws and regulations ("Foreign
Antitrust Laws"); (2) the filing with the SEC of (A) the Schedule
14D-9, (B) a proxy statement or information statement relating to the
Target Stockholders Meeting (such proxy statement or information
statement, as amended or supplemented from
16
time to time, the "Proxy Statement"), and (C) such reports under
Section 13(a), 13(d), 14(f), 15(d) or 16(a) of the Exchange Act, as may
be required in connection with this Agreement and the transactions
contemplated by this Agreement; (3) the filing of the Articles of
Merger with the Secretary of the Commonwealth of the Commonwealth of
Massachusetts and appropriate documents with the relevant authorities
of other states in which Target is qualified to do business; and (4)
such other consents, approvals, orders, authorizations, registrations,
recordations, declarations and filings the failure of which to be made
or obtained, individually or in the aggregate, is not reasonably likely
to (x) have a material adverse effect on Target, (y) impair the ability
of Target to perform its obligations under this Agreement or (z)
prevent or materially delay the consummation of the transactions
contemplated by this Agreement.
(e) SEC DOCUMENTS; UNDISCLOSED LIABILITIES. Target has filed
all required reports, schedules, forms, statements and other documents
(including exhibits and all other information incorporated therein)
with the SEC since January 1, 2000 the "Target SEC Documents"). As of
their respective dates, the Target SEC Documents complied in all
material respects with the requirements of the Securities Act of 1933
(the "Securities Act") or the Exchange Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable to
such Target SEC Documents, and none of the Target SEC Documents when
filed contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Except to the extent that
information contained in any Target SEC Document has been revised or
superseded by a later filed Target SEC Document, none of the Target SEC
Documents contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under
17
which they were made, not misleading. The financial statements of
Target included in the Target SEC Documents comply as to form, as of
their respective dates of filing with the SEC, in all material respects
with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto (the "Accounting Rules"),
have been prepared in accordance with generally accepted accounting
principles ("GAAP") (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto)
and fairly present in all material respects the consolidated financial
position of Target and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited
statements, to normal recurring year-end audit adjustments). Except (i)
as disclosed in the most recent financial statements contained in the
Target Filed SEC Documents or in the notes thereto or (ii) for
liabilities incurred in connection with this Agreement or the
transactions contemplated hereby, neither Target nor any of its
subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by GAAP to be set
forth on a consolidated balance sheet of Target and its consolidated
subsidiaries or in the notes thereto, which, individually or in the
aggregate, are reasonably likely to have a material adverse effect on
Target.
(f) INFORMATION SUPPLIED. None of the information supplied or
to be supplied by Target specifically for inclusion or incorporation by
reference in (i) the Offer Documents or the Schedule 14D-9 or any
information statement to be filed by Target in connection with the
Offer pursuant to Rule 14f-1 under the Exchange Act (the "Information
Statement") will, at the time it is filed with the SEC or first
published, sent or given to Target's stockholders, or at the time of
any amendment or supplement thereof, or (ii) the Proxy Statement will,
at the time it is filed with the SEC, sent or given to Target's
stockholders, at the time of the Target Stockholders Meeting, or at the
time of any amendment
18
or supplement thereof, in each case, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading. The
Schedule 14D-9, the Information Statement and the Proxy Statement will
comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder. No
representation or warranty is made by Target with respect to statements
made or incorporated by reference therein based on information supplied
by Parent specifically for inclusion or incorporation by reference in
the Offer Documents, the Schedule 14D-9, the Information Statement or
the Proxy Statement.
(g) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for
liabilities incurred in connection with this Agreement or the
transactions contemplated hereby and except as disclosed in the Target
SEC Documents filed and publicly available prior to the date of this
Agreement (as amended to the date of this Agreement, the "Target Filed
SEC Documents"), since March 31, 2001, Target and its subsidiaries have
conducted their business only in the ordinary course, and since such
date there has not been (1) any material adverse change in Target, (2)
any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any
of Target's capital stock, except for, subject to Section 4.01(a)(i),
regular dividends of not more than $0.135 per share payable once each
calendar quarter to Target's stockholders, (3) any purchase, redemption
or other acquisition of any shares of capital stock or any other
securities of Target or any of its subsidiaries or any options,
warrants, calls or rights to acquire such shares or other securities,
(4) any split, combination or reclassification of any of Target's
capital stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for
shares of Target's capital stock, (5) (A) any granting by Target or any
of its subsidiaries to any current or former director,
19
consultant, executive officer, developer, author, publisher, editor,
illustrator or other employee or independent contractor of Target or
its subsidiaries of any increase in compensation, bonus, royalties,
commissions or other benefits, except for normal increases in cash
compensation, bonus or other benefits in the ordinary course of
business consistent with past practice or as was required under any
employment agreements, developer agreements, author agreements,
illustrator agreements, publisher agreements or consulting or
independent contractor agreements in effect as of the date of the most
recent audited financial statements included in the Target Filed SEC
Documents, (B) any granting by Target or any of its subsidiaries to any
such current or former director, consultant, executive officer,
developer, author, publisher, editor, illustrator or employee of any
increase in severance or termination pay, (C) any entry by Target or
any of its subsidiaries into, or any amendments of, any Target Benefit
Agreement, (D) any amendment to, or modification of, any Target Stock
Option or (E) any adoption of, or amendment to, a Target Benefit Plan,
(6) except insofar as may have been required by a change in GAAP, any
change in accounting methods, principles or practices by Target or any
of its subsidiaries materially affecting their respective assets,
liabilities or businesses, (7) any tax election that individually or in
the aggregate would reasonably be expected to adversely affect in any
material respect the tax liability or tax attributes of Target or any
of its subsidiaries, (8) any settlement or compromise of any material
income tax liability, (9) any revaluation by Target or any of its
subsidiaries of any of the material assets of Target or any of its
subsidiaries, (10) the entering into, modification, termination,
nonrenewal or assignment of any rights or delegation of any obligations
under any state or local adoption agreement, licensing agreement,
illustrator agreement, development agreement, author agreement,
publishing agreement, distribution agreement or any other agreement
with regard to the acquisition, licensing in or disposition or
licensing out of any material Intellectual Property Rights or rights
thereto other than in the ordinary course of business consistent with
past practice or not in the ordinary course of business and not
consistent with past
20
practice where it will be reasonably likely, individually or in the
aggregate, to have a material adverse effect on Target or (11) any
lapse, reversion, termination or expiration of any Intellectual
Property Rights or agreement or understanding, including any copyright,
license, joint venture agreement, distribution agreement, publishing
agreement, author agreement, work-for-hire agreement or development
agreement to which Target or any of its subsidiaries is a party, except
where such lapse, reversion, termination or expiration, individually
and in the aggregate, is not reasonably likely to have a material
adverse effect on Target.
(h) LITIGATION. There is no suit, action, proceeding,
arbitration or written claim pending or, to the knowledge of Target or
any of its subsidiaries, threatened against or affecting Target or any
of its subsidiaries that, individually or in the aggregate, is
reasonably likely to have a material adverse effect on Target, nor is
there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against Target or any of
its subsidiaries having, or which is reasonably likely to have,
individually or in the aggregate, a material adverse effect on Target;
PROVIDED that for purposes of this Section 3.01(h), any such suit,
action, proceeding, arbitration, claim, judgment, decree, injunction,
rule or order arising after the date of this Agreement shall not be
deemed to have a material adverse effect on Target if, and to the
extent, such suit, action, proceeding, arbitration, claim, judgment,
decree, injunction, rule or order (or any relevant part thereof) is
based on this Agreement or the transactions contemplated hereby.
(i) COMPLIANCE WITH APPLICABLE LAWS. (i) Target and its
subsidiaries hold all permits, licenses, variances, exemptions, orders,
registrations and approvals of all Governmental Entities (the "Target
Permits") that are required for them to own, lease, license, exploit or
operate their assets and to carry on their businesses, except where the
failure to hold
21
any such Target Permit, individually and in the aggregate, is not
reasonably likely to have a material adverse effect on Target. Target
and its subsidiaries are in compliance with the terms of the Target
Permits and all applicable treaties, conventions, directives, statutes,
laws, ordinances, rules, regulations, orders and restrictions, except
where the failure to so comply, individually and in the aggregate, is
not reasonably likely to have a material adverse effect on Target. No
action, demand, requirement or investigation by any Governmental Entity
and no suit, action or proceeding by any person, in each case with
respect to Target or any of its subsidiaries or any of their respective
properties, is pending or, to the knowledge of Target, threatened other
than, in each case, those the outcome of which, individually and in the
aggregate, are not (i) reasonably likely to have a material adverse
effect on Target or Target's state adoption contracts in the State of
California, the State of Florida or the State of Texas or (ii)
reasonably likely to impair the ability of Target to perform its
obligations under this Agreement or to prevent or delay the
consummation of any of the transactions contemplated by this Agreement.
(ii) There have been no Releases of any Hazardous Materials
at, on or under any facility or property currently or formerly owned,
leased, or operated by Target or any of its subsidiaries that,
individually or in the aggregate, are reasonably likely to have a
material adverse effect on Target. Neither Target nor any of its
subsidiaries is the subject of any pending or, to Target's knowledge,
threatened investigation or proceeding under Environmental Law relating
in any manner to the off-site treatment, storage or disposal of any
Hazardous Materials generated at any facility or property currently or
formerly owned, leased or operated by Target or any of its subsidiaries
that, individually or in the aggregate, is reasonably likely to have a
material adverse effect on Target. Neither Target nor any of its
subsidiaries has assumed or otherwise agreed to be responsible for any
liabilities arising under Environmental Law which, individually or in
the aggregate, are reasonably likely to have a material adverse effect
on Target. The term "Environmental Law" means any and all applicable
laws
22
or regulations or other requirements of any Governmental Entity
concerning the protection of human health or the environment. The term
"Hazardous Materials" means all explosive or regulated radioactive
materials, hazardous or toxic substances, wastes or chemicals,
petroleum (including crude oil or any fraction thereof), and all other
materials or chemicals regulated under any Environmental Law. The term
"Release" means any spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching, emanation or
migration in, into, onto, or through the environment.
(j) ABSENCE OF CHANGES IN BENEFIT PLANS. Since the date of the
most recent audited financial statements included in the Target Filed
SEC Documents, except for the adoption by Target of the 2001 Stock
Compensation Plan set forth in the proxy statement for the 2001 annual
meeting of Target's stockholders, there has not been any adoption or
amendment in any material respect by Target or any of its subsidiaries
of any collective bargaining agreement or any material bonus, pension,
profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, retirement,
thrift, savings, stock bonus, restricted stock, cafeteria, paid time
off, perquisite, fringe benefit, vacation, severance, disability, death
benefit, hospitalization, medical, welfare benefit or other plan or
arrangement maintained, contributed to or required to be maintained or
contributed to by Target, any of its subsidiaries, or any other person
or entity that, together with Target, is treated as a single employer
under Section 414(b), (c), (m) or (o) of the Code (a "Commonly
Controlled Entity") providing benefits to any current or former
employee, officer, consultant or director of Target or any of its
subsidiaries (collectively, the "Target Benefit Plans"), or any change
in any actuarial or other assumption used to calculate funding
obligations with respect to any Target Pension Plans, or any change in
the manner in which contributions to any Target Pension Plans are made
or the basis on which such contributions are
23
determined. Except as disclosed in the Target Filed SEC Documents,
there are no (1) employment, consulting, deferred compensation,
indemnification, severance or termination agreements or arrangements
between Target or any of its subsidiaries and any current or former
employee, officer, consultant or director of Target or any of its
subsidiaries or (2) agreements between Target or any of its
subsidiaries and any current or former employee, editor, author,
developer, independent contractor, officer, consultant or director of
Target or any of its subsidiaries, the benefits of which agreements
(described in this clause (2)) are contingent, or the terms of which
are materially altered, upon the occurrence of a transaction involving
Target of a nature contemplated by this Agreement (collectively, the
"Target Benefit Agreements"), except for such agreements that,
individually and in the aggregate, would not reasonably be likely to
have a material adverse effect on Target.
(k) ERISA COMPLIANCE; EXCESS PARACHUTE PAYMENTS. (i) Section
3.01(k) of the Target Disclosure Schedule contains a list of each
Target Benefit Plan that is an "employee pension benefit plan" (as
defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")) (sometimes referred to herein as "Target
Pension Plans"), "employee welfare benefit plan" (as defined in Section
3(1) of ERISA) and all other Target Benefit Plans and Target Benefit
Agreements. Target has delivered (or will deliver as soon as
practicable following the date hereof) to Parent true, complete and
correct copies of (a) each Target Benefit Plan and Target Benefit
Agreement (or, in the case of any unwritten Target Benefit Plan or
Target Benefit Agreement a description thereof), (b) the two most
recent annual reports on Form 5500 filed with the Internal Revenue
Service with respect to each Target Benefit Plan (if any such report
was required), (c) the most recent summary plan description for each
Target Benefit Plan for which such summary plan description is required
(other than any summary plan description which is in the process of
being prepared in compliance with applicable law) and (d) each trust
agreement and insurance or group annuity contract relating to any
Target Benefit Plan.
24
(ii) Each Target Benefit Plan has been administered in all
material respects in accordance with its terms. Target, its
subsidiaries and each Target Benefit Plan are in compliance in all
material respects with the applicable provisions of ERISA and the Code,
and all other applicable laws, including laws of foreign jurisdictions.
Target is not a party to any collective bargaining agreement. All
Target Pension Plans intended to be qualified have received favorable
determination letters from the Internal Revenue Service with respect to
"TRA" (as defined in Section 1 of Rev. Proc. 93-39), to the effect that
such Target Pension Plans are qualified and exempt from Federal income
taxes under Sections 401(a) and 501(a), respectively, of the Code, and
no such determination letter has been revoked nor, to the knowledge of
Target, has revocation been threatened, nor has any event occurred
since the date of its most recent determination letter or application
therefor that would adversely affect its qualification or materially
increase its costs or require security under Section 307 of ERISA. The
▇▇ ▇▇▇▇▇ Canada Pension Plan having been terminated with the approval
of the appropriate governmental authorities, there is currently no
Target Pension Plan which is required to have been approved by any
foreign Governmental Entity. Target has delivered to Parent a true and
complete copy of the most recent determination letter received with
respect to each Target Pension Plan. There is currently no pending
application for a determination letter. Target has also provided to
Parent a restatement of the Houghton Mifflin Retirement Plan which
contains all Target Pension Plan amendments as to which a favorable
determination letter has not yet been received. There is no pending or,
to the knowledge of Target, threatened litigation relating to any
Target Benefit Plan.
(iii) No Target Pension Plan (1) is a "multiemployer plan"
within the meaning of Section 4001(a)(3) of ERISA or (2) had, as of the
respective last annual valuation date for each such Target Pension
Plan, any "unfunded benefit liabilities" (as such term is defined in
Section 4001(a)(18) of ERISA), based on actuarial
25
assumptions that have been furnished to Parent, and there has been no
material adverse change in the financial condition of any Target
Pension Plan since its last such annual valuation date. No liability
under Subtitle C or D of Title IV of ERISA has been or is expected to
be incurred by Target or any of its subsidiaries with respect to any
ongoing, frozen or terminated "single-employer plan", within the
meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any of them, or the single-employer plan of any Commonly
Controlled Entity. None of Target, any of its subsidiaries, any officer
of Target or any of its subsidiaries or any of the Target Benefit Plans
which are subject to ERISA, including the Target Pension Plans, any
trusts created thereunder or any trustee or administrator thereof, has
engaged in a "prohibited transaction" (as such term is defined in
Section 406 of ERISA or Section 4975 of the Code) or any other breach
of fiduciary responsibility that could subject Target, any of its
subsidiaries or any officer of Target or any of its subsidiaries to the
tax or penalty on prohibited transactions imposed by such Section 4975
or to any liability under Section 502(i) or 502(l) of ERISA. Although
the Target Pension Plan was converted on January 1, 1997 into the
Houghton Mifflin Retirement Plan (a cash-balance pension plan), no
Target Pension Plan subject to Title IV of ERISA or any related trust
has been terminated within the five- year period preceding the date
hereof, nor has there been any "reportable event" (as that term is
defined in Section 4043 of ERISA) for which the 30-day reporting
requirement has not been waived with respect to any Target Pension Plan
during the last five years, and no notice of a reportable event will be
required to be filed in connection with the Offer, the Merger or the
other transactions contemplated by this Agreement. All contributions
and premiums required to be made under the terms of any Target Benefit
Plan as of the date hereof have been timely made or have been reflected
on the most recent consolidated balance sheet filed or incorporated by
reference in the Target Filed SEC Documents. Neither any Target Pension
Plan nor any single-employer plan of any Commonly Controlled Entity has
an "accumulated funding deficiency" (as such term is defined in Section
302 of ERISA or Section 412 of the Code), whether or not waived.
26
(iv) Section 3.01(k)(iv) of the Target Disclosure Schedule
discloses whether each Target Benefit Plan that is an employee welfare
benefit plan is (a) unfunded, (b) funded through a "welfare benefit
fund" (as such term is defined in Section 419(e) of the Code) or other
funding mechanism or (c) insured. Target and its subsidiaries, with
respect to each Target Benefit Plan that is a "group health plan" (as
such term is defined in Section 5000(b)(1) of the Code), comply in all
material respects with the applicable requirements of Section 4980B(f)
of the Code. Each Target Benefit Plan (including any such plan covering
retirees or other former employees) that is an employee welfare benefit
plan may be amended or terminated without material liability to Target
or any of its subsidiaries on or at any time after the Effective Time
(other than liabilities accrued as of the time of such amendment or
termination). Neither Target nor any of its subsidiaries has any
obligations for retiree health or life insurance benefits under any
Target Benefit Plan or Target Benefit Agreement.
(v) None of the execution and delivery of this Agreement, the
consummation of the Offer, the Merger or any other transaction
contemplated by this Agreement (including as a result of any
termination of employment or engagement following the Effective Time)
will (x) entitle any employee, officer, consultant or director of
Target or any of its subsidiaries to severance or termination pay, (y)
accelerate the time of payment or vesting or trigger any payment or
funding (through a grantor trust or otherwise) of compensation or
benefits under, increase the amount payable or trigger any other
material obligation pursuant to, any of the Target Benefit Plans or
Target Benefit Agreements or (z) result in any breach or violation of,
or a default under, any of the Target Benefit Plans or Target Benefit
Agreements.
(vi) Other than payments or benefits that may be made or
provided to the persons listed in Section 3.01(k)(i) of the Target
Disclosure Schedule under the categories
27
"Change-in-Control Agreements 3X" and "Change-in-Control Agreements 2X"
(the "Primary Target Executives"), to the knowledge of Target, no
amount or other entitlement or economic benefit that could be received
(whether in cash or property or the vesting of property) as a result of
the Offer or the Merger (whether taken alone or together with any
termination, including constructive termination, of employment on or
following the Effective Time) by or for the benefit of any employee,
officer, director or consultant of Target or any of its affiliates who
is a "disqualified individual" (as such term is defined in proposed
Treasury Regulation Section 1.280G-1) under any Target Benefit Plan or
Target Benefit Agreement or otherwise should be characterized as an
"excess parachute payment" (as defined in Section 280G(b)(1) of the
Code), and, to the knowledge of Target, other than certain Primary
Target Executives, no disqualified individual is entitled to receive
any additional payment from Target or any of its subsidiaries or any
other person in the event that the excise tax under Section 4999 of the
Code is imposed on such disqualified individual. Target has provided
Parent with (a) the estimated "parachute payments" (as defined in
Section 280G(b)(2) of the Code) that could be paid to each Primary
Target Executive (except those listed in Section 3.01(k)(i) of the
Target Disclosure Schedule) as a result of the Offer or the Merger
(whether taken alone or together with any termination of employment on
or following the Effective Time) under all Target Benefit Plans and
Target Benefit Agreements and (b) the "base amount" (as defined in
Section 280G(b)(3) of the Code) for each Primary Target Executive
calculated as of the date of this Agreement.
(vii) Target and its subsidiaries are in compliance with all
Federal, state, local and foreign requirements regarding employment,
except for such noncompliance that, individually and in the aggregate,
is not reasonably likely to have a material adverse effect on Target.
Neither Target nor any of its subsidiaries is a party to any collective
bargaining or other labor union contract applicable to persons employed
by Target or any of its subsidiaries and no collective bargaining
agreement is being negotiated by Target or any of its subsidiaries. As
of the date of this Agreement, there
28
is no labor dispute, strike or work stoppage against Target or any of
its subsidiaries pending or, to the knowledge of Target, threatened
which may interfere with the respective business activities of Target
or its subsidiaries. As of the date of this Agreement, to the knowledge
of Target, none of Target, any of its subsidiaries or any of their
respective representatives, employees or independent contractors has
committed a material unfair labor practice in connection with the
operation of the respective businesses of Target or any of its
subsidiaries, and there is no charge or complaint against Target or any
of its subsidiaries by the National Labor Relations Board or any
comparable governmental agency pending or threatened in writing.
(viii) All material reports, returns and similar documents
with respect to all Target Benefit Plans required to be filed with any
Governmental Entity or distributed to any Target Benefit Plan
participant have been duly and timely filed or distributed. None of
Target or any of its subsidiaries has received notice of, and to the
knowledge of Target, there are no investigations by any Governmental
Entity with respect to, termination proceedings or other claims (except
claims for benefits payable in the normal operation of the Target
Benefit Plans), suits or proceedings against or involving any Target
Benefit Plan or asserting any rights or claims to benefits under any
Target Benefit Plan that could give rise to any liability, and, to the
knowledge of Target, there are not any facts that could give rise to
any material liability in the event of any such investigation, claim,
suit or proceeding.
(ix) Except as would not reasonably be likely, individually
and in the aggregate, to have a material adverse effect on Target, none
of Target nor any of its subsidiaries has any material liability or
obligations, including under or on account of a Target Benefit Plan,
arising out of the hiring of persons to provide services to Target or
any of its subsidiaries and treating such persons as consultants or
independent contractors and not as employees of Target or any of
29
its subsidiaries.
(l) TAXES. Except to the extent that the failure of the
following to be true would not reasonably be likely, individually and
in the aggregate, to have a material adverse effect on Target: (i) Each
of Target and its subsidiaries has filed all tax returns required to be
filed by it and all such returns are complete and correct, or requests
for extensions to file such tax returns have been timely filed, granted
and have not expired. Target and each of its subsidiaries has paid (or
caused to be paid) all taxes shown as due on such tax returns, and the
most recent financial statements contained in the Target Filed SEC
Documents reflect an adequate reserve (in addition to any reserve for
deferred taxes established to reflect timing differences between book
and tax income) of tax for all taxes payable by Target and its
subsidiaries for all taxable periods and portions thereof accrued
through the date of such financial statements.
(ii) No tax return of Target or any of its subsidiaries is
under audit or examination by any taxing authority, and no written
notice of such an audit or examination has been received by Target or
any of its subsidiaries. There is no deficiency, refund litigation,
proposed adjustment or matter in controversy with respect to any taxes
due and owing by Target or any of its subsidiaries. Each deficiency
resulting from any completed audit or examination relating to taxes by
any taxing authority has been timely paid, except for such deficiencies
being contested in good faith and for which adequate reserves are
reflected on the books of Target. The United States Federal income tax
returns of Target and each of its subsidiaries consolidated in such tax
returns have been either examined by and settled with the IRS or closed
by virtue of the applicable statute of limitations and no requests for
waivers of the time to assess any such taxes are pending.
(iii) No liens for taxes (other than for current taxes not yet
due and payable) exist with respect to any assets or properties of
Target or any of its subsidiaries. Neither Target nor any of its
subsidiaries is bound by any agreement with respect to
30
taxes.
(iv) For U.S. Federal income tax purposes, neither Target nor
any of its subsidiaries will be required to include in a taxable period
ending after the Effective Time taxable income attributable to income
that accrued (for purposes of the financial statements of Target
included in the Target Filed SEC Documents) in a prior taxable period
but was not recognized for tax purposes in any prior taxable period as
a result of the installment method of accounting, the completed
contract method of accounting, the long-term contract method of
accounting, the cash method of accounting or Section 481 of the Code or
for any other reason.
(v) Neither Target nor any of its subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock to any person that is not a member of the
affiliated group of corporations of which Target is the common parent
qualifying for tax-free treatment under Section 355 of the Code (x) in
the two years prior to the date of this Agreement or (y) in a
distribution which could otherwise constitute part of a "plan" or
"series of related transactions" (within the meaning of Section 355(e)
of the Code) in conjunction with the Offer or the Merger.
(vi) As used in this Agreement, (A) "taxes" shall include (1)
all forms of taxation, whenever created or imposed, and whether
domestic or foreign, and whether imposed by a national, Federal, state,
provincial, local or other Governmental Entity, including all interest,
penalties and additions imposed with respect to such amounts, (2)
liability for the payment of any amounts of the type described in
clause (1) as a result of being a member of an affiliated,
consolidated, combined or unitary group and (3) liability for the
payment of any amounts as a result of being party to any tax sharing
agreement or as a result of any express or implied obligation to
indemnify any other person with respect to the payment of any amount
described in clause (1) or (2) and (B) "tax returns" shall mean all
31
domestic or foreign (whether national, Federal, state, provincial,
local or otherwise) returns, declarations, statements, reports,
schedules, forms and information returns relating to taxes and any
amended tax return.
(m) VOTING REQUIREMENTS. The affirmative vote of the holders
of two-thirds of the voting power of all outstanding shares of Target
Common Stock at the Target Stockholders Meeting to approve this
Agreement (the "Target Stockholder Approval") is the only vote of the
holders of any class or series of Target's capital stock necessary to
approve this Agreement and the transactions contemplated hereby.
(n) STATE TAKEOVER STATUTES. The Board of Directors of Target
has unanimously approved the terms of this Agreement and the
consummation of the Offer, the Merger and the other transactions
contemplated by this Agreement and has recommended approval of this
Agreement to Target's stockholders and such approval and recommendation
constitutes approval of this Agreement and the Offer, the Merger and
the other transactions contemplated by this Agreement by the Board of
Directors of Target under the provisions of Mass. Gen. Laws, Chapters
110C and 110F and represents all the action necessary to ensure that
the requirements and restrictions contained in such Mass. Gen. Laws,
Chapters 110C and 110F do not apply to Parent or Sub in connection with
the Offer, the Merger and the other transactions contemplated by this
Agreement. To the knowledge of Target, no other state takeover statute
is applicable to the Offer, the Merger or the other transactions
contemplated hereby.
(o) BROKERS. No broker, investment banker, financial advisor
or other person, other than ▇.▇. ▇▇▇▇▇▇ Securities Inc., the fees and
expenses of which will be paid by Target, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of Target. Target will, promptly
after the date hereof, furnish to Parent true and complete copies of
all agreements under which any such
32
fees or expenses are payable and all indemnification and other
agreements related to the engagement of the persons to whom such fees
are payable.
(p) OPINION OF FINANCIAL ADVISOR. Target has received the
written opinion of ▇.▇. ▇▇▇▇▇▇ Securities Inc., dated the date of this
Agreement, to the effect that, as of such date, the consideration to be
received in the Offer and the Merger by Target's stockholders is fair
from a financial point of view to the stockholders of Target, a signed
copy of which opinion has been or promptly will be delivered to Parent.
(q) INTELLECTUAL PROPERTY. (i) Target and its subsidiaries
have such ownership of or such rights by license or otherwise in all
patents and patent applications, mask works, trademarks and service
marks, trademark and service ▇▇▇▇ registrations and applications, trade
names, logos, brands, titles, copyrights (including, without
limitation, in all published and unpublished pupil books, teacher
editions, ancillary materials, supplemental materials, multimedia
programs, manipulatives, digitized content and in all compilations,
collective works and derivative works of the foregoing), subsidiary
rights, copyright registrations and applications, trade secrets, names
and likenesses, know-how, proprietary processes, compositions of
matter, formulae, designs, computer software programs and other
proprietary rights as are necessary to conduct and permit the conduct
of the business of Target and its subsidiaries as currently conducted
(collectively, the "Intellectual Property Rights"), except where the
failure to have such ownership or right by license or otherwise,
individually and in the aggregate, is not reasonably likely to have a
material adverse effect on Target.
(ii) To the knowledge of Target, the conduct of the business
of Target and its subsidiaries as currently conducted does not infringe
upon the intellectual property rights of any third party or violate the
privacy rights of any third party or defame any third party and there
are no such present or, to the knowledge of Target, threatened
infringements or violations of the Intellectual Property Rights by any
third party, except, in either case, for such
33
infringements or violations which, individually and in the aggregate,
are not reasonably likely to have a material adverse effect on Target.
There are no pending or, to the knowledge of Target, threatened
proceedings, arbitrations, actions, suits, written claims or litigation
or other adverse claims by any person which challenge the rights of
Target or any of its subsidiaries in respect of any Intellectual
Property Rights owned or licensed or used by Target or its subsidiaries
or which charge Target or any of its subsidiaries with infringement,
invasion of privacy, misappropriation of name or likeness, or
defamation, or which demand an accounting, except for such claims
which, individually and in the aggregate, are not reasonably likely to
have a material adverse effect on Target.
(iii) Neither Target nor any of its subsidiaries is a party to
or bound by any Contract (A) that contains any non-competition covenant
or exclusivity commitment that restricts, in any material respect, the
manner in which, medium in which, or the localities in which, all or a
material portion of the business of Target and its subsidiaries, taken
as a whole, is conducted, other than agreements with Classwell Learning
Group, Inc. and Contracts entered into in the ordinary course of
Target's and its subsidiaries' respective businesses, (B) pursuant to
which Target or any of its subsidiaries has assigned, transferred,
licensed or granted to a third party any Intellectual Property Right on
an exclusive basis, other than agreements with Classwell Learning
Group, Inc. and Contracts entered into in the ordinary course of
Target's and its subsidiaries' respective businesses, or (C) that
contains any "most favored nation" pricing provision, other than
Contracts with state or local Governmental Entities for the purchase of
educational materials, except, in each case, for Contracts the
provisions of which, individually and in the aggregate, are not
reasonably likely to have a material adverse effect on Target.
(r) CONTRACTS. Except for Contracts filed as exhibits to the
Target Filed SEC Documents, as of the
34
date of this Agreement, none of Target or any of its subsidiaries is a
party to or bound by, and none of their properties or assets are bound
by or subject to, any written or oral:
(i) Contract that restricts in any material respect the manner
in which, or the localities in which, all or a material portion of the
business of Target and its subsidiaries is conducted;
(ii) Contract under which Target or any of its subsidiaries
has (i) incurred any indebtedness for borrowed money that is currently
owing, (ii) given any guarantee in respect of indebtedness for borrowed
money, excluding intercompany indebtedness, in each case having an
aggregate principal amount in excess of $1,000,000 or (iii) granted any
pledge, mortgage or other security interest in any property or assets
of Target or any of its subsidiaries securing indebtedness in excess of
$1,000,000;
(iii) Contract in respect of any joint venture, partnership,
business alliance or similar arrangement between Target or any of its
subsidiaries and any third party involving a material ownership
interest in any such entity; or
(iv) Contract granting the other party to such Contract or a third
party "most favored nation" status that, following the Merger, would in
any way apply to Parent or any of its subsidiaries (other than Target
and its subsidiaries and their products or services).
Each Contract of Target and its subsidiaries is in full force and
effect and is a legal, valid and binding agreement of Target or such
subsidiary and, to the knowledge of Target or such subsidiary, of each
other party thereto, enforceable against Target or any of its
subsidiaries, as the case may be, and, to the knowledge of Target,
against the other party or parties thereto, in each case, in accordance
with its terms, in each case, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or
affecting the rights and remedies of creditors generally and to general
principles of equity (regardless of whether considered in a proceeding
in
35
equity or at law), except for such failures to be in full force and
effect or enforceable that, individually and in the aggregate, are not
reasonably likely to have a material adverse effect on Target. Except
as is not reasonably likely, individually and in the aggregate, to have
a material adverse effect on Target, each of Target and its
subsidiaries has performed or is performing all obligations required to
be performed by it under its Contracts and is not (with or without
notice or lapse of time or both) in breach or default thereunder, and,
to the knowledge of Target or such subsidiary, no other party to any of
its Contracts is (with or without notice or lapse of time or both) in
breach or default thereunder.
(s) STATE ADOPTION CONTRACTS. All state and local adoption
contracts between Target or any of its subsidiaries on the one hand,
and any state or local department, agency or instrumentality on the
other hand, are in full force and effect and are legal, valid and
binding agreements of Target or its subsidiaries and, to the knowledge
of Target or such subsidiaries, of each other party thereto,
enforceable against Target or its subsidiaries, as the case may be,
and, to the knowledge of Target, against the other party or parties
thereto, in each case, in accordance with their terms, except for such
failures to be legal, valid, binding and enforceable that, individually
and in the aggregate, are not reasonably likely to have a material
adverse effect on Target. Neither Target nor any of its subsidiaries
nor any of their respective employees, independent contractors,
consultants or representatives has breached any such adoption contract,
except for such breaches that, individually and in the aggregate, are
not reasonably likely to have a material adverse effect on Target.
(t) RIGHTS AGREEMENT. Target has taken all actions necessary
to ensure that (i) the Rights Agreement and the Rights are and will be
inapplicable to Parent and its subsidiaries; (ii) neither Parent nor
any of its subsidiaries will be deemed to be an Acquiring Person (as
defined in the Rights Agreement);
36
and (iii) neither a Distribution Date nor a Stock Acquisition Date
(each as defined in the Rights Agreement) has occurred or will occur
and the Rights have not and will not become separable, distributable,
unredeemable or exercisable as a result of entering into this Agreement
or consummating the Offer, the Merger or the other transactions
contemplated by this Agreement.
SECTION 3.02. REPRESENTATIONS AND WARRANTIES OF PARENT AND
SUB. Parent and Sub represent and warrant to Target as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Parent is a
societe anonyme duly incorporated and validly subsisting under the laws
of France, Sub is a corporation duly organized, validly existing and in
good standing under the MBCL, and each of Parent and Sub has the
requisite corporate power and authority to carry on its business as now
being conducted, except where the failure to be so organized and
existing and in good standing or to have such power and authority is
not reasonably likely to prevent or delay the consummation of any of
the transactions contemplated by this Agreement.
(b) AUTHORITY; NONCONTRAVENTION. Each of Parent and Sub has
all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by Parent and
Sub and the consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action
on the part of Parent and Sub. This Agreement has been duly executed
and delivered by Parent and Sub and, assuming the due authorization,
execution and delivery by each of the other parties thereto, constitute
legal, valid and binding obligations of Parent and Sub, as applicable,
enforceable against each of them in accordance with its terms. The
execution and delivery of this Agreement do not, and the consummation
of the transactions contemplated by this Agreement and compliance with
the provisions of this Agreement will not, conflict with, or result in
any violation of, or default (with or without notice or lapse of time,
or
37
both) under, or give rise to a right of termination, cancelation or
acceleration of any obligation or loss of a benefit under, or result in
the creation of any Lien upon any of the properties or assets of Parent
or Sub under, (i) the Restated Corporate Statutes of Parent or the
articles of organization or by-laws of Sub, (ii) any Contract
applicable to Parent or Sub or their respective properties or assets or
(iii) subject to the governmental filings and other matters referred to
in the following sentence, (A) any judgment, order or decree or (B) any
statute, treaty, convention, directive, law, ordinance, rule,
regulation, order or restriction, in each case applicable to Parent or
any of its subsidiaries or their respective owned, licensed or leased
properties or assets, other than, in the case of clauses (ii) and
(iii), any such conflicts, violations, defaults, rights, losses or
Liens that, individually and in the aggregate, are not reasonably
likely to (x) impair the ability of Parent or Sub to perform its
obligations under this Agreement or (y) prevent or materially delay the
consummation of the transactions contemplated by this Agreement. No
consent, approval, order or authorization of, action by, or in respect
of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Parent or Sub in connection
with the execution and delivery of this Agreement by Parent and Sub or
the consummation by Parent and Sub of the transactions contemplated by
this Agreement, except for (1) the filing of a premerger notification
and report form by Parent under the HSR Act and any applicable filings
and approvals under Foreign Antitrust Laws; (2) the filing with the SEC
of the Offer Documents and such other reports under Section 13(a),
13(d), 15(d) or 16(a) of the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated by
this Agreement; (3) the filing of the Articles of Merger with the
Secretary of the Commonwealth of the Commonwealth of Massachusetts and
appropriate documents with the relevant authorities of other states in
which Parent is qualified to do business; and (4) such other consents,
approvals, orders, authorizations, registrations, declarations and
38
filings the failure of which to be made or obtained, individually and
in the aggregate, are not reasonably likely to (x) impair the ability
of Parent or Sub to perform its obligations under this Agreement or (y)
prevent or materially delay the consummation of the transactions
contemplated by this Agreement.
(c) INFORMATION SUPPLIED. None of the information supplied or
to be supplied by Parent specifically for inclusion or incorporation by
reference in (i) the Offer Documents, the Schedule 14D-9 or the
Information Statement will, at the date it is filed with the SEC or
first published, sent or given to Target's stockholders, or at the time
of any amendment or supplement thereof or (ii) the Proxy Statement
will, at the time it is filed with the SEC, mailed to Target's
stockholders, at the time of the Target Stockholders Meeting, or at the
time of any amendment of supplement thereof, in each case, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are
made, not misleading.
(d) INTERIM OPERATIONS OF SUB. Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has
engaged in no other business activities and has conducted its
operations only as contemplated hereby.
(e) CAPITAL RESOURCES. Parent has or, on or prior to the
Closing Date will have, sufficient cash or access to cash to enable
Parent to cause the Surviving Corporation to pay for all shares of
Target Common Stock validly tendered into and not validly withdrawn
from the Offer and to pay the Merger Consideration.
39
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.01. CONDUCT OF BUSINESS. (a) CONDUCT OF BUSINESS BY
TARGET. Except as set forth in Section 4.01(a) of the Target Disclosure
Schedule, as otherwise contemplated by this Agreement or as consented to in
writing by Parent, such consent not to be unreasonably withheld, conditioned or
delayed, during the period from the date of this Agreement to the earliest of
(A) such time as nominees of Parent shall comprise a majority of the members of
Target's Board of Directors, (B) the termination of this Agreement in accordance
with Article VII or (C) the Effective Time, Target shall, and shall cause its
subsidiaries to, carry on their respective businesses only in the ordinary
course consistent with past practice and in compliance in all material respects
with all applicable laws and regulations and, to the extent consistent
therewith, use all reasonable efforts to preserve intact their current business
organizations, use reasonable efforts to keep available the services of their
current officers and other key employees and preserve their relationships with
those persons having business dealings with them. Without limiting the
generality of the foregoing (but subject to the above exceptions), during the
period from the date of this Agreement to the earliest of (A) such time as
nominees of Parent shall comprise a majority of the members of Target's Board of
Directors, (B) the termination of this Agreement in accordance with Article VII
or (C) the Effective Time, Target shall not, and shall not permit any of its
subsidiaries to:
(i) other than dividends and distributions (including
liquidating distributions) by a direct or indirect wholly owned
subsidiary of Target to its parent, and except for regular dividends of
not more than $0.135 per share payable each calendar quarter to
Target's stockholders (PROVIDED that no such dividend shall be declared
after the date of this Agreement unless the purchase of shares pursuant
to the Offer shall not have been consummated by August 15, 2001), (x)
declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock, property or otherwise) in
respect of, any of its capital stock, (y) split, combine or reclassify
any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for
shares of its capital stock, or (z) purchase, redeem or otherwise
acquire, directly or
40
indirectly, any shares of capital stock of Target or any of its
subsidiaries or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber or
subject to any Lien (w) any shares of its capital stock, (x) any other
voting securities, (y) any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting securities or
convertible securities or (z) any "phantom" stock or stock rights, SARs
or stock-based performance units other than the issuance of Target
Common Stock upon the exercise of Target Stock Options outstanding as
of the date hereof in accordance with their present terms;
(iii) amend its articles of organization, by-laws or
other comparable organizational documents;
(iv) acquire, license or agree to acquire or license (A) by
merging or consolidating with, or by purchasing or licensing assets of,
or by any other manner, any business, division or person or any
interest therein or (B) any assets other than immaterial assets or
assets acquired in the ordinary course of Target's business operations
consistent with past practice;
(v) sell, lease, license out, sell and leaseback, mortgage or
otherwise encumber or subject to any Lien (other than any Lien imposed
by law, such as a carriers', warehousemen's or mechanics' Lien) or
otherwise dispose of any of its properties or assets (including
securitizations), other than sales or licenses out of finished goods or
services in the ordinary course of business consistent with past
practice;
(vi) repurchase, prepay or incur any indebtedness for borrowed
money or guarantee any such indebtedness of another person, issue or
sell any debt securities or warrants or other rights to acquire any
debt securities of Target or any of its subsidiaries, guarantee any
41
debt securities of another person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another
person or enter into any arrangement having the economic effect of any
of the foregoing, except for short-term borrowings incurred in the
ordinary course of business for working capital purposes (or to refund
existing or maturing indebtedness) consistent with past practice not to
exceed $300,000,000, at any time outstanding and except for
intercompany indebtedness between Target and any of its subsidiaries or
between such subsidiaries;
(vii) make any loans, advances or capital contributions to, or
investments in, any other person, other than (A) Target or any direct
or indirect wholly owned subsidiary of Target or (B) Classwell Learning
Group Inc., pursuant to existing obligations in written agreements of
which Parent's legal and financial advisors have been provided copies
(or given access) in connection with the transactions contemplated by
this Agreement;
(viii) make or agree to make any new capital expenditures,
other than capital expenditures relating to book plate assets, or enter
into any agreements providing for payments which, individually, are in
excess of $1,000,000 or, in the aggregate, are in excess of
$25,000,000;
(ix) (A) pay, discharge, settle or satisfy any material
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), or litigation (whether or not
commenced prior to the date of this Agreement) other than the payment,
discharge, settlement or satisfaction, in the ordinary course of
business consistent with past practice or in accordance with their
terms, of liabilities recognized or disclosed in the most recent
consolidated financial statements (or the notes thereto) of Target
included in the Target Filed SEC Documents or incurred since the date
of such financial statements, or (B) subject to Section 4.02, waive the
benefits of, agree to modify in any manner, terminate, release any
person from or fail to enforce any confidentiality, standstill or
similar agreement to which Target or any of its subsidiaries
42
is a party or of which Target or any of its subsidiaries is a
beneficiary;
(x) except as required in order to comply with law and except
for labor agreements negotiated in the ordinary course, (x) establish,
enter into, adopt or amend or terminate any Target Benefit Plan or
Target Benefit Agreement, (y) change any actuarial or other assumption
used to calculate funding obligations with respect to any Target
Pension Plan, or change the manner in which contributions to any Target
Pension Plan are made or the basis on which such contributions are
determined or (z) take any action to accelerate any rights or benefits,
or make any material determinations not in the ordinary course of
business consistent with past practice, under any collective bargaining
agreement, Target Benefit Plan or Target Benefit Agreement;
(xi) (w) other than in the ordinary course of business
consistent with past practice (other than with respect to executive
officers), increase the compensation, bonus, royalties, commissions, or
other benefits of any current or former director, consultant, officer
developer, author, illustrator, publisher, editor or other employee,
(x) grant any current or former director, consultant, officer,
developer, author, illustrator, publisher, editor or other employee or
independent contractor any increase in severance or termination pay,
(y) amend or modify any Target Stock Option, or (z) or pay any benefit
or amount not required by a plan or arrangement as in effect on the
date of this Agreement to any such person;
(xii) transfer or license to any person or entity or otherwise
extend, amend or modify or allow to revert, lapse or expire any
material rights to the Intellectual Property Rights of Target and its
subsidiaries other than in the ordinary course of business consistent
with past practices;
(xiii) enter into or amend any Contract of the type
listed in Section 3.01(r);
(xiv) obtain, through acquisition, lease, sublease or
43
otherwise, any real property for use as an office, warehouse or similar
facility of Target or any of its subsidiaries, other than in the
ordinary course of business consistent with past practice;
(xv) increase the headcount of full-time, permanent
employees of Target or its subsidiaries by an amount
inconsistent with past practice;
(xvi) except insofar as may be required by a change
in GAAP, make any changes in accounting methods,
principles or practices;
(xvii) take any action that would, or that would reasonably be
expected to, result in any condition to the Offer or the Merger set
forth in Exhibit A not being satisfied; or
(xviii) authorize, or commit, resolve or agree to
take, any of the foregoing actions.
(b) ADVICE OF CHANGES. Target and Parent shall promptly advise
the other party orally and in writing to the extent it has knowledge of (i) any
representation or warranty made by it (and, in the case of Parent, made by Sub)
contained in this Agreement that is qualified as to materiality becoming untrue
or inaccurate in any respect or any such representation or warranty that is not
so qualified becoming untrue or inaccurate in any material respect, (ii) the
failure by it (and, in the case of Parent, by Sub) to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement and (iii) any change or event having, or
which is reasonably likely to have, a material adverse effect on such party or
on the truth of their respective representations and warranties or the ability
of the conditions set forth in Article VI or Exhibit A to be satisfied;
PROVIDED, HOWEVER, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties (or remedies with respect
thereto) or the conditions to the obligations of the parties under this
Agreement.
(c) CERTAIN TAX MATTERS. During the period from the date of
this Agreement to the Effective Time, Target shall not, and shall not permit any
of its subsidiaries to,
44
make or change any material Tax election without the written consent of Parent.
SECTION 4.02. NO SOLICITATION BY TARGET. (a) Target shall not,
nor shall it permit any of its subsidiaries to, nor shall it authorize or permit
any of its directors, officers or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by it or any of
its subsidiaries to, directly or indirectly through another person, (i) solicit,
initiate or encourage (including by way of furnishing information), or take any
other action to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Takeover Proposal or
(ii) enter into, continue or otherwise participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to, any Takeover Proposal; PROVIDED, HOWEVER, that if, at any time prior to
acceptance for payment of shares of Target Common Stock pursuant to and subject
to the conditions of the Offer (the "Specified Date"), a majority of the members
of the Board of Directors of Target determines in good faith (after consultation
with outside counsel) that failure to do so would be reasonably likely to result
in a breach of the fiduciary duties of such Board to Target's stockholders under
applicable law, Target may, in response to a Takeover Proposal that a majority
of the members of the Board of Directors of Target determines in good faith is
or is reasonably likely to result in a Superior Proposal and which Takeover
Proposal was not solicited by it in breach of this Section 4.02(a) or which did
not otherwise result from a breach of this Section 4.02(a), and subject to
providing prior written notice of its decision to take such action to Parent and
compliance with Section 4.02(c), (x) furnish information with respect to Target
and its subsidiaries to any person making such Takeover Proposal pursuant to a
customary confidentiality agreement (PROVIDED that if such confidentiality
agreement contains provisions that are less restrictive than the comparable
provision in, or omits restrictive provisions, contained in the Confidentiality
Agreement dated as of January 17, 2001 between Parent and Target (the
"Confidentiality Agreement"), then the Confidentiality Agreement shall be deemed
amended to contain only such less restrictive provisions or to omit such
45
restrictive provisions as applicable) and (y) participate in discussions or
negotiations regarding such Takeover Proposal.
For purposes of this Agreement, "Superior Proposal" means any
offer not solicited by Target in breach of this Section 4.02(a) made by a third
party to consummate a tender offer, exchange offer, merger, consolidation or
similar transaction which would result in such third party (or its shareholders)
owning, directly or indirectly, all or substantially all of the shares of Target
Common Stock then outstanding (or of the surviving entity in a merger) or all or
substantially all of the assets of Target and its subsidiaries and otherwise on
terms which a majority of the members of the Board of Directors of Target
determines in good faith (after consultation with outside counsel and following
receipt of the advice of a financial advisor of nationally recognized
reputation) (i) to be more favorable to Target's stockholders than the Offer and
the Merger (as amended in accordance with the terms of this Agreement or as
proposed to be amended pursuant to any New Parent Proposal) after taking into
account all constituencies (including stockholders), the terms of this Agreement
and pertinent factors permitted under the MBCL, (ii) for which financing, to the
extent required, is then committed or which, in the good faith judgment of a
majority of the members of the Board of Directors of Target, is reasonably
capable of being obtained by such third party and (iii) for which, in the good
faith judgment of a majority of the members of the Board of Directors of Target,
no regulatory approvals are required, including antitrust approvals, that could
not reasonably be expected to be obtained.
For purposes of this Agreement, "Takeover Proposal" means any
inquiry, proposal or offer from any person relating to any direct or indirect
acquisition or purchase of 15% or more of the assets of Target and its
subsidiaries, taken as a whole, or 15% or more of any class or series of equity
securities of Target or any of its subsidiaries, any tender offer or exchange
offer that if consummated would result in any person beneficially owning 15% or
more of any class or series of equity securities of Target or any of its
subsidiaries, or any merger,
46
consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution or similar transaction involving Target or any of its
subsidiaries, other than the transactions contemplated by this Agreement.
(b) Neither Target nor the Board of Directors of Target nor
any committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent, the approval or recommendation by such
Board of Directors or such committee of the Offer, the Merger or this Agreement,
(ii) approve or recommend, or propose to approve or recommend, any Takeover
Proposal, (iii) approve or recommend, or propose to approve or recommend, or
execute or enter into, any letter of intent, memorandum of understanding,
agreement in principle, merger agreement, acquisition agreement, option
agreement, joint venture agreement, partnership agreement or other similar
agreement (each, an "Acquisition Agreement") related to any Takeover Proposal,
or (iv)(x) redeem the Rights, (y) waive or amend any provisions of the Rights
Agreement or (z) take any action with respect to, or make any determination
under, the Rights Agreement, in any such case to permit or facilitate the
consummation of a Takeover Proposal, or propose or agree to do any of the
foregoing constituting or related to, or which is intended to or would
reasonably be expected to lead to, any Takeover Proposal. Notwithstanding the
foregoing, at any time prior to the Specified Date, in response to a Superior
Proposal which was not solicited by Target and which did not otherwise result
from a breach of Section 4.02(a), the Board of Directors of Target may (subject
to this sentence and the definition of the term "Superior Proposal"), if a
majority of the members of the Board of Directors of Target determines in good
faith (after consultation with outside counsel) that failure to do so would be
reasonably likely to result in a breach of the fiduciary duties of such Board to
Target's stockholders under applicable law, withdraw or modify the approval or
recommendation by such Board of Directors of this Agreement, the Offer or the
Merger or terminate this Agreement (and concurrently with or after such
termination, if it so chooses, cause Target to enter into any Acquisition
Agreement with respect to any Superior Proposal), but only (x) at a time that is
after the third business day following Parent's receipt of written notice
advising Parent that the Board of Directors of Target is prepared to take such
action (during which period Target shall negotiate in good faith
47
with Parent and Sub concerning any New Parent Proposal), specifying the material
terms and conditions of such Superior Proposal and identifying the person making
such Superior Proposal and (y) if, at the time of such withdrawal, modification
or termination, such proposal continues to be a Superior Proposal, taking into
account any amendment of the terms of the Offer or the Merger by Parent or any
proposal by Parent to amend the terms of this Agreement, the Offer or the Merger
(a "New Parent Proposal").
(c) In addition to the obligations of Target set forth in
paragraphs (a) and (b) of this Section 4.02, Target shall promptly (and no later
than 48 hours) advise Parent orally and in writing of any request for
information or of any inquiry with respect to a Takeover Proposal, the material
terms and conditions of such request, inquiry or Takeover Proposal and the
identity of the person making such request, inquiry or Takeover Proposal. Target
will promptly keep Parent informed of the status and details (including
amendments or changes or proposed amendments or changes) of any such request,
inquiry or Takeover Proposal.
(d) Nothing contained in this Section 4.02 shall prohibit
Target from taking and disclosing to its stockholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure
to Target's stockholders if, in the good faith judgment of a majority of the
members of the Board of Directors of Target, after consultation with outside
counsel, failure so to disclose would be inconsistent with its obligations under
applicable law; PROVIDED, HOWEVER, that, subject to Section 4.02(b), neither
Target nor its Board of Directors nor any committee thereof shall withdraw or
modify, or propose to withdraw or modify, its position with respect to this
Agreement, the Offer or the Merger or approve or recommend, or propose to
approve or recommend, a Takeover Proposal.
(e) Target acknowledges and agrees that in the event a
Takeover Proposal shall have been made known to Target or has been made directly
to its stockholders or any person has announced an intention (whether or not
48
conditional) to make a Takeover Proposal, thereafter, the "standstill"
provisions of the Confidentiality Agreement shall cease to apply to Parent and
Sub.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. PREPARATION OF THE PROXY STATEMENT; TARGET
STOCKHOLDERS MEETING. (a) Target and Parent shall, as promptly as practicable
following the expiration of the Offer, prepare and file with the SEC the Proxy
Statement and Target shall use all reasonable efforts to respond as promptly as
practicable to any comments of the SEC with respect thereto and to cause the
Proxy Statement to be mailed to Target's stockholders as promptly as practicable
following the expiration of the Offer. Target shall promptly notify Parent upon
the receipt of any comments from the SEC or its staff or any request from the
SEC or its staff for amendments or supplements to the Proxy Statement and shall
provide Parent with copies of all correspondence between Target and its
representatives, on the one hand, and the SEC and its staff, on the other hand.
Notwithstanding the foregoing, prior to filing or mailing the Proxy Statement
(or any amendment or supplement thereto) or responding to any comments of the
SEC with respect thereto, Target (i) shall provide Parent an opportunity to
review and comment on such document or response, (ii) shall include in such
document or response all comments reasonably proposed by Parent and (iii) shall
not file or mail such document or respond to the SEC prior to receiving Parent's
approval, which approval shall not be unreasonably withheld or delayed.
(b) Target shall, as soon as practicable, establish a record
date (which will be as soon as practicable following the expiration of the
Offer) for, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Target Stockholders Meeting") solely for the purpose of
obtaining the Target Stockholder Approval. Subject to Section 4.02(b)(i), Target
shall, through its Board of Directors, recommend to its stockholders the
approval and adoption of this Agreement, the Merger and the other transactions
contemplated hereby. Without limiting the generality of the foregoing, Target
agrees that its
49
obligations pursuant to the first sentence of this Section 5.01(b) shall not be
affected by (i) the commencement, public proposal, public disclosure or
communication to Target of any Takeover Proposal or (ii) the withdrawal or
modification by the Board of Directors of Target or any committee thereof of
such Board of Directors' or such committee's approval or recommendation of the
Offer, the Merger or this Agreement.
(c) Parent shall cause all shares of Target Common Stock
purchased pursuant to the Offer and all other shares of Target Common Stock
owned by Parent or any subsidiary of Parent to be voted in favor of the approval
of this Agreement.
SECTION 5.02. ACCESS TO INFORMATION; CONFIDENTIALITY. Subject
to the Confidentiality Agreement, upon reasonable notice, Target shall, and
shall cause each of its subsidiaries to, afford to Parent and to its officers,
employees, accountants, counsel, financial advisors and other representatives,
reasonable access during normal business hours during the period prior to the
Effective Time to all its properties, books, contracts, commitments, personnel
and records and, during such period, Target shall, and shall cause each of its
subsidiaries to, promptly furnish or make available to Parent (a) a copy of each
report, schedule, registration statement and other document filed by it during
such period pursuant to the requirements of Federal or state securities laws and
(b) all other information concerning its business, properties and personnel as
Parent may reasonably request (including Target's outside accountants' work
papers, subject to the consent of such accountants). Target shall not be
required to provide access to or disclose information where such access or
disclosure would contravene any law, rule, regulation, order, decree or
agreement. No review pursuant to this Section 5.02 shall have an effect for the
purpose of determining the accuracy of any representation or warranty given by
either party hereto to the other party hereto. Parent will hold, and will cause
its officers, employees, accountants, counsel, financial advisors and other
representatives and affiliates to hold, any nonpublic information confidential,
in accordance with the terms of
50
the Confidentiality Agreement.
SECTION 5.03. REASONABLE EFFORTS. (a) Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties
agrees to use reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, and to assist and cooperate with the other parties
in doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Offer, the Merger and
the other transactions contemplated by this Agreement, including using
reasonable efforts to accomplish the following: (i) the taking of all reasonable
acts necessary to cause the conditions to Closing to be satisfied as promptly as
practicable; (ii) the obtaining of all necessary actions or nonactions, waivers,
consents and approvals from Governmental Entities and the making of all
necessary registrations and filings (including filings with Governmental
Entities, if any) and the taking of all steps as may be necessary to obtain an
approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity; (iii) the obtaining of all necessary consents, approvals or
waivers from third parties; (iv) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated hereby, including seeking to
have any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed; and (v) the execution and delivery of
any additional instruments necessary to consummate the transactions contemplated
by, and to fully carry out the purposes of, this Agreement; PROVIDED, HOWEVER,
that Parent will not be required to agree to, or proffer to, (i) divest or hold
separate any of Parent's, Target's or any of their respective subsidiaries' or
affiliates' businesses or assets (other than DE MINIMIS divestitures of
immaterial assets) or (ii) cease to conduct business or operations in any
jurisdiction in which Parent, Target or any of their respective subsidiaries
conducts business or operations as of the date of this Agreement.
(b) In connection with and without limiting the foregoing,
Target and its Board of Directors and Parent and its Board of Directors shall
(i) take all action necessary to ensure that no state takeover statute or
similar statute or regulation is or becomes applicable to the Offer, the
51
Merger, this Agreement or any of the other transactions contemplated hereby and
(ii) if any state takeover statute or similar statute or regulation becomes
applicable to the Offer, the Merger, this Agreement or any other transaction
contemplated hereby, take all action necessary to ensure that the Offer, the
Merger and the other transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Offer, the Merger and the other transactions contemplated by this Agreement.
SECTION 5.04. STOCK OPTIONS. (a) As soon as practicable
following the date of this Agreement, Target shall ensure that (i) each holder
(each, an "Optionee") of an outstanding Target Stock Option shall have the right
to irrevocably elect, subject to satisfaction of the conditions set forth in
Section 6.01(d), to surrender, immediately prior to the acceptance for payment
of shares of Target Common Stock pursuant to the Offer, any outstanding and
unexercised Target Stock Option then held by the Optionee in exchange for a cash
payment equal to (x) the excess, if any, of (A) the price per share of Target
Common Stock to be paid pursuant to the Offer over (B) the exercise price per
share of Target Common Stock subject to such Target Stock Option, multiplied by
(y) the number of shares of Target Common Stock issuable pursuant to the
unexercised portion of such Target Stock Option, less any tax withholding
required by the Code or any provision of state or local law, payable not later
than twenty days after the earlier of the satisfaction of the conditions set
forth in Section 6.01(d) and five days after the Effective Time, (ii) each
Optionee shall have the right to purchase, effective as of the consummation of
the Merger, subject to the consummation of the Merger and in accordance with the
terms of the relevant plan or document, all or any part of the shares of Target
Common Stock subject to any Target Stock Option held by the Optionee, whether
vested or unvested, and that each share of Target Common Stock so purchased
shall be converted, as of the Effective Time, in the right to required the
Merger Consideration, less any tax withholding received by the Code or any
provision of state or local law, and (iii) each Target Stock Option (with
respect to which an Optionee has not exercised
52
one of the rights set forth in this section) shall terminate and expire as of
the Effective Time.
(b) Prior to the Effective Time, Target shall take or cause to
be taken such actions as are required to cause (i) the Target Stock Plans to
terminate as of the Effective Time and (ii) the provisions in any other Target
Benefit Plan providing for the issuance, transfer or grant of any capital stock
of Target or any interest in respect of any capital stock of Target to be
deleted as of the Effective Time.
SECTION 5.05. EMPLOYEE MATTERS. (a) Parent shall provide, or
cause to be provided, from the Effective Time through December 31, 2002, to
current employees of Target and its subsidiaries who continue employment through
the Effective Time (the "Target Employees"), taken as a whole, employee benefits
(disregarding for such purpose any Target Benefit Plans or Target Benefit
Agreements that provide for equity and/or equity-based compensation) and annual
bonus opportunities that are, in the aggregate, substantially equivalent to the
employee benefits and annual bonus opportunities (without regard to form of
payment) provided to the Target Employees immediately prior to the Effective
Time; PROVIDED, that neither Parent nor the Surviving Corporation shall have any
obligation to issue, or adopt any plans or arrangements providing for the
issuance of, shares of capital stock, warrants, options or other rights in
respect of any shares of capital stock of any entity or any securities
convertible or exchangeable into such shares pursuant to any such plans or
arrangements; PROVIDED, FURTHER, that no plans or arrangements of Target or any
of its subsidiaries providing for such issuance shall be taken into account in
determining whether employee benefits are substantially equivalent in the
aggregate.
(b) For purposes of eligibility and vesting (but not benefit
accrual) under the employee benefit plans of Parent and its subsidiaries
providing benefits to Target Employees (the "Parent Plans"), Parent shall
credit, and shall cause the Surviving Corporation to credit, each Target
Employee with his or her years of service with Target and its subsidiaries and
any predecessor entities, to the same extent as such Target Employee was
entitled immediately prior to the Effective Time to credit for such service
under any similar Target Benefit Plan. The Parent Plans shall not
53
deny Target Employees coverage on the basis of pre-existing conditions and shall
credit such Target Employees for any deductibles and out-of-pocket expenses paid
in the year of initial participation in the Parent Plans.
(c) Nothing contained in this Section 5.05 or elsewhere in
this Agreement shall be construed to prevent the termination of employment of
any individual Target Employee or any change in the employee benefits available
to any individual Target Employee or the amendment or termination of any
particular Target Benefit Plan or Target Benefit Agreement to the extent
permitted by its terms as in effect immediately prior to the Effective Time.
SECTION 5.06. INDEMNIFICATION, EXCULPATION AND INSURANCE. (a)
Parent agrees that all rights to indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the Effective Time
now existing in favor of the current or former directors or officers of Target
and its subsidiaries as provided in their respective articles of organization or
by-laws (or comparable organizational documents) and any indemnification
agreements of Target (as each is in effect on the date hereof), the existence of
which does not constitute a breach of this Agreement, shall be assumed by the
Surviving Corporation in the Merger, without further action, as of the Effective
Time and shall survive the Merger and shall continue in full force and effect in
accordance with their terms, and Parent shall cause the Surviving Corporation to
honor all such rights.
(b) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, or otherwise dissolves the Surviving
Corporation, then, and in each such case, Parent shall cause proper provision to
be made so that the successors and assigns of the Surviving Corporation assume
the obligations set forth in this Section 5.06.
(c) The Surviving Corporation shall, at its
54
option, either (i) maintain for a period of not less than six years after the
Effective Time, Target's current directors' and officers' liability insurance
covering acts or omissions occurring prior to the Effective Time ("D&O
Insurance") with respect to those persons who are currently covered by Target's
directors' and officers' liability insurance policy on terms with respect to
such coverage and amount no less favorable than those of such policy in effect
on the date hereof or (ii) cause to be provided coverage no less favorable to
such directors or officers, as the case may be, than the D&O Insurance, in each
case so long as the annual premium therefor would not be in excess of 150% of
the last annual premium paid for the D&O Insurance prior to the date of this
Agreement (such 150% amount the "Maximum Premium"). If the existing or
substituted directors' and officers' liability insurance expires, is terminated
or canceled during such six-year period, the Surviving Corporation will obtain
as much D&O Insurance as can be obtained for the remainder of such period for an
annualized premium not in excess of the Maximum Premium. At the option of
Parent, Parent may assume the obligations of the Surviving Corporation set forth
in Sections 5.06(a) and (b), and thereafter neither Parent nor the Surviving
Corporation shall have any further obligations pursuant to this Section 5.06(c)
for so long as Parent continues to so assume the obligations of the Surviving
Corporation.
(d) From and after the consummation of the Offer, to the full
extent permitted by law, Parent shall, and shall cause Target (or any successor
to Target) to, indemnify, defend and hold harmless the present officers and
directors of Target and its subsidiaries (each an "Indemnified Party") against
all losses, claims, damages, liabilities, fees and expenses (including
attorneys' fees and disbursements), judgments, fines and amounts paid in
settlement (collectively, "Losses") arising out of actions or omissions
occurring at or prior to the Effective Time in connection with this Agreement,
the Offer and the Merger; PROVIDED, HOWEVER, that an Indemnified Party shall not
be entitled to indemnification under this Section 5.06(d) for Losses arising out
of actions or omissions by the Indemnified Party constituting (i) a breach of
this Agreement, (ii) criminal conduct or (iii) any violation of federal, state
or foreign securities laws. In order to be entitled to indemnification under
this Section 5.06(d), an Indemnified Party must give Parent and Target prompt
written notice of any third party
55
claim which may give rise to any indemnity obligation under this Section
5.06(d), and Parent and Target shall have the right to assume the defense of any
such claim through counsel of their own choosing, subject to such counsel's
reasonable judgment that separate defenses that would create a conflict of
interest on the part of such counsel are not available. If Parent and Target do
not assume any such defense, they shall be liable for all reasonable costs and
expenses of defending such claim incurred by the Indemnified Party, including
reasonable fees and disbursements of counsel and shall advance such reasonable
costs and expenses to the Indemnified Party; PROVIDED, HOWEVER, that such
advance shall be made only after receiving an undertaking from the Indemnified
Party that such advance shall be repaid if it is determined that such
Indemnified Party is not entitled to indemnification therefor. Neither Parent
nor Target shall be liable under this Section 5.06(d) for any Losses resulting
from any settlement, compromise or offer to settle or compromise any such claim
or litigation or other action, without the prior written consent of Parent and
Target. Any settlement involving an Indemnified Party shall provide for a full
release of such Indemnified Party.
(e) The provisions of this Section 5.06 (i) are intended to be
for the benefit of, and will be enforceable by, each indemnified party, his or
her heirs and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
SECTION 5.07. FEES AND EXPENSES. (a) All fees and expenses
incurred in connection with the Offer, the Merger, this Agreement and the
transactions contemplated by this Agreement shall be paid by the party incurring
such fees or expenses, whether or not the Merger is consummated. Parent shall
file any tax return with respect to, and shall pay, any state or local taxes
(including any penalties or interest with respect thereto), if any, which are
attributable to the transfer of the beneficial ownership of Target's real
property (collectively, the "Real Estate Transfer Taxes") as a result of the
Merger (other than any such taxes that are solely the obligations of a
stockholder
56
of Target, in which case Target shall pay any such taxes). Target shall
cooperate with Parent in the filing of such tax returns including, in the case
of Target, supplying in a timely manner a complete list of all real property
interests held by Target and any information with respect to such property that
is reasonably necessary to complete such returns. The fair market value of any
real property of Target subject to the Real Estate Transfer Taxes shall be as
agreed to between Parent and Target.
(b) In the event that (1) a Takeover Proposal shall have been
made known to Target or has been made directly to its stockholders or any person
has announced an intention (whether or not conditional) to make a Takeover
Proposal and thereafter this Agreement is terminated by either Parent or Target
pursuant to Section 7.01(b)(i)(A) (as a result of the failure to satisfy the
Minimum Tender Condition or the condition set forth in paragraph (f) of Exhibit
A) or 7.01(b)(i)(B) or (2) this Agreement is terminated by Parent pursuant to
Section 7.01(d)(i) or (3) this Agreement is terminated by Parent pursuant to
Section 7.01(d)(ii) or 7.01(d)(iii) or by Target pursuant to Section 7.01(f),
then in any such case Target shall promptly, but in no event later than the date
of such termination, pay to Parent a fee equal to $34,653,341 (the "Termination
Fee"), payable by wire transfer of same day funds; PROVIDED, HOWEVER, that no
Termination Fee shall be payable to Parent pursuant to a termination by Parent
pursuant to clause (1) or (2) of this paragraph (b) unless and until within 12
months after such termination, Target or any of its subsidiaries enters into any
Acquisition Agreement with respect to, or consummates, any Takeover Proposal
(which, for purposes of this proviso shall have the meaning assigned in Section
4.02 except that references to "15%" shall be deemed to be references to "35%"),
in which event the Termination Fee shall be payable upon the first to occur of
such events. Target acknowledges that the agreements contained in this Section
5.07(b) are an integral part of the transactions contemplated by this Agreement,
and that, without these agreements, Parent would not enter into this Agreement;
accordingly, if Target fails promptly to pay the amounts due pursuant to this
Section 5.07(b), and, in order to obtain such payment, Parent commences a suit
which results in a judgment against Target for the amounts set forth in this
Section 5.07(b), Target shall pay to Parent its reasonable costs and expenses
(including attorneys' fees
57
and expenses) in connection with such suit, together with interest on the
amounts set forth in this Section 5.07(b) at the prime rate of Citibank, N.A. in
effect on the date such payment was required to be made.
(c) Target acknowledges and agrees that in the event of a
breach of Section 4.02, the payment of the Termination Fee shall not constitute
the exclusive remedies available to Parent, and that Parent shall be entitled to
the remedies set forth in Section 8.09, including injunction and specific
performance, and all other remedies available at law or in equity to which
Parent is entitled.
SECTION 5.08. PUBLIC ANNOUNCEMENTS. Parent and Target will
consult with each other before issuing, and provide each other the opportunity
to review, comment upon and concur with, any press release or other public
statements with respect to the transactions contemplated by this Agreement,
including the Offer and the Merger, and shall not issue any such press release
or make any such public statement prior to such consultation, except as either
party may determine is required by applicable law, the SEC, court process or by
obligations pursuant to any listing or quotation agreement with any national
securities exchange or national trading system. The parties agree that the
initial press release to be issued with respect to the transactions contemplated
by this Agreement shall be in the form heretofore agreed to by the parties.
SECTION 5.09. LITIGATION. Target shall give Parent the
opportunity to participate in the defense of any litigation (other than where
Parent is an adverse party) against Target and/or its directors relating to the
transactions contemplated by this Agreement.
SECTION 5.10. U.S. CORPORATE HEADQUARTERS. It is the current
intention of Parent that the Surviving Corporation will maintain its U.S.
corporate headquarters in Boston, Massachusetts.
SECTION 5.11. TARGET NAME. It is the current intention of
Parent that the Surviving Corporation will continue to (i) be named Houghton
Mifflin Company and
58
(ii) utilize the Houghton Mifflin imprint on all English language publications
published and sold in the United States to the extent Target at the Effective
Time uses such imprint.
SECTION 5.12. RESIGNATION OF DIRECTORS. Prior to the Effective
Time, Target shall cause each member of its Board of Directors to execute and
deliver a letter effectuating his or her resignation as a director of such Board
effective immediately prior to the Effective Time.
SECTION 5.13. RIGHTS AGREEMENT. The Board of Directors of
Target shall take all further action (in addition to that referred to in Section
3.01(s)) reasonably requested in writing by Parent in order to render the Rights
inapplicable to the Offer, the Merger and the other transactions contemplated by
this Agreement to the extent provided herein. Except as provided above with
respect to the Offer, the Merger and the other transactions contemplated hereby,
the Board of Directors of Target shall not, without the written consent of
Parent (a) waive or amend any provisions of the Rights Agreement or (b) take any
action with respect to, or make any determination under, the Rights Agreement,
including a redemption of the Rights or any action to facilitate a Takeover
Proposal.
SECTION 5.14. DIRECTORS. (a) Upon the purchase of shares of
Target Common Stock pursuant to the Offer and from time to time thereafter,
subject to compliance with Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder, Parent shall be entitled to designate such number of
directors of Target, rounded down to the next whole number, as is equal to the
product of the total number of directors on Target's Board of Directors (giving
effect to the directors designated by Parent pursuant to this sentence)
multiplied by the Board Fraction. "Board Fraction" shall mean a fraction, the
numerator of which shall be the number of shares of Target Common Stock that
Parent and its subsidiaries beneficially own at the time of calculation of the
Board Fraction, and the denominator of which shall be the total number of shares
of Target Common Stock then outstanding. Subject to Section 5.14 of the Target
Disclosure Schedule, in furtherance thereof, subject to applicable law, Target
shall promptly take such actions as are necessary to enable such designees of
Parent to be elected or appointed to Target's Board of Directors,
59
including increasing the number of directors on Target's Board of Directors and
obtaining the resignations of a number of its incumbent directors, or both.
Target shall use its best efforts to cause the vacancies created by such
increase in the number of directors or the resignation of incumbent directors to
be filled by the designees of Parent. At such time, Target shall also, subject
to applicable law, take all action necessary to cause persons designated by
Parent to constitute the same Board Fraction of (i) each committee of Target's
Board of Directors, (ii) each board of directors (or similar body) of each
subsidiary of Target and (iii) each committee (or similar body) of each such
board.
(b) Subject to applicable law, Target shall take all action
requested by Parent necessary to effect any such election or appointment of the
designees of Parent to Target's Board of Directors, including mailing to its
stockholders an information statement containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and
Target agrees to make such mailing with the mailing of the Schedule 14D-9 so
long as Parent or Sub shall have provided to Target on a timely basis all
information required to be included in such information statement with respect
to Parent's designees. Parent and Sub shall be solely responsible for any
information with respect to either of them and their nominees, officers,
directors and affiliates required by Section 14(f) and Rule 14f-1.
(c) In the event that Parent's designees are elected or
appointed to Target's Board of Directors, until the Effective Time, Target's
Board of Directors shall have at least two directors of Target who are directors
on the date hereof and who are not affiliates of Parent or Sub (the "Independent
Directors"); PROVIDED that, in such event, if the number of Independent
Directors shall be reduced below two for any reason whatsoever, any remaining
Independent Directors (or Independent Director, if there be only one remaining)
shall be entitled to designate persons to fill such vacancies who shall be
deemed to be Independent Directors for purposes of this Agreement or, if no
Independent Director then remains, the other directors shall designate two
persons to fill such vacancies who shall not
60
be shareholders, affiliates or associates of Parent or Sub, and such persons
shall be deemed to be Independent Directors for purposes of this Agreement. The
Independent Directors shall form a committee that, during the period from the
time shares of Target Common Stock are purchased pursuant to the Offer until the
Effective Time, shall have the sole power and authority, by a majority vote of
such Independent Directors, for Target to (a) amend or terminate this Agreement
or to extend the time for the performance of any of the obligations or other
acts of Parent or Sub under the Offer, the Merger or this Agreement, (b)
exercise or waive any of Target's rights, benefits or remedies hereunder, or (c)
take any other action under or in connection with this Agreement if such action
materially and adversely affects holders of Target Common Stock other than
Parent or Sub.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) STOCKHOLDER APPROVAL. The Target Stockholder Approval
shall have been obtained.
(b) HSR ACT. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated
or shall have expired and any approvals under Foreign Antitrust Laws
applicable to the Merger shall have been obtained.
(c) NO RESTRAINTS. No judgment, order, decree, statute, law,
ordinance, rule or regulation, entered, enacted, promulgated, enforced
or issued by any court or other Governmental Entity of competent
jurisdiction or other legal restraint or prohibition (collectively,
"Restraints") shall be in effect preventing the consummation of the
Merger; PROVIDED, HOWEVER, that each of the parties shall have used its
reasonable efforts to prevent the entry of any such Restraints and to
appeal as promptly as possible any such Restraints
61
that may be entered.
(d) PURCHASE OF SHARES IN THE OFFER. Sub shall have previously
accepted for payment and paid for the shares of Target Common Stock
pursuant to the Offer.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. TERMINATION. This Agreement may be terminated,
and the Offer and the Merger may be abandoned, at any time prior to the
Effective Time, notwithstanding any requisite approval and adoption of this
Agreement:
(a) by mutual written consent of Parent and Target (PROVIDED,
that after the Specified Date, the consent of a majority of the
Independent Directors shall also be required);
(b) by either Parent or Target:
(i) if (A) as of the result of the failure of any of
the conditions set forth in Exhibit A, the Offer shall have
terminated or expired in accordance with its terms without Sub
having purchased any shares of Target Common Stock pursuant to
the Offer or (B) Sub shall not have accepted for payment any
shares of Target Common Stock pursuant to the Offer prior to
September 30, 2001 (PROVIDED that if the condition set forth
in clause (ii) of the first sentence of Exhibit A has not been
satisfied by such date, then such date shall be automatically
extended to December 31, 2001) (the "Outside Date"); PROVIDED,
HOWEVER, that the right to terminate this Agreement pursuant
to this Section 7.01(b)(i) shall not be available to any party
whose failure to perform any of its obligations under this
Agreement results in the failure of the Offer to be
consummated by such time; and PROVIDED, FURTHER, however, that
the passage of such period shall be
62
tolled for any part thereof during which any party or any of
its affiliates shall be subject to a nonfinal order, decree,
ruling or action restraining, enjoining or otherwise
prohibiting the consummation of the Offer or any of the other
transactions contemplated by this Agreement;
(ii) if any Restraint having any of the effects set
forth in Section 6.01(c) or having the effect of preventing
the consummation of the Offer shall be in effect and shall
have become final and nonappealable; PROVIDED that the party
seeking to terminate this Agreement pursuant to this Section
7.01(b)(ii) shall have used reasonable efforts to prevent the
entry of and to remove such Restraint; or
(iii) if, upon a vote at a duly held meeting to
obtain the Target Stockholder Approval, the Target Stockholder
Approval is not obtained; PROVIDED, HOWEVER, that this
Agreement may not be terminated by Parent pursuant to this
clause (iii) if Parent or Sub is in breach of Section 5.01(c);
(c) by Parent, if Target shall have breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach
or failure to perform (A) would give rise to the failure of a condition
set forth in paragraph (d) or (e) of Exhibit A, and (B) is incapable of
being or has not been cured by Target within 30 calendar days after
giving written notice to Target of such breach or failure to perform;
(d) by Parent:
(i) if Target or any of its directors or
officers shall breach Section 4.02 in any material
respect; or
(ii) (w) if the Board of Directors of Target or any
committee thereof shall withdraw or modify, or make any
disclosure to the stockholders of Target, whether or not
permitted pursuant to Section 4.02(d), that has the effect of
63
withdrawing or modifying, its approval or recommendation of
the Offer, the Merger or this Agreement, (x) if the Board of
Directors of Target or any committee thereof shall approve or
recommend, or make any disclosure to the stockholders of
Target, whether or not permitted pursuant to Section 4.02(d),
that has the effect of approving or recommending, to the
stockholders of Target a Takeover Proposal, (y) if, after a
Takeover Proposal shall have been made public, the Board of
Directors of Target fails to affirm its recommendation of the
Offer, the Merger and this Agreement as promptly as
practicable (but in any case within 3 business days) after any
request from Parent or (z) if a tender offer or exchange offer
constituting a Takeover Proposal is commenced, and the Board
of Directors of Target fails to recommend against acceptance
of such offer by the stockholders of Target (including by
taking no position with respect to the acceptance of such
offer by the stockholders of Target); or
(iii) if any person shall have consummated a tender
offer or an exchange offer or other transaction constituting a
Takeover Proposal;
(e) prior to the Specified Date by Target, if Parent or Sub
shall have breached in any material respect any of their respective
representations, warranties, covenants or other agreements contained in
this Agreement which breach is incapable of being or has not been cured
by Parent within 30 calendar days after giving written notice to Parent
of such breach;
(f) prior to the Specified Date by Target, in accordance with
Section 4.02(b), subject to compliance by Target with the notice
provisions therein and the Termination Fee and expense reimbursement
provisions of Section 5.07; or
(g) by Target, if Sub shall have failed to commence the Offer
within 15 days following the date of this Agreement; PROVIDED, HOWEVER,
that the right to
64
terminate this Agreement pursuant to this Section 7.01(g) shall not be
available to any party whose failure to perform any of its obligations
under this Agreement results in the failure of the Offer to be
commenced by such time.
SECTION 7.02. EFFECT OF TERMINATION. In the event of
termination of this Agreement by either Target or Parent as provided in Section
7.01, this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Parent or Target, other than the
provisions of Section 3.01(o), Section 4.02(e), the last sentence of Section
5.02, Section 5.07, this Section 7.02 and Article VIII, which provisions survive
such termination, and except to the extent that such termination results from
the willful and material breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
SECTION 7.03. AMENDMENT. This Agreement may be amended by the
parties at any time prior to the Effective Time; PROVIDED, HOWEVER, that after
the purchase of shares of Target Common Stock pursuant to the Offer, no
amendment shall be made which decreases the Merger Consideration, and after the
Target Stockholder Approval has been obtained, there shall not be made any
amendment that by law requires further approval by the stockholders of Target
without the further approval of such stockholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties.
SECTION 7.04. EXTENSION; WAIVER. At any time prior to the
Effective Time, a party may (a) extend the time for the performance of any of
the obligations or other acts of the other parties, (b) waive any inaccuracies
in the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to the proviso of Section 7.03, waive compliance by the other party with any of
the agreements or conditions contained in this Agreement. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a
65
waiver of such rights.
SECTION 7.05. PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION
OR WAIVER. Subject, in the case of Target, to Section 5.14(c), a termination of
this Agreement pursuant to Section 7.01, an amendment of this Agreement pursuant
to Section 7.03 or an extension or waiver pursuant to Section 7.04 shall, in
order to be effective, require, in the case of Parent or Target, action by its
Board of Directors or, with respect to any amendment to this Agreement, the duly
authorized committee of its Board of Directors to the extent permitted by law.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 8.01 shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the Effective Time.
SECTION 8.02. NOTICES. All notices, requests, claims, demands
and other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Sub, to
Vivendi Universal
▇▇, ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ Cedex 08
FRANCE
Telecopy No.: ▇▇▇-▇-▇▇-▇▇-▇▇-▇▇
Attention: ▇▇▇▇ Licoys
66
with a copy to:
Cravath, Swaine & ▇▇▇▇▇
Worldwide Plaza
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇;
and
Cabinet ▇▇▇▇▇▇ Prat
▇▇▇ ▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
Telecopy No.: ▇▇▇-▇-▇▇-▇▇-▇▇-▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.; and
(b) if to Target, to
Houghton Mifflin Company
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
with copies to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
and
67
Cadwalader, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Block
SECTION 8.03. DEFINITIONS. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, such first person,
where "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management policies of a
person, whether through the ownership of voting securities, by
contract, as trustee or executor, or otherwise;
(b) "business day" means any day other than Saturday, Sunday
or any other day on which banks are legally permitted to be closed in
New York;
(c) "knowledge" of any person which is not an individual means
the actual knowledge of such person's executive officers after
reasonable inquiry;
(d) "material adverse change" or "material adverse effect"
means, when used in connection with Target or Parent, any change,
effect, event, occurrence, condition or development or state of facts
that is materially adverse to the business, assets or results of
operations or condition (financial or other) of such party and its
subsidiaries taken as a whole, other than any change, effect, event,
occurrence, condition or development or state of facts (i) relating to
the U.S. economy in general, (ii) relating to the industries in which
such party operates in general (and not having a materially
disproportionate effect on such party relative to most other industry
participants), (iii) in respect of changes in such party's stock price,
in and of itself, (iv) resulting from the announcement of this
68
Agreement and the transactions contemplated hereby or (v) in the case
of Target, resulting from the failure to secure adoption contracts as a
result of the pendency of this Agreement;
(e) "person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust,
unincorporated organization or other entity; and
(f) a "subsidiary" of any person means another person, an
amount of the voting securities, other voting ownership or voting
partnership interests of which is sufficient to elect at least a
majority of its Board of Directors or other governing body (or, if
there are no such voting interests, 50% or more of the equity interests
of which) is owned directly or indirectly by such first person.
SECTION 8.04. INTERPRETATION. When a reference is made in this
Agreement to an Article, Section, Exhibit or Annex, such reference shall be to
an Article or Section of, or an Exhibit or Annex to, this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including
69
(in the case of agreements or instruments) by waiver or consent and (in the case
of statutes) by succession of comparable successor statutes and references to
all attachments thereto and instruments incorporated therein. References to a
person are also to its permitted successors and assigns. To the extent a matter
contained in the Target Disclosure Schedule expressly qualifies or modifies a
definition contained in this Agreement, such definition shall be construed and
interpreted as so qualified or modified.
SECTION 8.05. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
SECTION 8.06. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES.
This Agreement (including the documents and instruments referred to herein) (a)
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement and (b) except for the provisions of Article II
and Section 5.06, are not intended to confer upon any person other than the
parties any rights or remedies.
SECTION 8.07. GOVERNING LAW. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York,
regardless of the laws that might otherwise govern under applicable principles
of conflict of laws thereof, except to the extent that the laws of the
Commonwealth of Massachusetts are mandatorily applicable to the Merger;
PROVIDED, HOWEVER, that the laws of the respective states (or country, in the
case of Parent) of each of the parties hereto shall govern the relative rights,
obligations, powers, duties and other internal affairs of such party and its
Board of Directors.
SECTION 8.08. ASSIGNMENT. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties hereto
70
without the prior written consent of the other parties. Any assignment in
violation of the preceding sentence shall be void. Subject to the preceding two
sentences, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
SECTION 8.09. ENFORCEMENT. Each of the parties hereto agrees
that irreparable damage would occur and that the parties would not have any
adequate remedy at law in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any Federal court
located in the State of New York or in any New York state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any Federal court located in the State of New York or
any New York state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, (c) agrees that it will not bring any
action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court other than a Federal court sitting in the State of
New York or any New York state court and (d) waives any right to trial by jury
with respect to any claim or proceeding related to or arising out of this
Agreement or any transaction contemplated by this Agreement.
SECTION 8.10. SEVERABILITY. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect. Upon such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible to the
fullest extent permitted by applicable law in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
71
IN WITNESS WHEREOF, Vivendi Universal, Soraya Merger Inc. and
Houghton Mifflin Company have caused this Agreement to be signed as an
instrument under seal by their respective officers thereunto duly authorized,
all as of the date first written above.
VIVENDI UNIVERSAL,
by /s/ ▇▇▇▇ Licoys
----------------------------------
Name: ▇▇▇▇ Licoys
Title: Chief Operating Officer
SORAYA MERGER INC.,
by /s/ ▇▇▇▇▇ ▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
Title: President and Treasurer
by /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Assistant Treasurer
HOUGHTON MIFFLIN COMPANY,
by /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Chairman of the Board,
President and CEO
by /s/ ▇▇▇▇ ▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Treasurer
72
EXHIBIT A
CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer or this Agreement,
Sub shall not be required to accept for payment or, subject to any applicable
rules and regulations of the SEC, including Rule 14e-l(c) under the Exchange Act
(relating to Sub's obligation to pay for or return tendered shares of Target
Common Stock promptly after the termination or withdrawal of the Offer), to pay
for any shares of Target Common Stock tendered pursuant to the Offer unless (i)
there shall have been validly tendered and not withdrawn prior to the expiration
of the Offer that number of shares of Target Common Stock which would represent
at least two-thirds of the Fully Diluted Shares (the "Minimum Tender
Condition"), and (ii) any waiting period (and any extension thereof) applicable
to the purchase of shares of Target Common Stock pursuant to the Offer or to the
Merger under the HSR Act shall have been terminated or shall have expired and
any approvals under any Foreign Antitrust Laws applicable to the purchase of
shares of Target Common Stock pursuant to the Offer or to the Merger shall have
been obtained. The term "Fully Diluted Shares" means all outstanding securities
entitled generally to vote in the election of directors of Target on a fully
diluted basis, after giving effect to the exercise or conversion of all options,
rights and securities exercisable or convertible into such voting securities.
Furthermore, notwithstanding any other term of the Offer or this Agreement, Sub
shall not be required to accept for payment or, subject as aforesaid, to pay for
any shares of Target Common Stock not theretofore accepted for payment or paid
for, and, subject to Section 1.01 of this Agreement, may terminate or amend the
Offer, with the consent of Target or if, as of the scheduled expiration date of
the Offer (as extended pursuant to Section 1.01(a)) and before the acceptance of
such shares for payment or the payment therefor, any of the following conditions
exists:
(a) any Restraint shall be in effect preventing
73
the purchase of shares of Target Common Stock pursuant to the Offer or
the Merger or there shall be any statute, rule, regulation, judgment,
order or injunction enacted, entered, enforced, promulgated or issued
by any Governmental Entity that would be reasonably likely to result in
any of the consequences referred to in paragraph (b) below;
(b) there shall be pending any suit, action or proceeding by
any Governmental Entity, (i) challenging the acquisition by Parent or
Sub of any shares of Target Common Stock, seeking to restrain or
prohibit consummation of the Offer or the Merger, or seeking to place
limitations on the ownership of shares of Target Common Stock (or
shares of common stock of the Surviving Corporation) by Parent or Sub,
(ii) seeking to prohibit or limit the ownership or operation by Target
or Parent and their respective subsidiaries of any material portion of
the business or assets of Target or Parent and their respective
subsidiaries taken as a whole, or to compel Target or Parent and their
respective subsidiaries to dispose of or hold separate any material
portion of the business or assets of Target or Parent and their
respective subsidiaries taken as a whole, as a result of the Offer, the
Merger or any of the other transactions contemplated by this Agreement,
or (iii) seeking to prohibit Parent or any of its subsidiaries from
effectively controlling in any material respect the business or
operations of Target or Parent and their respective subsidiaries taken
as a whole;
(c) there shall have occurred and continue to exist (i) any
general suspension of trading in, or limitation on prices for,
securities on the New York Stock Exchange for a period in excess of ten
consecutive trading hours (excluding suspensions or limitations
resulting solely from physical damage or interference with such
exchange not related to market conditions), (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in
the United States (whether or not mandatory) or (iii) any limitation
(whether or not mandatory) by any Governmental Entity in the United
States on the
74
extension of credit by banks or other financial institutions;
(d) any representation and warranty of Target set forth in
this Agreement, disregarding all qualifications and exceptions
contained therein relating to materiality or material adverse effect,
shall not be true and correct, in each case, as of the date of this
Agreement or as of the scheduled or extended expiration of the Offer
(except to the extent such representation and warranty is expressly
made as of an earlier date, in which case as of such earlier date),
except to the extent that the facts or matters as to which such
representations and warranties are not so true and correct as of such
dates, individually and in the aggregate, are not reasonably likely to
have a material adverse effect on Target;
(e) Target shall have failed to perform in any material
respect its obligations or to comply in any material respect with its
agreements or covenants required to be performed or complied with by it
under this Agreement;
(f) the Rights shall have become exercisable; or
(g) this Agreement shall have been terminated in
accordance with its terms,
which, in the sole and reasonable judgment of Sub or Parent, in any such case,
and regardless of the circumstances giving rise to any such condition (including
any action or inaction by Parent or any of its affiliates), makes it inadvisable
to proceed with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Sub and
Parent and may be asserted by Sub or Parent regardless of the circumstances
giving rise to such condition or may be waived by Sub and Parent in whole or in
part at any time and from time to time in their sole discretion. The failure by
Parent, Sub or any other affiliate of Parent at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and circumstances shall not be
deemed a waiver with respect to any other facts and circumstances and each such
right shall be deemed an ongoing right that may be
75
asserted at any time and from time to time.
The terms in this Exhibit A that are defined in the attached
merger agreement have the meanings set forth therein.
76
ANNEX I
TO THE MERGER AGREEMENT
INDEX OF DEFINED TERMS
TERM PAGE
Accounting Rules............................................................. 23
Acquisition Agreement........................................................ 52
affiliate.................................................................... 73
Agreement.................................................................... 6
Articles of Merger........................................................... 11
Board Fraction............................................................... 64
business day................................................................. 73
Certificates................................................................. 14
Closing...................................................................... 11
Closing Date................................................................. 11
Code......................................................................... 16
Commonly Controlled Entity................................................... 28
Confidentiality Agreement.................................................... 50
Contract..................................................................... 21
control...................................................................... 73
D&O Insurance................................................................ 60
Dissenting Shares............................................................ 13
Effective Time............................................................... 11
Environmental Law............................................................ 27
ERISA........................................................................ 29
Exchange Act................................................................. 8
Foreign Antitrust Laws....................................................... 21
Fully Diluted Shares......................................................... 79
GAAP......................................................................... 23
Governmental Entity.......................................................... 21
Hazardous Materials.......................................................... 28
HSR Act...................................................................... 21
Indemnified Party............................................................ 60
Independent Directors........................................................ 65
Information Statement........................................................ 23
Intellectual Property
Rights..................................................................... 38
knowledge.................................................................... 73
Liens........................................................................ 18
Losses....................................................................... 60
material adverse change...................................................... 73
material adverse effect...................................................... 73
Maximum Premium.............................................................. 60
MBCL......................................................................... 11
A-1
Merger....................................................................... 6
Merger Consideration......................................................... 13
Minimum Tender
Condition.................................................................. 79
New Parent Proposal.......................................................... 53
Offer........................................................................ 6
Offer Documents.............................................................. 8
Optionee..................................................................... 57
Outside Date................................................................. 67
Parent....................................................................... 6
Parent Plans................................................................. 58
Paying Agent................................................................. 14
person....................................................................... 73
Primary Target Executives.................................................... 33
Proxy Statement.............................................................. 22
Real Estate Transfer Taxes................................................... 61
Release...................................................................... 28
Restraints................................................................... 66
Rights....................................................................... 18
Rights Agreement............................................................. 18
SARs......................................................................... 19
Schedule 14D-9............................................................... 9
SEC.......................................................................... 7
Securities Act............................................................... 22
Specified Date............................................................... 50
Sub.......................................................................... 6
subsidiary................................................................... 73
Superior Proposal............................................................ 51
Surviving Corporation........................................................ 11
Takeover Proposal............................................................ 51
Target....................................................................... 6
Target Authorized Preferred
Stock...................................................................... 18
Target Benefit Agreements.................................................... 29
Target Benefit Plans......................................................... 28
Target Common Stock.......................................................... 6
Target Disclosure Schedule................................................... 17
Target Employees............................................................. 58
Target SEC Documents......................................................... 22
Target Filed SEC Documents................................................... 24
Target Pension Plans......................................................... 29
A-2
Target Permits............................................................... 26
Target SEC Documents......................................................... 22
Target Stock Options......................................................... 18
Target Stock Plans........................................................... 19
Target Stockholder
Approval................................................................. 37
Target Stockholders
Meeting.................................................................. 54
taxes........................................................................ 36
tax returns.................................................................. 36
Termination Fee.............................................................. 62
A-3