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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-86481
[LOGO]
September 7, 1999
Dear Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders of
World Color Press, Inc., which we will hold at 9:30 a.m., local time, on October
8, 1999, at World Color's corporate headquarters, The Mill, 340 Pemberwick Road,
Greenwich, Connecticut 06381.
At the special meeting we will ask you to vote on the merger of World Color
and an indirect wholly owned subsidiary of Quebecor Printing Inc. On August 20,
1999, Quebecor Printing purchased approximately 50.4% of the issued and
outstanding shares of World Color common stock for $35.69 per share in a cash
tender offer. In the merger, each share of World Color common stock not
purchased in the tender offer will be exchanged for 1.2685 Quebecor Printing
subordinate voting shares and $8.18 in cash, assuming no additional shares of
World Color common stock are issued prior to the effective time of the merger.
On August 31, 1999, the Quebecor Printing subordinate voting shares, which are
listed on the New York Stock Exchange under the trading symbol "PRW" and on The
Toronto Stock Exchange and The Montreal Exchange under the trading symbol "IQI,"
closed at $22 15/16 per share and Cdn$34.25 per share, respectively. Based on
the Quebecor Printing closing stock price on the NYSE, the Quebecor Printing
subordinate voting shares and cash you would receive for each World Color share
would have a total value of $37.28.
We appreciate your ongoing interest and participation in this company.
Please take the time to complete, date, sign and promptly return the enclosed
proxy card to ensure that your shares will be represented at the meeting.
Quebecor Printing has sufficient voting power to approve the merger
agreement at the World Color special meeting, even if no other stockholder of
World Color votes in favor of approving the merger agreement.
We are enclosing a proxy statement/prospectus containing detailed
information concerning the merger, including the merger agreement. FOR RISKS IN
CONNECTION WITH THE MERGER, SEE "RISK FACTORS" BEGINNING ON PAGE 14 OF THIS
DOCUMENT.
We believe this transaction represents an exciting strategic combination for
World Color. AFTER CAREFUL CONSIDERATION, WORLD COLOR'S BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND DETERMINED THAT THE MERGER IS
ADVISABLE AND FAIR TO WORLD COLOR AND YOU AND IN WORLD COLOR'S AND YOUR BEST
INTERESTS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE ADOPTION OF THE
MERGER AGREEMENT.
YOU CAN FIND ADDITIONAL INFORMATION REGARDING QUEBECOR PRINTING AND WORLD
COLOR IN THE SECTION ENTITLED "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 88
OF THIS DOCUMENT.
Sincerely,
/s/ Charles G. Cavell /s/ Marc L. Reisch
Charles G. Cavell Marc L. Reisch
Chairman of the Board President and Chief Executive Officer
This document is dated September 7, 1999 and was first mailed to
stockholders on or about September 8, 1999.
THE SECURITIES AND EXCHANGE COMMISSION AND THE STATE SECURITIES REGULATORS
HAVE NOT APPROVED OR DISAPPROVED THE QUEBECOR PRINTING SUBORDINATE VOTING SHARES
TO BE ISSUED IN THE MERGER OR DETERMINED IF THIS DOCUMENT IS ACCURATE OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
WORLD COLOR PRESS, INC.
THE MILL
340 PEMBERWICK ROAD
GREENWICH, CONNECTICUT 06831
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
FRIDAY, OCTOBER 8, 1999
9:30 A.M., LOCAL TIME AT
WORLD COLOR'S CORPORATE HEADQUARTERS
THE MILL
340 PEMBERWICK ROAD
GREENWICH, CT 06831
SPECIAL MEETING AGENDA
1. To consider and vote upon a proposal to adopt the Agreement and Plan of
Merger dated as of July 12, 1999 by and among Quebecor Printing Inc., Printing
Acquisition Inc. and World Color Press, Inc. A copy of the merger agreement is
included as Annex A to the attached proxy statement/ prospectus.
2. To transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on September 7, 1999 are
entitled to vote their shares.
By Order of the Board of Directors
/s/ Jennifer L. Adams
World Color Press, Inc.
Jennifer L. Adams
Secretary
Greenwich, Connecticut
September 7, 1999
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TABLE OF CONTENTS
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QUESTIONS & ANSWERS ABOUT THE MERGER....................................................................... 1
SUMMARY.................................................................................................... 3
The Companies.......................................................................................... 3
What You Will Receive In The Merger.................................................................... 3
Ownership Of Quebecor Printing After The Merger........................................................ 3
Material U.S. Federal Income Tax Consequences.......................................................... 4
World Color Board Recommendations...................................................................... 4
Interests Of World Color Officers And Directors In The Merger.......................................... 4
Opinion Of Financial Advisor........................................................................... 4
Adoption Of The Merger Agreement; Record Date For Voting............................................... 4
Conditions To The Completion Of The Merger............................................................. 4
Termination Of The Merger Agreement.................................................................... 4
Regulatory Matters..................................................................................... 5
Accounting Treatment................................................................................... 5
Listing Of Quebecor Printing Subordinate Voting Shares................................................. 5
QUEBECOR PRINTING SELECTED HISTORICAL FINANCIAL INFORMATION................................................ 6
WORLD COLOR SELECTED HISTORICAL FINANCIAL INFORMATION...................................................... 7
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION................................................ 9
Purchase Accounting Treatment.......................................................................... 9
Periods Covered........................................................................................ 9
Comparative Per Share Data............................................................................. 12
Market Prices And Dividends............................................................................ 12
Equivalent Per Share Data.............................................................................. 13
RISK FACTORS............................................................................................... 14
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.................................................. 15
THE WORLD COLOR SPECIAL MEETING............................................................................ 16
General................................................................................................ 16
Place, Date And Time................................................................................... 16
Matters To Be Considered At The Special Meeting........................................................ 16
Record Date............................................................................................ 16
Vote Required.......................................................................................... 16
Voting at the Special Meeting.......................................................................... 17
How Shares Will Be Voted At Special Meeting............................................................ 17
How to Revoke a Proxy.................................................................................. 17
Solicitation Of Proxies................................................................................ 18
THE MERGER................................................................................................. 18
What You Will Receive In The Merger.................................................................... 18
Background Of The Merger............................................................................... 19
Reasons For The Merger................................................................................. 22
Recommendation Of The World Color Board Of Directors; Reasons For The Merger........................... 24
Opinion Of World Color's Financial Advisor............................................................. 26
Interests Of World Color Officers And Directors In The Merger.......................................... 31
Material U.S. Federal Income Tax Consequences.......................................................... 36
Material Canadian Federal Income Tax Consequences...................................................... 39
Purchase Accounting Treatment.......................................................................... 40
Regulatory Approvals................................................................................... 40
Appraisal Rights....................................................................................... 42
THE MERGER AGREEMENT....................................................................................... 46
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The Tender Offer....................................................................................... 46
Board of Directors..................................................................................... 46
The Merger............................................................................................. 46
Effective Time Of The Merger........................................................................... 46
Stock Options.......................................................................................... 46
Procedures For Exchange Of Certificates................................................................ 47
Representations And Warranties......................................................................... 48
Covenants Relating To The Conduct Of Business.......................................................... 49
Meetings............................................................................................... 50
No Purchase Of Shares And Voting Agreements............................................................ 50
Proxy Statement And Registration Statement; Canadian Exemption......................................... 51
Additional Efforts..................................................................................... 51
Acquisition Proposals.................................................................................. 52
Employee Compensation And Benefits..................................................................... 52
Quebecor Printing Guarantee............................................................................ 52
Conditions Precedent To Merger......................................................................... 53
Termination............................................................................................ 53
Termination Fees....................................................................................... 53
Expenses............................................................................................... 54
Amendments............................................................................................. 54
Tender, Voting And Option Agreement.................................................................... 54
Stock Option Agreement................................................................................. 54
Registration Rights Agreement.......................................................................... 55
Agreements Of Certain Quebecor Printing Shareholders................................................... 55
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS.......................................................... 56
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS................................................. 60
DESCRIPTION OF SHARE CAPITAL............................................................................... 63
Equity Shares.......................................................................................... 63
Preferred Shares....................................................................................... 69
Series 2 Cumulative Redeemable First Preferred Shares.................................................. 69
MATERIAL DIFFERENCES BETWEEN RIGHTS OF STOCKHOLDERS OF WORLD COLOR AND RIGHTS OF STOCKHOLDERS OF QUEBECOR
PRINTING................................................................................................. 69
Size And Classification Of The Board Of Directors...................................................... 70
Director Qualifications................................................................................ 70
Removal Of Directors; Vacancies........................................................................ 70
Special Meetings Of Stockholders....................................................................... 70
Action By Written Consent Of Stockholders.............................................................. 71
Vote Required For Extraordinary Corporate Transactions................................................. 71
Business Combinations With Interested Stockholders..................................................... 72
Stockholder Suits...................................................................................... 72
Dissenters' Rights..................................................................................... 73
Dividends.............................................................................................. 74
Amendments To Charter And By-Laws...................................................................... 75
Director Liability..................................................................................... 75
Fiduciary Duties Of Directors.......................................................................... 75
Rights Of Inspection................................................................................... 76
Indemnification Of Officers, Directors And Others...................................................... 76
Additional Provisions Relating To Board Action......................................................... 77
Oppression Remedy...................................................................................... 77
Quorum Of Stockholders................................................................................. 77
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THE COMPANIES.............................................................................................. 78
Quebecor Printing...................................................................................... 78
World Color............................................................................................ 83
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................................. 86
LEGAL MATTERS.............................................................................................. 86
EXPERTS.................................................................................................... 87
FUTURE STOCKHOLDER PROPOSALS............................................................................... 87
WHERE YOU CAN FIND MORE INFORMATION........................................................................ 88
ANNEX A--Agreement and Plan of Merger...................................................................... A-1
ANNEX B--Opinion of Morgan Stanley & Co., Incorporated..................................................... B-1
ANNEX C--Section 262 of the Delaware General Corporation Law............................................... C-1
</TABLE>
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<PAGE>
QUESTIONS & ANSWERS ABOUT THE MERGER
Q: WHY ARE THE TWO COMPANIES PROPOSING THE MERGER?
A: Quebecor Printing and World Color believe that the merger will create a
global company that will be better positioned to take advantage of future growth
opportunities that may not have been available to Quebecor Printing or World
Color on their own. To review the reasons for the merger in greater detail, see
pages 22 and 24.
Q: WHAT DO I NEED TO DO IF I AM NOT PLANNING TO ATTEND THE WORLD COLOR SPECIAL
MEETING?
After you carefully read this document, please indicate on your proxy card how
you want to vote. Sign and mail the proxy card in the enclosed return envelope
as soon as possible, so that your shares may be represented at the World Color
special meeting.
Q: IF MY BROKER HOLDS MY SHARES IN "STREET NAME", WILL MY BROKER VOTE MY SHARES
FOR ME?
Your broker will not vote your shares unless you follow the directions your
broker provides to you regarding how to vote your shares.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY
CARD?
You can change your vote by sending a notice of revocation or a later-dated,
signed proxy card to World Color's Secretary before the World Color special
meeting or attending the meeting in person and voting. If you attend in person
and vote, you will override any previously submitted proxy.
Q: DOESN'T QUEBECOR PRINTING ALREADY OWN WORLD COLOR?
A: On August 20, 1999, Quebecor Printing completed a tender offer for 19,179,495
shares of World Color common stock for $35.69 per share. As a result, Quebecor
Printing owns approximately 50.4% of World Color's outstanding common stock.
Quebecor Printing now seeks to acquire the remaining shares of World Color
through the merger.
Q: WHICH STOCKHOLDERS NEED TO APPROVE THE MERGER?
A: Only the approval of the World Color stockholders is needed to approve the
merger. As a result of the tender offer, Quebecor Printing has sufficient voting
power to approve the merger agreement at the World Color special meeting, even
if no other stockholder of World Color votes in favor of approving the merger
agreement.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: World Color stockholders, other than Quebecor Printing, will receive 1.2685
subordinate voting shares of Quebecor Printing and $8.18 in cash for each share
of World Color common stock, assuming no additional shares of World Color common
stock are issued. Holders of Quebecor Printing shares will continue to hold
their same shares after the merger.
Q: WHAT ARE THE TAX CONSEQUENCES TO STOCKHOLDERS IN THE MERGER?
A: If the merger is completed, World Color stockholders who are U.S. persons
will recognize gain or loss for United States federal income tax purposes. World
Color stockholders are urged to consult their own tax advisors to determine the
particular tax consequences of the merger to them. The merger will not have any
tax consequences for Quebecor Printing shareholders.
Q: WHAT DO I NEED TO DO TO GET MY QUEBECOR PRINTING SHARES?
A: After we complete the merger, we will send World Color stockholders written
instructions for exchanging their shares. If you hold World Color shares in
physical form, you should not send in your stock certificates now.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We expect that the merger will be completed shortly after the World Color
special meeting.
1
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Q: WHEN IS THE WORLD COLOR SPECIAL MEETING?
A: The World Color special meeting will take place on Friday, October 8, 1999.
Q: WILL I GET APPRAISAL RIGHTS IN THE MERGER?
A: Yes. Under Delaware General Corporation Law, World Color stockholders are
entitled to appraisal rights. Any World Color stockholder wanting to exercise
appraisal rights must strictly comply with the rules governing the exercise of
appraisal rights or lose those appraisal rights. We describe the procedures for
exercising appraisal rights in this proxy statement/prospectus and we attach the
provisions of Delaware law that govern appraisal rights as Annex C.
Q: ARE ANY REGULATORY APPROVALS REQUIRED IN CONNECTION WITH THE MERGER?
A: No. Quebecor Printing and World Color have received all regulatory approvals
required to complete the merger.
Q: WHO CAN ANSWER MY QUESTIONS?
A: Georgeson Shareholder Communications Inc., World Color's proxy solicitor, at
800-223-2064 (banks and brokers call collect 212-440-9800).
2
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SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT. IT MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. YOU SHOULD CAREFULLY
READ THIS ENTIRE DOCUMENT AND THE OTHER DOCUMENTS REFERRED TO IN THIS DOCUMENT.
FOR A GUIDE TO WHERE YOU CAN OBTAIN MORE INFORMATION ON QUEBECOR PRINTING AND
WORLD COLOR, SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 88.
THE COMPANIES
WORLD COLOR PRESS, INC.
The Mill
340 Pemberwick Road
Greenwich, Connecticut 06831
(203) 532-4200
World Color, a Delaware corporation, was incorporated in 1903. World Color
is an industry leader in the management and distribution of print and digital
information. It is the second largest diversified commercial printer in the
United States, providing digital prepress, press, binding, distribution and
multi-media services to customers in the commercial, magazine, catalog, direct
mail, book and directory product categories. World Color operates 58 facilities
with a network of sales offices nationwide.
QUEBECOR PRINTING INC.
612 Saint-Jacques Street
Montreal, Quebec, Canada, H3C 4M8
(514) 954-0101
Quebecor Printing, a corporation amalgamated under the laws of Canada, was
incorporated in 1989. Quebecor Printing, a diversified global commercial
printing company, is the largest commercial printer in Canada and Europe, and
one of the largest in the United States and South America. Quebecor Printing
offers its customers state-of-the-art web offset, gravure and sheetfed printing
capabilities and related printing services from prepress to distribution.
Quebecor Printing's product categories include magazines, inserts and circulars,
books, catalogs, specialty printing and direct mailing, related services, CD-ROM
mastering and replicating, as well as directories.
WHAT YOU WILL RECEIVE IN THE MERGER (SEE PAGE 18)
When the merger is completed, each World Color stockholder other than
Quebecor Printing, will receive 1.2685 Quebecor subordinate voting shares and
$8.18 in cash for each World Color share, assuming no additional shares of World
Color common stock are issued prior to the effective time of the merger. If
additional World Color shares are issued prior to the effective time of the
merger, the cash portion of the per share consideration will decrease and the
stock portion of the per share consideration will increase in accordance with
the terms of the merger agreement.
Quebecor Printing will not issue fractional subordinate voting shares.
Instead, each World Color stockholder other than Quebecor Printing, will instead
be paid cash equal to the product of:
- the fractional part of a Quebecor Printing subordinate voting share to
which a World Color stockholder would otherwise be entitled, and
- $21.6875 in cash.
The effect of the merger upon World Color's 6% convertible senior
subordinated notes due 2007 that are outstanding at the time of the merger is
discussed on page 18.
Holders of Quebecor Printing shares will continue to hold their same shares
after the merger.
OWNERSHIP OF QUEBECOR PRINTING AFTER THE MERGER
Quebecor Printing will issue as many as 30 million subordinate voting shares
to World Color stockholders in the merger. This represents approximately 20% of
the outstanding Quebecor Printing shares and approximately 4% of the total
voting power immediately after the merger. This information is based on the
number of Quebecor Printing subordinate voting shares outstanding on August 31,
1999 and shares of World Color common stock outstanding on August 31, 1999, and
takes into account shares issuable with respect to World Color stock options and
shares issuable upon conversion of World Color's convertible notes.
3
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SUMMARY CONTINUED
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 36)
The merger will be a taxable transaction to World Color stockholders who are
United States persons for United States federal income tax purposes. As a
result, a World Color stockholder generally will recognize gain or loss in an
amount equal to:
- the amount of cash plus the fair market value, as of the closing of the
merger, of the Quebecor Printing subordinate voting shares received by a
World Color stockholder, MINUS
- the aggregate tax basis of the World Color common stock to be exchanged
for the Quebecor Printing subordinate voting shares and cash in the
merger.
WORLD COLOR BOARD RECOMMENDATIONS (SEE PAGE 24)
The World Color board of directors has unanimously approved the merger
agreement and determined that the merger agreement and the merger are fair to,
advisable, and in the best interests of, World Color and its stockholders and
recommends you vote FOR the adoption of the merger agreement.
INTERESTS OF WORLD COLOR OFFICERS AND DIRECTORS IN THE MERGER (SEE PAGE 31)
Some World Color directors and officers have employment arrangements, and/or
other arrangements and agreements that provide them with interests in the merger
that may be different from, or in addition to, the interests of other World
Color stockholders. You should be aware of these interests because they may
conflict with yours.
OPINION OF FINANCIAL ADVISOR (SEE PAGE 26)
On July 12, 1999, Morgan Stanley & Co. Incorporated delivered its written
opinion to the board of directors of World Color to the effect that as of the
date of the opinion the consideration to be received by the holders of World
Color common stock in the offer and the merger pursuant to the merger agreement
was fair from a financial point of view to such stockholders. The opinion of
Morgan Stanley does not constitute a recommendation as to how any World Color
stockholder should vote with respect to the merger. WE HAVE ATTACHED THIS
OPINION TO THIS DOCUMENT AS ANNEX B. YOU SHOULD READ THE OPINION CAREFULLY AND
IN ITS ENTIRETY.
ADOPTION OF THE MERGER AGREEMENT;
RECORD DATE FOR VOTING (SEE PAGE 16)
At the World Color meeting, World Color stockholders will be asked to adopt
the merger agreement. You can vote at the World Color meeting or by proxy if you
owned World Color shares at the close of business on September 7, 1999.
VOTE REQUIRED (SEE PAGE 16)
The adoption of the merger agreement requires the approval of a majority of
the issued and outstanding shares of World Color common stock. As a result of
the successful completion of the tender offer, Quebecor Printing owns enough
shares to approve the merger agreement without the vote of any other World Color
stockholder.
CONDITIONS TO THE COMPLETION OF THE MERGER (SEE PAGE 53)
The completion of the merger depends on the satisfaction or waiver of the
following conditions:
- the approval of the World Color stockholders, which is assured;
- the absence of legal prohibitions to the merger; and
- the absence of any stop order suspending effectiveness of the registration
statement relating to the Quebecor Printing subordinate voting shares to
be issued in the merger and the approval of those shares for listing on
the New York Stock Exchange, subject to official notice of issuance, and
on The Toronto Stock Exchange and The Montreal Exchange, subject to
customary requirements.
TERMINATION OF THE MERGER AGREEMENT
(SEE PAGE 53)
Either World Color or Quebecor Printing can terminate the merger agreement
if a court or other governmental body located in the United
4
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SUMMARY CONTINUED
States or Canada permanently prohibits the merger.
REGULATORY MATTERS (SEE PAGE 40)
On July 27, 1999 the waiting period for the transaction under the
Hart-Scott-Rodino statute expired. As a result, we now have all regulatory
approvals required by the merger agreement to complete the merger.
ACCOUNTING TREATMENT (SEE PAGE 40)
We will account for the merger using the purchase method of accounting.
APPRAISAL RIGHTS (SEE PAGE 42)
World Color stockholders have the right under Delaware law to exercise
appraisal rights and to receive payment in cash for the fair value of their
shares of World Color common stock determined by the Delaware Chancery Court. To
preserve their rights, stockholders who wish to exercise appraisal rights must
not vote in favor of adoption of the merger agreement and must follow specific
procedures. These procedures are described in this proxy statement/prospectus,
and the provisions of Delaware law that grants appraisal rights and governs such
procedures is attached as Annex C.
LISTING OF QUEBECOR PRINTING SUBORDINATE VOTING SHARES (SEE PAGE 41)
Quebecor Printing's subordinate voting shares are currently listed on the
New York Stock Exchange, The Toronto Stock Exchange and The Montreal Exchange.
Quebecor Printing will also list the subordinate voting shares to be issued in
the merger on those stock exchanges.
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QUEBECOR PRINTING SELECTED HISTORICAL FINANCIAL INFORMATION
Quebecor Printing is providing the following financial information to assist
you in your analysis of the merger. This information is only a summary and you
should read it in conjunction with the historical financial statements of
Quebecor Printing and the related notes contained in the annual and quarterly
reports and other information that Quebecor Printing has filed with the
Securities and Exchange Commission. See "WHERE YOU CAN FIND MORE INFORMATION" on
page 88. The selected consolidated financial data for each of the five years in
the five-year period ended December 31, 1998 are derived from the consolidated
financial statements of Quebecor Printing audited by KPMG LLP. The selected
consolidated financial data for each of the six-month periods ended June 30,
1999 and 1998 are derived from the unaudited consolidated financial statements
of Quebecor Printing. Unless otherwise stated, all financial information in this
registration statement is in United States dollars. The selected consolidated
financial information is presented in accordance with Canadian GAAP and should
be read in conjunction with Quebecor Printing's consolidated financial
statements and other information included in the documents incorporated in this
document by reference. See "WHERE YOU CAN FIND MORE INFORMATION" on page 88.
QUEBECOR PRINTING INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE DATA OR AS OTHERWISE NOTED)
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FOR THE SIX MONTHS
ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
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INCOME STATEMENT DATA:
Revenues............................................... $ 1,854.8 $ 1,772.1 $ 3,808.2 $ 3,483.2 $ 3,110.3 $ 3,004.0 $ 2,115.9
Operating expenses:
Cost of sales........................................ 1,445.5 1,392.5 2,979.3 2,736.8 2,403.2 2,343.9 1,655.5
Selling and administrative........................... 149.9 147.5 287.6 267.2 252.5 238.5 180.3
Depreciation and amortization........................ 124.5 113.2 239.4 210.7 194.1 169.7 101.9
--------- --------- --------- --------- --------- --------- ---------
Operating income....................................... 134.9 118.9 301.9 268.5 260.5 251.9 178.2
Financial expenses..................................... 33.7 30.4 64.3 66.9 62.5 82.4 29.1
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes............................. 101.2 88.5 237.6 201.6 198.0 169.5 149.1
Income taxes........................................... 30.4 27.9 74.8 69.1 69.1 62.6 59.3
Non-controlling interest............................... 0.7 1.0 3.2 2.1 2.6 1.4 2.6
--------- --------- --------- --------- --------- --------- ---------
Net income............................................. 70.1 59.6 159.6 130.4 126.3 105.5 87.2
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Earnings per share..................................... $ 0.56 $ 0.47 $ 1.29 $ 1.12 $ 1.09 $ 1.05 $ 0.87
OTHER FINANCIAL DATA:
Cash provided by operations before change in non-cash
working capital...................................... $ 208.8 $ 187.4 $ 425.3 $ 379.3 $ 361.8 $ 321.7 $ 213.7
Additions to fixed assets.............................. 72.9 185.7 312.1 325.6 243.1 167.6 178.3
Business acquisitions.................................. 59.9 15.0 260.2 319.9 56.4 144.4 159.4
BALANCE SHEET DATA (AT PERIOD END):
Cash................................................... $ 1.7 $ 1.8 $ 0.3 $ 0.4 $ 0.8 $ -- $ --
Trade receivables...................................... 621.2 569.9 695.9 683.8 590.5 578.5 383.6
Inventories............................................ 222.9 244.8 233.0 253.2 183.7 225.2 139.6
Prepaid expenses....................................... 31.3 26.1 25.0 20.9 17.6 17.1 12.5
Total assets........................................... 3,766.6 3,423.4 3,842.1 3,475.5 2,913.4 2,796.5 1,955.9
Working capital........................................ 235.2 242.4 244.1 219.3 206.8 273.6 220.1
Short-term debt (including current portion of long-term
debt)................................................ 41.8 60.3 66.7 71.0 43.2 46.5 7.8
Long-term debt......................................... 949.8 953.2 1,140.9 913.3 767.3 805.7 698.3
Convertible debentures................................. 52.6 57.4 58.2 60.0 83.9 92.5 --
Shareholders' equity................................... $ 1,736.6 $ 1,469.5 $ 1,564.5 $ 1,436.3 $ 1,155.1 $ 1,060.1 $ 707.2
</TABLE>
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WORLD COLOR SELECTED HISTORICAL FINANCIAL INFORMATION
World Color is providing the following financial information to assist you
in your analysis of the financial aspects of the merger. This information is
only a summary and you should read it in conjunction with the historical
financial statements of World Color and the related notes contained in the
annual and quarterly reports and other information that World Color has filed
with the Securities and Exchange Commission. See "WHERE YOU CAN FIND MORE
INFORMATION" on page 88. The selected consolidated financial data for each of
the five fiscal years in the five-year period ended December 27, 1998 are
derived from the consolidated financial statements of World Color audited by
Deloitte & Touche LLP. The selected consolidated financial data for the
six-month periods ended June 27, 1999 and June 28, 1998 are derived from the
unaudited consolidated financial statements of World Color.
WORLD COLOR PRESS, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE DATA OR AS OTHERWISE NOTED)
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<CAPTION>
FOR THE SIX MONTHS
ENDED
------------------------ FISCAL YEAR(1)
JUNE 27, JUNE 28, -----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ----------- --------- --------- --------- --------- ---------
(UNAUDITED)
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INCOME STATEMENT DATA:
Net sales......................................... $ 1,172.4 $ 1,096.9 $ 2,356.9 $ 1,981.2 $ 1,641.4 $ 1,295.6 $ 971.6
Cost of sales..................................... 910.5 856.7 1,810.0 1,501.5 1,260.5 1,011.6 763.2
Selling, general and administrative expenses...... 100.0 95.8 192.0 169.4 137.2 114.0 82.1
Depreciation and amortization..................... 77.4 69.2 140.7 131.7 104.5 74.7 62.9
Restructuring and other special charges(2)........ 62.4 -- -- -- -- 40.9 --
Operating income................................ 22.1 75.2 214.2 178.6 139.2 54.4 63.4
Interest expense and securitization fees.......... 49.0 42.5 88.5 80.0 58.4 37.9 23.8
Income tax provision (benefit).................... (11.1) 13.6 52.1 41.4 33.5 6.6 15.9
Extraordinary items, net of tax(3)................ 12.0 -- -- -- -- -- --
Cumulative effect of change in accounting
principle(4).................................... 10.5 -- -- -- -- -- --
Net income (loss)................................. $ (38.3) $ 19.1 $ 73.6 $ 57.2 $ 47.3 $ 9.9 $ 23.7
Net income (loss) per common share:(5)
Basic........................................... $ (1.01) $ 0.50 $ 1.92 $ 1.65 $ 1.40 $ 0.31 $ 0.74
Diluted......................................... (1.01) 0.49 1.84 1.60 1.35 0.29 0.69
OTHER FINANCIAL DATA:
Depreciation and amortization..................... $ 77.4 $ 69.2 $ 140.7 $ 131.7 $ 104.5 $ 74.7 $ 62.9
Capital expenditures(6)........................... 60.6 117.5 95.5 93.1 70.6 120.3 83.9
Adjusted operating income margin(7)............... 7.3% 7.0% 9.1% 9.0% 8.5% 7.4% 6.5%
BALANCE SHEET DATA (AT PERIOD END):
Working capital................................... $ 239.6 $ 219.5 $ 239.4 $ 168.8 $ 227.1 $ 160.8 $ 113.1
Property, plant and equipment, net................ 929.7 978.7 886.0 857.2 818.2 480.4 363.9
Total assets...................................... 2,367.2 2,252.9 2,433.9 1,933.6 1,822.4 1,150.7 837.4
Long-term debt (including current maturities)..... 1,265.3 1,133.1 1,255.9 819.1 897.9 487.1 293.5
Stockholders' equity.............................. 605.7 619.4 668.6 599.8 414.9 358.8 274.1
</TABLE>
- ------------------------------
(1) The fiscal years shown each represent the 52 or 53 week period ending on the
last Sunday in December. Fiscal year 1995 consisted of 53 weeks. Fiscal
years 1994, 1996, 1997 and 1998 each consisted of 52 weeks.
(2) Operating income in the first six months of 1999 was reduced by $62.4 of
restructuring and other special charges. These amounts relate primarily to
facility consolidation and the related write-off of fixed assets and
provision for certain lease costs, as well as the elimination of certain
administrative positions. Operating income in 1995 was reduced by $40.9 of a
nonrecurring streamlining charge. This charge reflects World Color's
strategy in 1995 to realign certain business operations. The major
components of this realignment plan were to close a facility and to
consolidate certain digital prepress operations and functions.
(3) In the first quarter of 1999 World Color recorded extraordinary charges
totaling $20.3, or $12.0 net of tax, as a result of the early extinguishment
of debt and the write-off of deferred financing costs due to a substantial
modification of terms under World Color's credit agreement.
(4) In the first quarter of 1999 World Color recorded a charge of $17.8, or
$10.5 net of tax, as the cumulative effect of a change in accounting
principle upon adoption of the American Institute of Certified Public
Accountants' Statement of Position 98-5,
7
<PAGE>
"Reporting on the Costs of Start-up Activities," which requires costs of
start-up activities and organization costs to be expensed as incurred.
(5) In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share," World Color has calculated net income per common
share--basic and diluted based on the weighted average shares and dilutive
common equivalent shares outstanding, as applicable, during each period
after giving effect to the change in World Color's capital structure
pursuant to the Merger and the Options Adjustments (as defined in the notes
to World Color's consolidated financial statements).
(6) Full year 1998 capital expenditures are net of proceeds of approximately
$88.5 from the sale and leaseback of certain equipment.
(7) Adjusted operating income represents operating income before restructuring
and other special charges. Adjusted operating income is not intended to
represent cash flows for the period, is not presented as an alternative to
operating income as an indicator of operating performance, may not be
comparable to other similarly titled measures of other companies and should
not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles. See World Color's consolidated financial statements.
8
<PAGE>
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
We are providing the following selected unaudited pro forma combined
financial information to show what the results of operations and financial
position of Quebecor Printing and World Color would have looked like, absent any
operational or other changes, had the offer and merger been completed for the
periods and at the dates indicated.
This information is provided for illustrative purposes only. It does not
show what our results of operations or financial position would have been if the
offer and merger had actually occurred on the dates assumed or indicate what our
future operating results or consolidated financial position will be. The pro
forma results do not reflect synergies and, accordingly, do not account for any
potential increase in operating income, any estimated cost savings or
adjustments to conform accounting practices. You should read the selected
unaudited pro forma combined financial information in conjunction with the
"UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS" on pages 56 to 59, including
the notes, and in conjunction with the historical consolidated financial
statements of Quebecor Printing and World Color, including the notes, that are
incorporated by reference in this document.
Quebecor Printing's consolidated financial statements are prepared in
accordance with generally accepted accounting principles in Canada, which differ
in some respects from generally accepted accounting principles in the United
States. Note 18 to Quebecor Printing's December 31, 1998 consolidated financial
statements provides a description of the principal differences between Canadian
GAAP and US GAAP. For the purposes of presenting the selected unaudited pro
forma combined financial information, financial information relating to Quebecor
Printing has been adjusted to conform to US GAAP.
PURCHASE ACCOUNTING TREATMENT
We will account for the offer and merger as a purchase of World Color by
Quebecor Printing, and the selected unaudited pro forma combined financial
information reflects this method of accounting.
PERIODS COVERED
Quebecor Printing's fiscal year ends on December 31 and its second quarter
ends on June 30. World Color's 1998 fiscal year comprised the 52 week period
ended on December 27, 1998 and its second quarter comprised the 26 week period
ended on June 27, 1999.
The unaudited pro forma combined income statement for fiscal year 1998
combines Quebecor Printing's results for the twelve months ended December 31,
1998 with World Color's results for the 52 weeks ended December 27, 1998, giving
effect to the offer and merger as if both transactions had occurred as of
January 1, 1998. The unaudited pro forma combined income statement for the first
two quarters of 1999 combines Quebecor Printing's results for the six months
ended June 30, 1999 with World Color's results for the 26 weeks ended June 27,
1999, giving effect to the offer and merger as if both transactions had occurred
as of January 1, 1998.
The unaudited pro forma combined balance sheet as at June 30, 1999, gives
effect to the offer and merger as if both transactions had occurred on June 30,
1999 by combining the balance sheet for Quebecor Printing at June 30, 1999 and
World Color at June 27, 1999.
9
<PAGE>
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
FOR THE FIRST TWO QUARTERS OF 1999
(IN MILLIONS, EXCEPT PER SHARE DATA OR AS OTHERWISE NOTED)
<TABLE>
<CAPTION>
COMBINED
QUEBECOR QUEBECOR PRO FORMA
PRINTING PRINTING QUEBECOR QUEBECOR
CANADIAN US GAAP PRINTING WORLD COLOR PRO FORMA PRINTING AND
GAAP ADJUSTMENT US GAAP US GAAP ADJUSTMENTS WORLD COLOR
----------- --------------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues.................................... $ 1,855 $ 0 $ 1,855 $ 1,172 $ 0 $ 3,027
Cost of sales............................... 1,446 1 1,447 911 0 2,358
Selling, general and administration
expenses.................................. 150 0 150 100 0 250
Depreciation and amortization............... 124 0 124 77 12 213
Restructuring and other special charges..... 0 0 0 62 0 62
----------- ------ ----------- ----------- ------ ------------
Operating income............................ 135 (1) 134 22 (12) 144
Financial expenses.......................... 34 0 34 49 26 109
----------- ------ ----------- ----------- ------ ------------
Income (loss) before income taxes,
extraordinary items and change in
accounting principle...................... 101 (1) 100 (27) (38) 35
Income taxes................................ 30 (1) 29 (11) (8) 10
----------- ------ ----------- ----------- ------ ------------
Income (loss) before extraordinary items and
changes in accounting principle........... 71 0 71 (16) (30) 25
Extraordinary items, net of tax............. 0 0 0 (11) 0 (11)
Cumulative effect of change in accounting
principle, net of tax..................... 0 0 0 (11) 0 (11)
----------- ------ ----------- ----------- ------ ------------
Net income (loss) before non-controlling
interest.................................. 71 0 71 (38) (30) 3
Non-controlling interest.................... 1 0 1 0 0 1
----------- ------ ----------- ----------- ------ ------------
Net income (loss)........................... 70 0 70 (38) (30) 2
Net income available for holders of
preferred shares.......................... 5 0 5 0 0 5
----------- ------ ----------- ----------- ------ ------------
Net income (loss) available for holders of
equity shares............................. 65 0 65 (38) (30) (3)
----------- ------ ----------- ----------- ------ ------------
----------- ------ ----------- ----------- ------ ------------
Average number of equity shares
outstanding............................... 116.7 116.7 116.7 30.7 147.4
Earnings (loss) per share................... $ 0.56 $ 0.00 $ 0.56 $ (0.02)
</TABLE>
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
FOR FISCAL YEAR 1998
(IN MILLIONS, EXCEPT PER SHARE DATA OR AS OTHERWISE NOTED)
<TABLE>
<CAPTION>
COMBINED
QUEBECOR QUEBECOR PRO FORMA
PRINTING PRINTING QUEBECOR QUEBECOR
CANADIAN US GAAP PRINTING WORLD COLOR PRO FORMA PRINTING AND
GAAP ADJUSTMENT US GAAP US GAAP ADJUSTMENTS WORLD COLOR
----------- ----------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues............................. $ 3,808 $ 0 $ 3,808 $ 2,357 $ 0 $ 6,165
Cost of sales........................ 2,979 0 2,979 1,810 0 4,789
Selling, general and administrative
expenses........................... 288 0 288 192 0 480
Depreciation and amortization........ 239 0 239 141 25 405
----------- ----------- ----------- ----------- ------ ------------
Operating income..................... 302 0 302 214 (25) 491
Financial expenses................... 64 0 64 88 53 205
----------- ----------- ----------- ----------- ------ ------------
Income before income taxes........... 238 0 238 126 (78) 286
Income taxes......................... 75 (1) 74 52 (16) 110
----------- ----------- ----------- ----------- ------ ------------
Income before non-controlling
interest........................... 163 1 164 74 (62) 176
Non-controlling interest............. 3 0 3 0 0 3
----------- ----------- ----------- ----------- ------ ------------
Net income........................... 160 1 161 74 (62) 173
Net income available for holders of
preferred shares................... 10 0 10 0 0 10
----------- ----------- ----------- ----------- ------ ------------
Net income available for holders of
equity shares...................... $ 150 $ 1 $ 151 $ 74 $ (62) $ 163
----------- ----------- ----------- ----------- ------ ------------
----------- ----------- ----------- ----------- ------ ------------
Average number of equity shares
outstanding........................ 115.7 115.7 115.7 31.5 147.2
Earnings per share................... $ 1.29 $ 0.01 $ 1.30 $ 1.11
</TABLE>
10
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS AT JUNE 30, 1999
(IN MILLIONS)
<TABLE>
<CAPTION>
COMBINED
QUEBECOR QUEBECOR PRO FORMA
PRINTING PRINTING QUEBECOR QUEBECOR
CANADIAN US GAAP PRINTING WORLD COLOR PRO FORMA PRINTING AND
GAAP ADJUSTMENT US GAAP US GAAP ADJUSTMENTS WORLD COLOR
----------- --------------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Current and other assets............. $ 975 $ 8 $ 983 $ 649 $ (7) $ 1,625
Fixed assets (net)................... 2,167 11 2,178 930 0 3,108
Goodwill............................. 625 44 669 788 990 2,447
----------- --- ----------- ----------- ------ ------
TOTAL ASSETS......................... $ 3,767 $ 63 $ 3,830 $ 2,367 $ 983 $ 7,180
----------- --- ----------- ----------- ------ ------
----------- --- ----------- ----------- ------ ------
Current and other liabilities........ $ 735 $ 35 $ 770 $ 423 $ 126 $ 1,319
Long-term debt (including current
portion)........................... 1,040 0 1,040 1,265 972 3,277
Deferred income taxes................ 234 30 264 73 (40) 297
Non-controlling interest............. 21 0 21 0 0 21
Shareholder's equity................. 1,737 (2) 1,735 606 (75) 2,266
----------- --- ----------- ----------- ------ ------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY............................. $ 3,767 $ 63 $ 3,830 $ 2,367 $ 983 $ 7,180
----------- --- ----------- ----------- ------ ------
----------- --- ----------- ----------- ------ ------
</TABLE>
11
<PAGE>
COMPARATIVE PER SHARE DATA
We have summarized below the historical per share information for our
companies and pro forma information as if the companies had been combined for
the periods shown, calculated using the exchange ratio of 1.2685. The following
takes into account that on August 20, 1999, Quebecor Printing purchased
19,179,495 shares of World Color common stock at a price of $35.69 per share.
You should read this information in conjunction with our historical
financial statements and related notes contained in the annual reports and other
information that we have filed with the Securities and Exchange Commission. See
"WHERE YOU CAN FIND MORE INFORMATION" on page 88.
You should also read this information in connection with the unaudited pro
forma combined financial statements set forth on pages 56 to 59.
You should not rely on the pro forma information as being indicative of the
historical results that we would have had or the future results that we will
experience after the merger.
<TABLE>
<CAPTION>
QUEBECOR
PRINTING
WORLD COLOR CANADIAN US GAAP
PRESS GAAP ADJUSTMENT
----------- -------- ----------
<S> <C> <C> <C>
FISCAL YEAR 1998
Earnings per share
Basic................................. $ 1.92 $ 1.29 $ 0.01
Diluted............................... 1.84 N/A N/A
Dividends per share..................... 0.00 0.24
Net book value at December 31, 1998..... 17.31 11.68 (0.02)
FIRST TWO QUARTERS OF 1999
Earnings (loss) per share
Basic................................. $(1.01) $ 0.56 0.00
Diluted............................... (1.01) N/A N/A
Dividends per share..................... 0.00 0.14
Net book value at June 30, 1999......... 15.95 12.43 (0.02)
<CAPTION>
QUEBECOR QUEBECOR
PRINTING PRO FORMA PRINTING
US GAAP ADJUSTMENT PRO FORMA
------- ---------- ---------
<S> <C> <C> <C>
FISCAL YEAR 1998
Earnings per share
Basic................................. $ 1.30 $(0.19) $ 1.11
Diluted............................... N/A N/A N/A
Dividends per share..................... 0.24 0.24
Net book value at December 31, 1998..... 11.66 2.17 13.83
FIRST TWO QUARTERS OF 1999
Earnings (loss) per share
Basic................................. 0.56 (0.58) (0.02)
Diluted............................... N/A N/A N/A
Dividends per share..................... 0.14 0.14
Net book value at June 30, 1999......... 12.41 1.51 13.91
</TABLE>
MARKET PRICES AND DIVIDENDS
Quebecor Printing subordinate voting shares are listed on the New York Stock
Exchange, The Toronto Stock Exchange and on The Montreal Exchange. The World
Color common stock is listed on the New York Stock Exchange. The Quebecor
Printing ticker symbol is "PRW" on the NYSE and "IQI" on The Toronto Stock
Exchange and The Montreal Exchange. The World Color ticker symbol is "WRC."
12
<PAGE>
The table below shows, for the calendar quarters indicated, the reported
high and low sale prices of Quebecor Printing subordinate voting shares and
World Color common stock as reported on the New York Stock Exchange Composite
Transaction Tape, in each case based on published financial sources and the
dividends declared on the stock.
<TABLE>
<CAPTION>
QUEBECOR PRINTING
SUBORDINATE VOTING SHARES WORLD COLOR
COMMON STOCK
--------------------------- ---------------------------
MARKET PRICE MARKET PRICE
------------- -------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter............................. $193/4 $173/8 -- $225/8 $181/8 None
Second Quarter............................ 187/8 17 0.11 261/4 19 5/8 None
Third Quarter............................. 197/8 18 1/16 -- 327/16 23 1/2 None
Fourth Quarter............................ 181/4 14 1/4 0.11 303/16 22 11/16 None
1998
First Quarter............................. 1811/16 15 3/8 -- 343/4 25 3/8 None
Second Quarter............................ 181/16 16 7/8 0.12 3511/16 29 7/8 None
Third Quarter............................. 197/16 17 1/4 0.06 361/4 26 None
Fourth Quarter............................ 217/8 17 1/8 0.06 343/4 22 3/4 None
1999
First Quarter............................. 231/8 20 9/16 0.07 307/16 21 1/4 None
Second Quarter............................ 251/16 21 5/8 0.07 283/16 20 None
Third Quarter (through August 31, 1999)... 247/16 21 5/8 0.07 373/16 27 7/16 None
</TABLE>
EQUIVALENT PER SHARE DATA
The following table presents closing market price information for Quebecor
Printing subordinate voting shares and shares of World Color common stock on
July 9 and August 31, 1999. July 9 was the last full trading day before our
announcement of the signing of the merger agreement. The following table also
presents the "equivalent per share price" of shares of World Color common stock
on those dates. The "equivalent per share price" of shares of World Color common
stock represents the per share closing market price for Quebecor Printing
subordinate voting shares reported on the NYSE Composite Transactions Tape at
such specified date, multiplied by an exchange ratio of 1.2685 Quebecor Printing
subordinate voting shares plus $8.18 in cash.
<TABLE>
<CAPTION>
QUEBECOR PRINTING WORLD COLOR
SUBORDINATE VOTING SHARES WORLD COLOR EQUIVALENT PER
COMMON STOCK SHARE PRICE
----------------------------- ----------------------------- -----------------------------
HIGH LOW CLOSE HIGH LOW CLOSE HIGH LOW CLOSE
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
July 9, 1999........ $23 3/4 $22 3/16 $23 11/16 $31 3/16 $29 $29 13/16 $38 5/16 $36 3/8 $38 1/4
August 31, 1999..... 23 22 7/8 22 15/16 36 13/16 36 9/16 36 3/4 37 3/8 37 3/16 37 1/4
</TABLE>
YOU ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS. We cannot assure you
what the market prices of Quebecor Printing subordinate voting shares will be at
the merger date or during the period during which the exchange ratio is
calculated.
After the merger, as holders of Quebecor Printing shares, former World Color
stockholders who receive Quebecor Printing subordinate voting shares in the
merger will receive any dividends declared on their Quebecor Printing shares
with a record date after the merger. The most recent quarterly dividend rate on
Quebecor Printing subordinate voting shares was $0.07 per share.
13
<PAGE>
RISK FACTORS
STOCKHOLDERS OF WORLD COLOR SHOULD CONSIDER THE FOLLOWING FACTORS, IN
ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS DOCUMENT.
THE SUCCESSFUL INTEGRATION OF WORLD COLOR'S BUSINESS INTO QUEBECOR PRINTING AND
THE ACHIEVEMENT OF EXPECTED COST SAVINGS CANNOT BE ASSURED.
Achieving the cost savings, operating efficiencies, revenue enhancement and
other benefits of the merger will depend in part on the integration of the
businesses of Quebecor Printing and World Color in an efficient manner. We
cannot assure you that this will happen quickly or that it will happen at all.
This acquisition is significantly larger than previous acquisitions completed by
Quebecor Printing and the consolidation of operations will require substantial
attention from management. The diversion of management attention and any
difficulties encountered in the transition and integration process could have a
material adverse effect on the revenues, levels of expenses and operating
results of the combined company.
SINCE THE MARKET PRICE OF QUEBECOR PRINTING SUBORDINATE VOTING SHARES COULD
DECLINE, WORLD COLOR STOCKHOLDERS CANNOT BE SURE OF THE MARKET VALUE OF THE
QUEBECOR PRINTING SUBORDINATE VOTING SHARES THEY WILL RECEIVE IN THE MERGER.
The Quebecor Printing subordinate voting shares to be received by each World
Color stockholder will not be adjusted for changes in Quebecor Printing's stock
price. As a result, the value of the Quebecor Printing subordinate voting shares
received by World Color stockholders in the merger will decline if there is a
decline in the value of the Quebecor Printing subordinate voting shares from
their current level.
ADDITIONAL DEBT INCURRED TO CONSUMMATE THE TENDER OFFER COULD ADVERSELY AFFECT
QUEBECOR PRINTING BY REDUCING ITS FLEXIBILITY TO RESPOND TO CHANGING ECONOMIC,
BUSINESS AND MARKET CONDITIONS.
Quebecor Printing's increased leverage as a result of borrowings to fund the
completed tender offer for World Color common stock and its acquisition of World
Color, may reduce its flexibility to respond to adverse changes in economic,
business or market conditions. On a pro forma basis, Quebecor Printing would
have had $3.2 billion of long-term debt outstanding as of June 30, 1999. This is
significantly more debt than Quebecor Printing has had in the past. Quebecor
Printing believes that it should be able to finance its and World Color's
current operating and capital requirements following completion of the merger.
See "SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION" and "UNAUDITED
PRO FORMA COMBINED FINANCIAL STATEMENTS."
THE MERGER COULD BE DILUTIVE TO QUEBECOR PRINTING'S EARNINGS PER SHARE.
The transaction could continue to be dilutive to Quebecor Printing's
earnings per share until the end of the year 1999. If Quebecor Printing does not
realize the expected cost savings, operating efficiencies and revenue
enhancements, or if World Color earnings or the interest rate of our borrowings
are significantly different from our expectations, the earnings dilution may
continue beyond the period we envision.
SINCE QUEBECOR PRINTING IS INCORPORATED IN CANADA AND MOST OF ITS OFFICERS AND
DIRECTORS ARE CANADIAN RESIDENTS, IT MAY BE DIFFICULT TO ENFORCE U.S. BASED
CIVIL LIABILITIES AGAINST THEM.
Quebecor Printing is incorporated in Canada and most of its directors and
executive officers and some of the experts named in this document are residents
of Canada. A significant portion of the assets of Quebecor Printing, its
directors and executive officers and those experts are located outside of the
United States. As a result, it may be difficult for United States investors to
serve process successfully within the United States upon Quebecor Printing, its
directors and officers or those experts. Furthermore, it may be difficult to
recover judgments against Quebecor Printing, its officers and
14
<PAGE>
directors or those experts in the United States based on civil liabilities under
the United States federal securities laws or the securities or blue sky laws of
any state within the United States. In addition, investors should not assume
that courts of Canada would:
- enforce judgments of U.S. courts obtained in actions against Quebecor
Printing, its officers and directors or those experts based on the civil
liability provisions of the U.S. federal securities laws or the securities
or blue sky laws of any state within the United States; or
- enforce, in original actions, liabilities against Quebecor Printing, its
officers or directors or those experts based on the U.S. federal
securities laws or any state securities or blue sky laws.
Quebecor Printing has appointed Quebecor Printing (USA) Holdings Inc. of
Wilmington, Delaware, as agent for service of process, in any action in any U.S.
federal or state court brought against it under the securities laws of the
United States arising out of the registration of its subordinate voting shares
pursuant to the registration statement of which this document forms a part.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This document and the documents incorporated by reference in this document
contain a number of forward-looking statements which are subject to risks and
uncertainties. Forward-looking statements include statements concerning
anticipated product plans, profitability, cost savings, revenue growth and
strategic plans and goals. These statements are based on the beliefs and
assumptions of the respective company's management, and on information currently
available to the management. These statements are contained in "QUESTIONS &
ANSWERS ABOUT THE MERGER," "SUMMARY," "RISK FACTORS," "THE MERGER--Background Of
The Merger," "--Reasons For The Merger," "--Recommendation Of The World Color
Board Of Directors; Reasons For The Merger," "--Opinion Of World Color's
Financial Advisor" and "UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS."
These statements may be preceded by, followed by or otherwise include the words
"believes," "expects," "anticipates," "intends," "estimates" or similar
expressions.
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. The future results and shareholder values
of Quebecor Printing after the merger may differ materially from those expressed
in these forward-looking statements. Many of the factors that will determine
these results and values are beyond Quebecor Printing's and World Color's
ability to control or predict.
Various factors, in addition to those discussed elsewhere in the documents
which are incorporated by reference into this document, or discussed elsewhere
in this document, including those listed under "Risk Factors," could affect the
future results of Quebecor Printing following the merger and could cause results
to differ materially from those expressed in those forward-looking statements,
including:
- changes in customers' demand for products;
- changes in raw material and equipment costs and availability;
- seasonal changes in customer orders;
- pricing actions by Quebecor Printings' competitors; and
- changes in estimates of the readiness of Quebecor Printing or its vendors
and customers with regard to Year 2000 issues and the significance of
costs associated with those issues, and general changes in economic
conditions.
In addition, Quebecor Printing's forward-looking statements could be
affected by general industry and market conditions and growth rates, and general
domestic and international economic conditions.
15
<PAGE>
THE WORLD COLOR SPECIAL MEETING
GENERAL
We are furnishing this document to holders of World Color common stock for
use at a special meeting of World Color stockholders and any adjournments or
postponements of the meeting. At the World Color special meeting, the
stockholders of World Color will consider and vote upon the adoption of the
merger agreement and any other business which may properly be brought before the
World Color special meeting.
PLACE, DATE AND TIME
We will hold a special meeting of World Color stockholders on Friday,
October 8, 1999, at 9:30 a.m., local time, at World Color's corporate
headquarters, The Mill, 340 Pemberwick Road, Greenwich, Connecticut 06381,
subject to any adjournments or postponements.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the World Color special meeting, World Color stockholders will consider
and vote on a proposal to adopt the merger agreement.
You are urged to read the copy of the merger agreement attached to this
document as Annex A. In addition, representatives of Deloitte & Touche LLP,
World Color's independent auditors, are expected to be present at the World
Color special meeting and available to respond to appropriate questions. These
individuals will be given the opportunity to make a statement at the World Color
special meeting if they desire to do so.
THE WORLD COLOR BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT,
INCLUDING THE MERGER, ARE FAIR TO, ADVISABLE AND IN THE BEST INTERESTS OF, WORLD
COLOR AND ITS STOCKHOLDERS, HAS APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING THE MERGER, AND
UNANIMOUSLY RECOMMENDS THAT THE WORLD COLOR STOCKHOLDERS VOTE FOR THE ADOPTION
OF THE MERGER AGREEMENT AT THE WORLD COLOR SPECIAL MEETING.
RECORD DATE
Only holders of World Color common stock at the close of business on
September 7, 1999 will be entitled to receive notice of and to vote at the World
Color special meeting. World Color will have a list of World Color stockholders
entitled to vote at the World Color special meeting available during normal
business hours at World Color's corporate headquarters, The Mill, 340 Pemberwick
Road, Greenwich, Connecticut 06381 for the five business day period before the
World Color special meeting and at the special meeting on the day of the
meeting.
VOTE REQUIRED
Holders of a majority of the issued and outstanding shares of World Color
common stock must vote in favor of the proposal to approve the merger agreement
in order for the proposal to pass. As of August 19, 1999, there were 38,036,302
outstanding shares of World Color common stock other than shares held in World
Color's treasury which are not entitled to vote. Each outstanding share of World
Color common stock is entitled to one vote. As of August 20, 1999, World Color's
directors and executive officers do not beneficially own any shares of World
Color common stock. As a result of the tender offer that was completed by
Quebecor Printing on August 20, 1999, Quebecor Printing owns enough shares of
World Color common stock to approve the merger agreement without the vote of any
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other World Color stockholder. Quebecor Printing has agreed in the merger
agreement to vote all of its shares of World Color common stock in favor of
adopting the merger agreement.
VOTING AT THE SPECIAL MEETING
Whether or not you plan to attend the special meeting, please vote your
shares as soon as possible. Your prompt voting may save World Color the expense
of a second mailing. Each proxy which is properly completed will be voted at the
special meeting. If you return a proxy but do not specify your vote, your shares
will be voted FOR the adoption of the merger agreement.
A majority of the shares of World Color common stock that were issued and
outstanding as of the World Color record date must either attend the World Color
special meeting or be represented by someone to whom they have given their proxy
in order for there to be a quorum at the World Color meeting, and permit a vote
to be taken on the proposal to approve the merger agreement. Since Quebecor
Printing owns approximately 50.4% of the outstanding shares of World Color
common stock and has agreed to vote its shares at the World Color special
meeting, there will be a quorum at the World Color special meeting, even if no
other shares of World Color common stock are represented at the World Color
special meeting.
HOW SHARES WILL BE VOTED AT THE SPECIAL MEETING
Shares of World Color common stock represented by properly executed proxies
received in time for the World Color meeting will be voted at the World Color
meeting in the manner specified on such proxies. Proxies which are properly
executed but which do not contain voting instructions will be voted FOR adoption
of the merger agreement.
World Color will count a properly executed proxy marked "ABSTAIN" as present
for purposes of determining whether there is a quorum, but an abstention will
have the effect of a vote against the approval of the merger agreement.
Under New York Stock Exchange rules, your broker cannot vote World Color
common stock without specific instructions from you. Unless you follow the
directions your broker provides to you regarding how to instruct your broker to
vote your shares, your shares will not be voted and will have the effect of a
vote against the approval of the merger agreement.
It is not expected that any matter other than those contemplated in this
proxy statement/ prospectus will be brought before the World Color meeting;
however, if other matters are properly presented, the persons named in such
proxy will have the authority to vote in accordance with their judgment on any
other such matter, including, without limitation, any proposal to adjourn or
postpone the meeting or otherwise concerning the conduct of the meeting.
HOW TO REVOKE A PROXY
Your grant of a proxy on the enclosed card does not prevent you from voting
in person or otherwise revoking your proxy.
You may revoke your proxy at any time before its use by delivering to the
Corporate Secretary of World Color a signed notice of revocation or a
later-dated signed proxy at a later time or by attending the World Color special
meeting and voting in person. Attendance at the World Color special meeting will
not itself constitute the revocation of a proxy.
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SOLICITATION OF PROXIES
World Color will bear the cost of the solicitation of proxies from its
stockholders. Arrangements will also be made with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of solicitation
materials to the beneficial owners of shares held of record by such persons, and
World Color will reimburse such custodians, nominees and fiduciaries for their
reasonable out-of-pocket expenses in connection with the forwarding of these
solicitation materials. In addition, World Color has retained Georgeson
Shareholder Communications Inc. to assist World Color in the solicitation of
proxies from World Color stockholders in connection with the World Color
meeting. Georgeson will receive a fee of $5,000 as compensation for its services
and reimbursement of its out-of-pocket expenses in connection with its services.
THE MERGER
WHAT YOU WILL RECEIVE IN THE MERGER
At the effective time of the merger, Printing Acquisition Inc., an indirect
wholly owned subsidiary of Quebecor Printing, will be merged with and into World
Color. As a result of the merger, World Color will continue as the surviving
corporation of the merger and will become an indirect, wholly owned subsidiary
of Quebecor Printing.
At the effective time of the merger, each share of World Color common stock
issued and outstanding immediately prior to the effective time of the merger,
other than shares of World Color common stock to be canceled pursuant to the
merger agreement, shall be canceled, extinguished and converted into the right
to receive 1.2685 fully paid and nonassessable subordinate voting shares of
Quebecor Printing and $8.18 in cash, assuming no additional shares of World
Color common stock are issued prior to the effective time of the merger. If
additional World Color shares are issued prior to the effective time of the
merger, the cash portion of the per share consideration will decrease and the
stock portion of the per share consideration will increase in accordance with
the terms of the merger agreement.
Each share of World Color common stock held in the treasury of World Color
and each share of World Color common stock owned by Quebecor Printing or
Printing Acquisition, in each case immediately prior to the effective time of
the merger, will automatically be canceled and retired without any conversion
and no payment or distribution shall be made with respect to those shares.
If prior to the effective time, either of the companies pays or declares a
dividend or split, combines or otherwise reclassifies the Quebecor Printing
subordinate voting shares or the shares of World Color common stock, then the
consideration to be paid in the merger will be appropriately adjusted to reflect
this action.
Quebecor Printing will not issue fractional Quebecor Printing subordinate
voting shares in the merger. The merger agreement provides that each holder of
shares of World Color common stock exchanged in the merger who would otherwise
have been entitled to receive a fraction of a Quebecor Printing subordinate
voting share after taking into account all share certificates delivered by the
holder and all shares held in book-entry form will instead receive cash, without
interest, in an amount equal to the product of (1) the fractional part of a
Quebecor Printing subordinate voting share to which the holder would otherwise
be entitled and (2) $21.6875.
WORLD COLOR CONVERTIBLE NOTES
Pursuant to the terms of the indenture dated as of October 8, 1997 between
World Color and State Street Bank and Trust Company, as Trustee, in connection
with the change of control that resulted from the consummation of the offer,
World Color will offer to repurchase its 6% convertible
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senior subordinated notes due 2007 at a price that is equal to 100% of the
outstanding principal amount thereof, plus accrued and unpaid interest. Holders
of World Color convertible notes are under no obligation to accept this offer to
redeem their notes.
At the time of the merger, each World Color convertible note that remains
outstanding and not converted prior to the merger will, in accordance with
Section 11.6 of the indenture, become convertible into the number of Quebecor
Printing subordinate voting shares and the amount of cash that would have been
received in the merger had the convertible note been converted immediately prior
to the merger so that, assuming no additional shares of World Color common stock
are issued prior to the effective time:
- each World Color convertible note will be convertible solely into Quebecor
Printing subordinate voting shares and cash;
- to calculate the number of Quebecor Printing subordinate voting shares and
the amount of cash to be received upon conversion, the principal amount of
each World Color convertible note is DIVIDED by the conversion rate of
$41.47. This figure is MULTIPLIED by 1.2685 to yield the number of
Quebecor Printing subordinate voting shares and by $8.18 to yield the
amount of cash; and
- the per share conversion price of each Quebecor Printing subordinate
voting share issued upon the conversion of a World Color convertible note
will be equal to the principal amount of the World Color convertible note
to be converted minus the cash payable upon conversion, DIVIDED by the
number of Quebecor Printing subordinate voting shares, as provided above,
that are issuable upon conversion, or approximately $26.24.
The number of Quebecor Printing subordinate voting shares that may be issued
upon the conversion of each World Color convertible note, however, shall not
include any fractional shares. Upon the conversion of a World Color convertible
note, a cash payment will be made for any fractional share in an amount equal to
the product of (1) the fractional part of a Quebecor Printing subordinate voting
share to which the holder would otherwise be entitled and (2) $21.6875.
BACKGROUND OF THE MERGER
The terms and conditions of the merger agreement and related agreements are
the result of arm's length negotiations between World Color, Quebecor Printing
and their representatives. The following is a summary of the background to these
negotiations and the execution of the merger agreement.
On October 28, 1998, Pierre Karl Peladeau, at that time Executive Vice
President and Chief Operating Officer of Quebecor Printing, contacted Robert G.
Burton, Chairman and Chief Executive Officer of World Color, to explore a
possible strategic transaction. Messrs. Peladeau and Burton subsequently met on
November 4, 1998 to pursue their discussion of a potential business combination
between Quebecor Printing and World Color. There were no further contacts
between the parties until January 1999.
On January 12, 1999, Messrs. Peladeau and Burton met at World Color's
corporate headquarters in Greenwich, Connecticut, along with Charles G. Cavell,
President and Chief Executive Officer of Quebecor Printing and Scott M. Stuart
of Kohlberg Kravis Roberts & Co. L.P., at that time a member of World Color's
board of directors, to discuss Quebecor Printing's interest in pursuing a
possible strategic combination with World Color. Mr. Stuart is a general partner
of KKR Associates, L.P. and an affiliate of Kohlberg Kravis Roberts & Co. L.P.
Kohlberg Kravis Roberts & Co. provides advisory services to World Color, and KKR
Associates is the general partner of four partnerships that together with KKR
Associates own approximately 24% of the outstanding shares of World Color. There
were no further contacts between the parties until April, 1999.
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On April 19, 1999, Messrs. Peladeau and Stuart met in New York with a view
to initiate discussions regarding Quebecor Printing's possible interest in
acquiring World Color, World Color's business and the terms, conditions and
structure of a possible transaction.
On May 25, 1999, Mr. Peladeau, in his capacity as Vice Chairman of Quebecor
Printing, met with Mr. Stuart, Alexander Navab, Jr., at that time a member of
the board of directors of World Color and executive of Kohlberg Kravis Roberts &
Co., and Joseph Bae, an executive of Kohlberg Kravis Roberts & Co., and
reiterated the possible interest of Quebecor Printing in acquiring World Color.
The parties then discussed in broad terms the possible consideration and other
terms of this type of transaction. These discussions were not conclusive in
relation to the terms and conditions of the merger.
On June 7, 1999, representatives of Quebecor Printing and World Color met in
Montreal to explore potential terms and conditions of a business combination.
Quebecor Printing was represented by Mr. Peladeau. Francois R. Roy, Executive
Vice President and Chief Financial Officer of Quebecor Inc. was also present at
the meeting. Messrs. Stuart, Navab and Bae were present on World Color's behalf.
These discussions were not conclusive in relation to the terms and conditions of
the merger. During the period from June 16 to June 18 Messrs. Peladeau, Roy,
Cavell and Christian Paupe, Executive Vice President, Chief Administrative
Officer and Chief Financial Officer of Quebecor Printing, met in Montreal with
representatives of RBC Dominion Securities Inc. and Credit Suisse First Boston
Corporation, financial advisors to Quebecor Printing, to discuss the proposed
combination, valuation parameters, combination characteristics, other issues and
potential next steps.
On June 23, 1999, representatives of Kohlberg Kravis Roberts & Co. on behalf
of World Color and representatives of Quebecor Printing met to discuss the
rationale for, and benefits of a possible business combination, potential
transaction structures, preliminary due diligence requirements, management
issues and price considerations for the proposed transaction and to establish a
framework for continuing the discussions between the two companies.
On June 24, 1999, separate meetings between Messrs. Peladeau and Burton and
Messrs. Peladeau, Stuart, Navab and Bae took place to discuss further terms and
conditions relating to the proposed transaction. During these discussions,
representatives of Kohlberg Kravis Roberts & Co. on behalf of World Color and
representatives of Quebecor Printing were unable to agree upon the total value
of consideration to be offered and the relative percentages of stock and cash
consideration. Representatives of World Color also sought to protect the value
of any stock of Quebecor Printing to be received by the stockholders of World
Color in a merger with mechanisms such as a floating exchange ratio and a
"collar" for the stock portion of the consideration. Following these
discussions, representatives of RBC Dominion Securities Inc. and Credit Suisse
First Boston Corporation met with representatives of Kohlberg Kravis Roberts &
Co. to continue discussion of potential terms and conditions, including the
inclusion of a collar for the issuance of Quebecor Printing shares in the
merger.
On June 25, 1999, at a joint meeting of the Executive Committee of the board
of directors of Quebecor Inc. and the board of directors of Quebecor Printing,
the directors of Quebecor Printing and Quebecor Inc. approved the proposed
transaction in principle and authorized the management of Quebecor Printing to
pursue the negotiation of the final terms of the transaction subject to the
approval of the board of directors of Quebecor Printing.
On June 25, 1999, after an internal review by Quebecor Printing and Quebecor
Inc. of the proposed terms and conditions of the merger and the status of
ongoing negotiations, Messrs. Peladeau and Stuart had a telephone conversation,
during which the preference of Quebecor Printing for the issuance of a fixed
number of shares in connection with the merger was discussed.
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On June 27, 1999, Messrs. Peladeau and Stuart had a telephone conversation
where no specific agreements were reached regarding the principal economic terms
of the transaction. In particular, the parties were unable to agree upon the
total value of consideration to be offered, the percentages of stock and cash in
the transaction or whether any collar or similar mechanism would be provided
with respect to Quebecor Printing stock to be issued in the merger. Messrs.
Peladeau and Stuart agreed however that representatives of management and legal
advisors of both parties should meet to discuss the financial and legal terms of
the proposed transaction, pursue their work on documentation and propose a list
of issues for consideration by senior management.
On June 28 and 29, 1999, representatives of RBC Dominion Securities Inc. had
telephone conversations with representatives of Morgan Stanley & Co.
Incorporated to discuss terms and conditions of the tender offer and the merger.
On June 30 and July 1, 1999 representatives of the parties continued to meet
to discuss terms of the transaction including the consideration to be received
by World Color's stockholders. Messrs. Peladeau, Roy, Paupe, and John A. Willett
of Arnold & Porter, representing Quebecor Printing, met with Messrs. Stuart,
Navab and David J. Sorkin of Simpson Thacher & Bartlett, representing World
Color, and discussed terms and conditions in relation to the proposed
transaction including the support from Kohlberg Kravis Roberts & Co. for the
transaction, the tender, voting and option agreement, the stock option
agreement, termination fees, management issues and other considerations. At this
meeting, Quebecor Printing's representatives increased their offer to the
consideration to be received in the offer and merger subject to the approval of
Quebecor Printing's board of directors. Subject to the resolution of remaining
issues, including management related issues, World Color's representatives
agreed to discuss this revised proposal with the board of directors of World
Color.
Beginning on July 1, 1999, World Color conducted its due diligence
investigation of Quebecor Printing. During the July 4th weekend, Messrs.
Peladeau and Stuart discussed unresolved issues concerning the proposed business
combination, and the Right Honourable Brian Mulroney, a director of Quebecor
Printing, had a discussion with Henry Kravis, a senior executive of Kohlberg
Kravis Roberts & Co., concerning management issues in connection with a possible
combination of Quebecor Printing and World Color.
On July 5, 1999, Quebecor Printing's board of directors authorized Quebecor
Printing to enter into the merger agreement on the terms and conditions
presented to the board of directors. On July 6, 1999, the board of directors of
World Color met to consider the possible transaction. At the meeting, members of
senior management and representatives of World Color's legal and financial
advisors reviewed with World Color's board, among other things, the status of
the ongoing discussions between World Color and Quebecor Printing, and
management's views on the advisability of pursuing a transaction with Quebecor
Printing. World Color's legal and financial advisors also discussed the proposed
terms and structure of a business combination with Quebecor Printing. World
Color's board agreed that management should pursue further discussions with
Quebecor Printing, and agreed to reconvene when all remaining open issues had
been resolved and due diligence had been completed. World Color's board took no
further action at this meeting.
On July 6, 1999, representatives of World Color and Quebecor continued the
negotiation of the terms of the transaction and the draft merger agreement and
other related transaction documents. In addition, the parties discussed the
terms of the management arrangements to be entered into at the time of execution
of the merger agreement.
On July 7, 1999, Quebecor Printing began its due diligence investigation of
World Color.
On July 7, 1999, Messrs. Peladeau, Cavell and Paupe met with Mr. Burton and
Marc L. Reisch, President, Ms. Jennifer L. Adams, Vice Chairman, Chief Legal and
Administrative Officer and
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Mr. Robert B. Lewis, Executive Vice President and Chief Financial Officer of
World Color, to discuss terms and conditions of the offer and the merger, due
diligence and other issues in connection with the proposed business combination.
On July 8 and 9, 1999, Messrs. Paupe and Navab met and had telephone
conversations to discuss due diligence findings, to review the status of
Quebecor Printing financing for the offer and to finalize terms and conditions
of the tender offer and the merger agreement.
On Friday, July 9, 1999, following the close of New York Stock Exchange
trading, World Color's board of directors met to consider the proposed
transaction with Quebecor Printing. Representatives of World Color's senior
management and World Color's legal and financial advisors made presentations and
reviewed, among other things, the matters discussed below under
"--Recommendation of the World Color Board of Directors; Reasons for the
Merger." World Color's legal advisors reviewed with the board the transaction
terms that had been negotiated since the board meeting on July 6, 1999,
including arrangements with management. Morgan Stanley made a presentation
including, among other things, a financial analysis of the proposed transaction
with Quebecor Printing and rendered its oral opinion, subsequently confirmed in
writing, that as of that date, and based upon and subject to the assumptions,
limitations and qualifications set forth in their opinion, a copy of which is
attached to this registration statement at Annex B, the consideration to be
received by the holders of shares of World Color in connection with the
transactions contemplated by the merger agreement, including the tender offer
and the merger, is fair, from a financial point of view to those holders.
Following discussion, the board unanimously determined that the merger agreement
and the transactions contemplated by the merger agreement, including the offer
and the merger, are advisable and fair to, and in the best interests of the
stockholders of World Color, approved the merger agreement and the transactions
contemplated in the merger agreement, including the offer and the merger,
approved the stock option agreement and the tender, voting and option agreement
and the transactions contained in each of those agreements and recommended that
the stockholders of World Color accept the offer and tender their shares of
World Color to Printing Acquisition and approve the merger agreement and the
transactions contemplated in the merger agreement, including the merger. In
addition, members of World Color's board not affiliated with Kohlberg Kravis
Roberts & Co. and who constitute a majority of the board of directors, approved
the engagement letters with Morgan Stanley and Kohlberg Kravis Roberts & Co.
Thereafter, the merger agreement and related agreements were signed, and
prior to the opening of business on Monday, July 12, 1999, the parties issued a
joint press release announcing execution of the merger agreement and related
agreements.
On July 16, 1999, Quebecor Printing, through Printing Acquisition, commenced
a tender offer for up to 23,500,000 shares of World Color common stock at $35.69
in cash, subject to various conditions, including the condition that a majority
of the voting power of the World Color common shares on a fully diluted basis be
tendered in the tender offer which was to expire at 12:00 midnight on August 12,
1999. On August 13, Quebecor Printing announced that it had extended the
expiration date to 12:00 midnight on August 19, 1999. On August 20, 1999,
Quebecor Printing completed the tender offer, purchasing 19,179,495 shares of
World Color common stock. As a result of the tender offer, Quebecor Printing
holds through Printing Acquisition approximately 50.4% of the outstanding shares
of World Color common stock. The World Color board of directors was
reconstituted on August 20, 1999 in accordance with the terms of the merger
agreement.
REASONS FOR THE MERGER
At a meeting on July 5, 1999 the Quebecor Printing board of directors
determined that the merger agreement and the transactions contemplated by that
agreement were fair to and in the interests of Quebecor Printing. The board
believes that, in comparison with either Quebecor Printing or World
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Color on its own, the combined company will be more competitive and will create
greater value for both shareholders and customers. In reaching this conclusion,
the Quebecor Printing board considered the following material factors:
(1) ECONOMIES OF SCALE: Quebecor Printing believes that the U.S. printing
industry is a mature and highly fragmented industry in which
purchased materials, primarily paper and ink, are over 40% of the
gross revenue dollar. In this type of industry, consolidation offers
significant economies of scale in purchasing, scheduling, marketing
and administration. The transaction approximately doubles Quebecor
Printing's revenues in the U.S. and therefore significantly increases
its scale. This new leading competitive position will increase the
ability to compete through cost reductions and service improvements.
This enhanced power to serve customers is expected to generate new
sales from both existing and new clients;
(2) GEOGRAPHIC FIT: Quebecor Printing has a global presence with 115
plants, 43 in the U.S., in 14 countries serving both national and
international clients. World Color has a solid position in the U.S.
with 58 facilities. The combined company will improve its market
coverage and will be able to offer global resources for global
clients. The additional plants permit greater specialization in any
given facility with consequent reductions in cost. The network of
plants should also permit faster and more efficient distribution;
(3) PRODUCT LINE FIT: the product mix of the two companies is broadly
similar. This permits many enhancements to the combined company's
service offering with the consequent expected positive impact on
sales. Magazine clients will have improved access to manufacturing
resources in every region. This includes more short cut-off
rotogravure and offset capabilities. Advertising insert clients
should benefit from improved scheduling and distribution as
facilities are linked by fiber optic networks. Catalog customers can
avail themselves of better internet support through broadcast.com.
Book clients should experience faster turnaround times due to the
larger equipment base. The transaction will create a high quality,
continental sheet-fed network for direct mail clients and a
continental directory network for directory clients;
(4) SYNERGIES: Quebecor Printing believes that the combined company can
generate in excess of $50 million in annual synergies in a full year
of operations. The estimated cost savings are in addition to cost
savings previously targeted by the two companies separately. The
synergies arise due to purchasing and distribution savings, enhanced
asset utilization, optimization of the manufacturing network, lower
general and administrative costs due to the elimination of duplicate
functions, and integration of the sales and marketing networks. An
overall reduction in capital spending is also forecast;
(5) IMPROVED INTEGRATION OF TRADITIONAL AND NEW MEDIA: traditional print
media will remain the core competency of the combined company but
both companies have used the receipt of digital information to reduce
client costs and increase the speed of production. The transaction
will expand these capabilities by electronically linking the
facilities of both companies. Furthermore, the transaction will
create a larger firm with an enhanced ability to leverage new media
opportunities to complement print products and to assist print
clients in re-purposing their data. Quebecor Printing brings to its
clients multimedia relationships with Intellia (Canada and USA) and
with Canoe.com. World Color has relationships with broadcast.com and
with Worldtrak, a logistics based catalog delivery system. The
integration of traditional and new media offers enhanced medium term
opportunities;
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(6) COMPLEMENTARY MANAGEMENT STRATEGIES: Quebecor Printing believes that
integration of the companies will be facilitated by the companies'
common experiences and complementary management strategies. Both
companies have a history of successful growth through acquisitions,
over 60 at Quebecor Printing since 1988 and 25 at World Color since
1993. Both Quebecor Printing and World Color share a results oriented
and customer driven mission that emphasizes the achievement of
excellence in all graphic arts products and services. This is
achieved with lean corporate offices, an intense focus on cost
reductions, and decentralized decision-making at the plant or group
level. Corporate cultural differences should be minimal; and
(7) POTENTIAL FOR IMPROVED MARKET VALUATION DUE TO SECTOR LEADERSHIP AND
INCREASED LIQUIDITY: Quebecor Printing believes, that other things
being equal, higher float and trading volume may achieve higher P-E
multiples. The second step of the transaction, after completion of
the offer, involves the issuance of as many as 30 million Quebecor
Printing shares. This will markedly increase the liquidity of the
Quebecor Printing shares and the size of the free float. As these
shares will primarily be distributed to American shareholders, it is
anticipated that average daily trading volumes on the New York Stock
Exchange will increase. Finally, although there is no assurance of a
change, the board believes that sector leadership by the firm will be
recognized by the marketplace over time through an enhanced price
earnings ratio relative to the broad market indices.
The board also considered several other positive factors including the
specific terms of the merger agreement and the likelihood of success of the
offer given the lock-up agreements in place with specific shareholders. Negative
issues considered included the increase in debt necessary to finance the
transaction and the added dilution arising from the issue of subordinate voting
shares. These issues were not considered to outweigh the benefits arising from
the transaction.
RECOMMENDATION OF THE WORLD COLOR BOARD OF DIRECTORS; REASONS FOR THE MERGER
The World Color board of directors has unanimously approved the merger
agreement and has determined that the merger agreement and the transactions
contemplated by the merger agreement including the merger are fair to, advisable
and in the best interests of World Color and its stockholders.
REASONS FOR THE RECOMMENDATION
In reaching the determination described above, the World Color board of
directors considered a number of factors including, without limitation, the
following:
(1) TRANSACTION FINANCIAL TERMS: the amount of consideration to be
received by World Color's stockholders in the transactions
contemplated by the merger agreement relative to the earnings and
cash flows of World Color, comparable precedent transactions and
public market prices of comparable companies, and the implied premium
of this consideration over the market price of the shares of World
Color common stock;
(2) WORLD COLOR OPERATING AND FINANCIAL CONDITION; COMBINATION OF WORLD
COLOR AND QUEBECOR PRINTING: a review of World Color's business,
financial performance and operations as well as the potential for
cost savings and other synergies that could be created by combining
the two companies;
(3) DUE DILIGENCE REVIEW: the due diligence review of Quebecor Printing
conducted by management of World Color and World Color's legal,
financial and accounting advisors in connection with the receipt by
World Color stockholders of Quebecor Printing subordinate voting
shares in the merger;
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(4) TERMS OF MERGER AGREEMENT AND RELATED MATTERS: the terms of the
merger agreement and the stock option agreement, including Quebecor
Printing's representation in the merger agreement that it would have
available to it the financing necessary to complete the tender offer
and the merger and the absence of a financing condition in the merger
agreement and including Quebecor Printing's undertaking in the merger
agreement to secure all required antitrust clearances;
(5) ALTERNATIVES TRANSACTIONS: a review of the possible alternatives to
the transactions contemplated by the merger agreement, including the
possibilities of continuing to operate World Color as an independent
entity, as well as the risks and uncertainties associated with those
alternatives;
(6) STOCKHOLDER SUPPORT: the fact that the holders of approximately 24%
of the shares of World Color common stock were prepared to commit to
tender their shares into the tender offer pursuant to the terms of
the tender, voting and option agreement and the review by the World
Color board of the terms of the tender, voting and option agreement;
(7) ATTRACTIVE ACQUISITIONS: the increasing difficulty of World Color to
identify attractive acquisitions of significant scale;
(8) MORGAN STANLEY FAIRNESS OPINION: the financial presentation of Morgan
Stanley to the World Color board in connection with the tender offer
and the merger, including the opinion of Morgan Stanley, delivered to
the World Color board that as of July 12, 1999 and, based upon and
subject to the assumptions, limitations and qualifications set forth
in the opinion, the consideration to be received by the holders of
the shares of World Color common stock in the offer and the merger
was fair from a financial point of view to these holders. We have
attached the full text of the Morgan Stanley written opinion dated as
of July 12, 1999 as Annex B to this document and you should read this
opinion carefully and in its entirety;
(9) INTEGRATION: the review by Morgan Stanley of the strategic
alternatives available to World Color, the potential synergies
available to Quebecor Printing and the absence of any contacts in
spite of persistent rumors in the printing industry of a transaction
with Quebecor Printing during recent months;
(10) LIMITED CONDITIONS TO ACCEPT ALTERNATIVE PROPOSALS: the fact,
notwithstanding the foregoing, that pursuant to the merger agreement,
World Color may respond to an unsolicited proposal, and may terminate
the merger agreement and accept this alternative proposal, subject to
compliance with the terms of the merger agreement and the payment of
the termination fee as defined in the merger agreement and to
Printing Acquisition's right to exercise the option set forth in the
stock option agreement; and
(11) TERMINATION OF MERGER AGREEMENT: the fact that the termination fee,
and the number of shares of World Color common stock subject to the
option, as defined in the stock option agreement, is significantly
lower in connection with a termination of the merger agreement as a
result of entering into an acquisition proposal with any potential
third party acquiror of World Color that surfaces within two weeks of
the signing of the merger agreement.
In view of the wide variety of factors considered in connection with its
evaluation of the tender offer and the merger, the World Color board of
directors did not find it practicable to, and did not, quantify or otherwise
attempt to assign relative weights to the specific factors considered in
reaching its respective determinations.
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OPINION OF WORLD COLOR'S FINANCIAL ADVISOR
Under a letter agreement dated as of July 9, 1999, World Color engaged
Morgan Stanley to provide financial advisory services. The World Color board
selected Morgan Stanley to act as its financial advisor in connection with the
offer and merger and other matters arising in connection therewith, based on
Morgan Stanley's qualifications, expertise and reputation, as well as its
knowledge of the business and affairs of World Color. On July 9, 1999, Morgan
Stanley delivered an oral opinion to the World Color board which was confirmed
in writing on July 12, 1999, that, as of those dates, and based upon and subject
to the considerations set forth in the written opinion, the consideration to be
received by the holders of shares of World Color common stock in the offer and
merger pursuant to the merger agreement was fair from a financial point of view
to those holders.
The full text of the opinion dated July 12, 1999, which lists, among other
things, the assumptions made, procedures followed, matters considered and
limitations on the scope of the review undertaken by Morgan Stanley in rendering
its opinion, is attached to this document as Annex B. Morgan Stanley's written
opinion is directed to the World Color board and only addresses the fairness of
the consideration to be received by the holders of shares of World Color common
stock in the offer and merger pursuant to the merger agreement from a financial
point of view as of the date of the opinion. Morgan Stanley's written opinion
does not address any other aspect of the offer and merger and does not
constitute a recommendation to any World Color stockholder as to how to vote at
the World Color special meeting. The summary of the opinion set forth in this
document is qualified in its entirety by reference to the full text of the
opinion attached to this document as Annex B. The following is only a summary of
the Morgan Stanley opinion. World Color stockholders are urged to, and should
read the opinion carefully and in its entirety.
In arriving at Morgan Stanley's opinion, Morgan Stanley, among other things:
- reviewed certain publicly available financial statements and other
information of World Color and Quebecor Printing;
- reviewed certain internal financial statements and other financial and
operating data concerning World Color and Quebecor Printing prepared by
the respective managements of World Color and Quebecor Printing;
- analyzed certain financial projections for World Color and Quebecor
Printing prepared by the respective managements of World Color and
Quebecor Printing;
- discussed the past and current operations and financial condition and the
prospects of World Color and Quebecor Printing with senior executives of
World Color and Quebecor Printing;
- reviewed the reported prices and trading activity for the common stock of
World Color and Quebecor Printing subordinate voting shares;
- compared the financial performance of World Color and Quebecor Printing
and the prices and trading activity of World Color and Quebecor Printing
with that of certain other comparable publicly traded companies and their
securities;
- reviewed the financial terms, to the extent publicly available, of certain
comparable acquisition transactions;
- participated in discussions and negotiations among representatives of
World Color, Quebecor Printing and certain other parties and their
financial and legal advisors;
- reviewed the merger agreement, the tender, voting and option agreement and
certain related documents; and
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<PAGE>
- performed other analyses and considered other factors that Morgan Stanley
deemed appropriate.
Morgan Stanley assumed and relied upon without independent verification the
accuracy and completeness of the information it reviewed for the purposes of its
opinion. With respect to the financial projections, Morgan Stanley assumed that
they had been reasonably prepared on bases reflecting the best currently
available estimates and judgements of the future financial performance of World
Color and Quebecor Printing. Morgan Stanley has not made any independent
valuation or appraisal of the assets or liabilities of World Color and Quebecor
Printing, nor has Morgan Stanley been furnished with any appraisals. Morgan
Stanley has assumed that the offer and merger will be consummated in accordance
with the terms set forth in the merger agreement. Morgan Stanley's opinion is
necessarily based on economic, market and other conditions as in effect on, and
the information made available to it as of, the date of its opinion.
The following is a brief description of certain analyses performed by Morgan
Stanley in connection with its oral opinion and the preparation of its written
opinion letter dated July 12, 1999. These summaries of financial analyses
include information presented in tabular format. In order to understand the
financial analysis used by Morgan Stanley, the tables must be read together with
the text of each summary. The tables alone do not constitute a complete
description of the financial analyses.
HISTORICAL PUBLIC MARKET TRADING VALUE
Morgan Stanley reviewed the stock price performance of World Color based on
an analysis of the historical closing prices and trading volumes from the World
Color initial public offering date, January 25, 1996, through June 30, 1999. The
following table lists the low, average and high daily closing prices of shares
of World Color common stock for the periods indicated.
<TABLE>
<CAPTION>
HISTORICAL WORLD COLOR COMMON
STOCK PRICES
-------------------------------
<S> <C> <C> <C>
LOW AVERAGE HIGH
--------- --------- ---------
IPO (January 25, 1996) to June 30, 1999.............................................. $ 18.13 $ 25.69 $ 35.69
One Year ended June 30, 1999......................................................... 20.88 27.69 35.69
Six Months ended June 30, 1999....................................................... 20.88 24.94 30.44
Three Months ended June 30, 1999..................................................... 20.88 24.69 27.94
One Month ended June 30, 1999........................................................ 24.44 25.89 27.94
</TABLE>
Morgan Stanley noted the closing price one month prior on May 30, 1999 was
$25.50 for World Color common stock. Morgan Stanley noted that the one month
prior share price reflected a date on which speculation regarding a potential
business combination involving World Color did not materially affect the market
price of World Color Press common stock.
COMPARATIVE STOCK PRICE PERFORMANCE
As part of its analysis, Morgan Stanley reviewed the stock price performance
of World Color and Quebecor Printing and compared this performance with the
following group of commercial printing companies:
Banta Corporation
Consolidated Graphics, Inc.
R. R. Donnelley & Sons Company
Valassis Communications, Inc.
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<PAGE>
Morgan Stanley observed that over the period from the World Color initial
public offering date to June 30, 1999, the closing market prices appreciated as
set forth below:
<TABLE>
<CAPTION>
% TOTAL APPRECIATION
---------------------
<S> <C>
World Color.................................................................................. 40.1%
Quebecor Printing............................................................................ 24.8
Commercial Printing Companies
(equity market capitalization-weighted index).............................................. 125.3
</TABLE>
No company used in the stock price performance comparison is identical to
World Color or Quebecor Printing. In evaluating the stock price performance
comparison, Morgan Stanley made judgements and assumptions with regard to
industry performance, business, economic, market and financial conditions and
other matters, many of which are beyond the control of World Color and Quebecor
Printing, e.g. the impact of competition on World Color or Quebecor Printing and
the industry, industry growth and the absence of material adverse change in the
financial condition and prospects of World Color or Quebecor Printing or the
industry or in the financial markets.
SECURITIES RESEARCH ANALYSTS' FUTURE PRICE TARGETS
Morgan Stanley reviewed and analyzed future public market trading price
targets for World Color common stock and Quebecor Printing subordinate voting
shares prepared and published by securities research analysts during the period
from April 22, 1999 to June 22, 1999 for World Color and April 28, 1999 to June
21, 1999 for Quebecor Printing. These targets reflected each analysts' estimate
of the future public market trading price of World Color common stock and
Quebecor Printing subordinate voting shares at the end of the particular period
considered for each estimate. Using a discount rate of 13%, Morgan Stanley
discounted these estimates to June 30, 1999 to arrive at a range of present
values of these targets as set forth below:
<TABLE>
<CAPTION>
PRESENT VALUE RANGE
----------------------
<S> <C> <C>
LOW HIGH
--- -----
World Color Public Market Trading Price Target...................................................... $ 29 $ 38
Quebecor Printing Public Market Trading Price Target................................................ 24 25
</TABLE>
Morgan Stanley noted that the public market trading price targets published
by the securities research analysts do not reflect current market trading prices
and that these estimates are subject to uncertainties, including the future
financial performance of World Color and Quebecor Printing and future financial
market conditions.
PEER GROUP COMPARISON
Morgan Stanley compared financial information of World Color and Quebecor
Printing with corresponding financial information for the group of commercial
printing companies.
Morgan Stanley analyzed, among other things, for each company:
- The current share price expressed as a multiple of estimated future
earnings per share, or EPS;
- The ratio of the multiple of current share price to estimated EPS in the
calendar year 2000 to the estimated, long-term EPS growth rate; and
- The current aggregate value (i.e., equity value adjusted for capital
structure, expressed as a multiple of earnings before interest, taxes,
depreciation and amortization expense, or EBITDA).
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<PAGE>
As of June 30, 1999 and based on estimates of EPS, long-term EPS growth
rates and EBITDA taken from selected securities research analysts, the
statistics derived from this analysis are set forth below:
<TABLE>
<CAPTION>
GROUP OF COMMERCIAL
PRINTING COMPANIES
QUEBECOR ---------------------------------
WORLD COLOR PRINTING MEDIAN HIGH LOW
--------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Price to 1999 EPS Multiple...................................... 12.9x 14.6x 16.8x 18.9x 10.2x
Price to 2000 EPS Multiple...................................... 11.4 12.7 14.3 16.0 9.1
2000 EPS Multiple/Growth........................................ 0.8 1.1 0.8 1.3 0.5
1999 EBITDA Multiple............................................ 6.0 6.5 7.4 10.6 3.8
2000 EBITDA Multiple............................................ 5.7 6.1 6.2 9.7 3.6
</TABLE>
No company used in the peer group comparison is identical to World Color or
Quebecor Printing. In evaluating the peer group companies, Morgan Stanley made
judgements and assumptions with regard to industry performance, business,
economic, market and financial conditions and other matters, many of which are
beyond the control of World Color and Quebecor Printing, e.g. the impact of
competition on World Color or Quebecor Printing and the industry, industry
growth and the absence of material adverse change in the financial condition and
prospects of World Color or Quebecor Printing or the industry or in the
financial markets.
ANALYSIS OF SELECTED PRECEDENT TRANSACTIONS
As part of its analysis, Morgan Stanley reviewed a number of acquisition
transactions involving commercial printing companies.
For each of the transactions reviewed, Morgan Stanley analyzed, to the
extent available from publicly disclosed information, the prices paid and
calculated the multiples of historical revenues and EBITDA. This analysis
indicated that, for the majority of transactions reviewed, the multiples paid
were in the range of 0.5x to 1.5x the last twelve months revenues and 6.0x to
8.5x the last twelve months EBITDA. Morgan Stanley noted that all transactions
reviewed were smaller, in many cases significantly smaller, than the proposed
World Color and Quebecor Printing transaction. Morgan Stanley also noted that
detailed, publicly disclosed financial information was not available for many of
the transactions reviewed.
No transaction used in the analysis of selected precedent transactions is
identical to the proposed transaction. In evaluating these transactions, Morgan
Stanley made judgements and assumptions with regard to industry performance,
business, economic, market and financial conditions and other matters, many of
which are beyond the control of World Color and Quebecor Printing, e.g. the
impact of competition on World Color or Quebecor Printing and the industry,
industry growth and the absence of material adverse change in the financial
condition and prospects of World Color or Quebecor Printing or the industry or
in the financial markets.
DISCOUNTED CASH FLOW ANALYSIS
Morgan Stanley performed discounted cash flow analyses of World Color's
business. A discounted cash flow analysis involves an analysis of the present
value of projected cash flows and a terminal value using discount rates and
terminal year EBITDA multiples as indicated below. Morgan Stanley analyzed World
Color's business using a forecast for the period beginning January 1, 1999, and
ending December 31, 2003, based on estimates published by securities research
analysts and projections provided by the management of World Color. Morgan
Stanley estimated the World Color common stock discounted cash flow value by
using discount rates ranging from 10.5% to 11.5% and terminal
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<PAGE>
multiples of estimated 2003 EBITDA ranging from 5.5x to 6.5x. This analysis
yielded a range of per share values for World Color common stock of
approximately $25 to $33. In addition, Morgan Stanley performed sensitivity
analyses on assumptions underlying the World Color forecasts. Specifically,
Morgan Stanley varied the assumptions regarding future revenue growth and EBITDA
margins. The sensitivity cases analyzed implied a range of values for the World
Color common stock of $23 to $30 per share.
Morgan Stanley also performed discounted cash flow analyses of Quebecor
Printing's business. Morgan Stanley analyzed Quebecor Printing's business using
a forecast for the period beginning January 1, 1999, and ending December 31,
2003, based on estimates published by securities research analysts and
projections provided by the management of Quebecor Printing. Morgan Stanley
estimated the Quebecor Printing subordinate voting share discounted cash flow
value by using discount rates ranging from 10.5% to 11.5% and terminal multiples
of estimated 2003 EBITDA ranging from 5.5x to 6.5x. This analysis yielded a
range of per share values for Quebecor Printing of approximately $21 to $23. In
addition, Morgan Stanley performed sensitivity analyses on assumptions
underlying the Quebecor Printing forecasts. Specifically, Morgan Stanley varied
the assumptions regarding future revenue growth and EBITDA margins. The
sensitivity cases analyzed implied a range of values for the Quebecor Printing
subordinate voting shares of $21 to $25 per share.
ANALYSIS OF PREMIUMS PAID IN PRECEDENT ACQUISITIONS OF U.S. PUBLIC COMPANIES
Morgan Stanley reviewed announced acquisition transactions from January 1,
1997 to May 31, 1999 for U.S. publicly traded companies with transaction values
of $100 million or more, and analyzed the premiums paid over prevailing market
prices. Morgan Stanley noted that, of those transactions reviewed in which the
selling shareholders were to receive consideration including both stock and
cash, 59% involved consideration which, at the time of the transaction
announcement, implied a premium of less than 40% to the prevailing market price
30 days prior to the announcement.
Morgan Stanley observed that the premium to the $25.50 closing price of
World Color common stock 30 days prior to June 30, 1999 implied by the merger
consideration, and assuming a closing price for Quebecor Printing subordinate
voting shares of $22.375 as of July 8, 1999, was 42%.
PRO FORMA ANALYSIS OF THE OFFER AND MERGER
Morgan Stanley analyzed the pro forma impact of the offer and merger on
Quebecor Printing's earnings per share for the calendar years 1999 through 2002,
as estimated by securities research analysts. Morgan Stanley observed that,
assuming no synergies were to result from the combination of the businesses of
World Color and Quebecor Printing, the offer and merger would result in earnings
per share dilution for shareholders for each of the calendar years 1999 and
2000, and earnings per share accretion for each of the years 2001 and 2002.
Morgan Stanley noted that, assuming annual synergies of $50 million were to
result from the combination of the businesses of World Color and Quebecor
Printing, the offer and merger would result in earnings per share accretion in
each of the years 1999 through 2002. Morgan Stanley also noted that the pro
forma analysis suggested that the offer and merger would result in a more
leveraged capital structure for Quebecor Printing than Quebecor Printing's
current capital structure.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, Morgan Stanley considered the results of all of its
analyses as a whole and did not attribute any particular weight to any
particular analysis or factor considered by it. Furthermore, selecting any
portion of Morgan Stanley's analyses, without considering all analyses, would
create an incomplete view of the process underlying the Morgan Stanley opinion.
In addition, Morgan Stanley may have deemed various assumptions more or less
probable than other assumptions, so that the ranges of valuations resulting from
any particular analysis described above should not be taken to be Morgan
Stanley's view of the actual value of World Color or Quebecor Printing.
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<PAGE>
In performing its analysis, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of World Color and Quebecor
Printing. The analyses performed by Morgan Stanley are not necessarily
indicative of actual values, which may be significantly more or less favorable
than suggested by the analyses. Such analyses were prepared solely as a part of
Morgan Stanley's analysis of the fairness of the consideration to be received by
holders of shares of World Color common stock in the offer and merger pursuant
to the merger agreement from a financial point of view to those holders and were
provided to World Color in connection with the delivery of Morgan Stanley's
opinion dated July 12, 1999 to World Color's board. The analyses do not purport
to be appraisals or to reflect the prices at which World Color common stock or
Quebecor Printing subordinate voting shares might actually trade. In addition,
as described above, the Morgan Stanley opinion was one of many factors taken
into consideration by the World Color board in making its determination to
approve the offer and merger.
The merger consideration was determined through arm's-length negotiations
between World Color and Quebecor Printing and was approved by the World Color
board. Morgan Stanley did not recommend any specific consideration to World
Color or that any specific consideration constituted the only appropriate
consideration for the transaction. Morgan Stanley's opinion to the World Color
board was one of many factors taken into consideration by the World Color board
in making its determination to approve the offer and merger. Consequently, the
Morgan Stanley analyses described above should not be viewed as determinative of
the opinion of the World Color board with respect to the value of World Color or
whether the World Color board would have been willing to agree to different
consideration.
Morgan Stanley is an internationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking business, is
continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. In the ordinary course of
Morgan Stanley's trading, brokerage and financing activities, Morgan Stanley or
its affiliates may at any time hold long or short positions, may trade, make a
market or otherwise effect transactions, for its own account or for the accounts
of customers, in the securities of World Color or Quebecor Printing. In the
past, Morgan Stanley and its affiliates have provided financial advisory and
financing services for Quebecor Printing and have received fees for the
rendering of these services. Morgan Stanley and its affiliates have in the past
provided investment banking services to World Color and its affiliates and in
particular acted as lead manager in connection with a high yield offering for
World Color in February 1999 and have received fees for the rendering of these
services.
Pursuant to an engagement letter dated July 9, 1999, World Color has agreed
to pay Morgan Stanley a fee of $7,500,000, payable upon consummation of the
offer and merger, or, if the parties proceed with a one-step merger, payable at
the effective time of the merger. World Color also has agreed to reimburse
Morgan Stanley for reasonable expenses and to indemnify Morgan Stanley and
specified related persons against specified liabilities, including liabilities
under the federal securities laws, arising out of its engagement.
INTERESTS OF WORLD COLOR OFFICERS AND DIRECTORS IN THE MERGER
In considering the recommendation of the World Color board of directors,
stockholders should be aware that a number of executive officers of World Color,
including some officers who are also directors, have interests in the merger
that may be different from, or in addition to, the interests of World Color's
stockholders generally. The World Color board of directors recognized these
interests and determined that they neither supported nor detracted from the
fairness of the transactions contemplated by the merger agreement to the holders
of World Color common stock.
31
<PAGE>
EMPLOYMENT AGREEMENTS
Under the merger agreement, World Color and Quebecor Printing agreed to
enter into agreements and adopt plans or programs, effective no later than the
effective time of the merger. The terms and conditions of those agreements
include the following:
Robert G. Burton, the former Chief Executive Officer and Chairman of the
board of World Color, resigned upon the completion of the tender offer. At that
time, Mr. Burton received payments under the change in control agreement between
Mr. Burton and World Color, as described below, the World Color Press, Inc.
Third Amended and Restated Supplemental Retirement Program, effective April 1,
1995, and also received his 1999 bonus. Mr. Burton will be a member of the board
of directors of Quebecor Printing.
Marc L. Reisch, the current President of World Color, became the Chairman,
Chief Executive Officer and President of the North American Group (U.S. and
Canada) of Quebecor Printing and a member of the Office of the President of
Quebecor Printing. Mr. Reisch's salary and bonus target were increased to a
level commensurate with these positions and related authority. The corporate
headquarters of Quebecor Printing shall remain in Montreal, but the corporate
headquarters of the North American Group and Mr. Reisch's principal office shall
be in Greenwich, Connecticut.
World Color entered into individual agreements with a limited group of
executives, including Mr. Reisch, who are defined as Group A Executives, which
became effective upon the completion of the tender offer. Each Group A agreement
provides for a lump sum retention bonus equal to:
- 40% of the cash payment portion of the severance benefits provided under
the Group A Executive's change in control agreement, payable upon the
completion of the tender offer; and
- 60% of the cash payment portion of the severance benefits provided under
the Group A Executive's change in control agreement, payable upon the
first anniversary of the completion of the tender offer, unless prior to
that first anniversary the Group A Executive's employment is terminated by
Quebecor Printing other than for cause or by the Group A Executive for
good reason, in which case severance benefits described below shall apply.
Each Group A agreement also provides for severance benefits upon termination by
Quebecor Printing other than for cause or by the Group A Executive for good
reason during the two years following the completion of the tender offer
including:
- an amount equal to the cash payment portion of the severance benefits
provided under the Group A Executive's change in control agreement,
reduced by the amount of any retention bonus already paid; PROVIDED,
HOWEVER, that if the payment is equal to zero then the Group A Executive
shall be entitled, as soon as reasonably practicable after termination, to
one times the sum of his or her then current annual base salary and target
bonus;
- continuation of coverage and participation in employee welfare and fringe
benefit plans or programs until the end of the three-year period, two-year
period in the cases of three of the Group A Executives, following
termination, subject to mitigation upon re-employment and receipt of
comparable benefits; and
- during the severance period, outplacement services no less favorable than
the executive outplacement provided by World Color consistent with past
practices.
The Group A agreements include a non-competition/no raid covenant, which
provides that for one and one-half years, one year in the cases of three of the
Group A Executives, following termination, a Group A Executive shall not
directly or indirectly, own, manage, operate, join, control or participate in
the ownership, management, operation or control, or be connected as a director,
officer, employee, partner, consultant or otherwise with any "competing
business," other than as a stockholder or
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<PAGE>
beneficial owner, directly or indirectly, of five percent or less of the
outstanding securities of a publicly held competing business, nor shall the
Group A Executive solicit customers or employees from World Color. For these
purposes, "competing business" means any business, firm or enterprise engaged in
a business substantially similar to World Color's printing business as it exists
at the time of the completion of the tender offer within the same geographical
locations in which World Color operates on the date of the completion of the
tender offer. Group A Executives shall receive a full gross-up for all excise
taxes and related costs in connection with any payments deemed "excess parachute
payments."
World Color also entered into individual agreements with a group of other
key World Color executives, defined as Group B Executives, which became
effective upon the completion of the tender offer. These Group B agreements
provide for $10 million to be set aside to fund lump sum retention bonuses to
each Group B Executive, 40% of which became payable on the completion of the
tender offer and 60% of which will become payable on the earlier of the first
anniversary of completion of the tender offer or termination by Quebecor
Printing other than for cause or by the Group B Executive for good reason. Each
Group B agreement also provides for severance benefits upon termination by
Quebecor Printing other than for cause or by the Group B Executive for good
reason during the one year following the completion of the tender offer
including:
- a lump sum payment equal to the balance of the retention bonus; and
- continuation of coverage and participation in employee welfare and fringe
benefit plans or programs until the earlier of the first anniversary of
termination or the date on which the Group B Executive becomes re-employed
and receives comparable benefits.
Under the agreements, Group B Executives receive a full gross-up for all
excise taxes and related costs in connection with any payments deemed "excess
parachute payments."
World Color has entered into change in control severance agreements, dated
as of April 16, 1999, with eight senior executives: Ms. Adams, Ms. Hlavaty and
Messrs. Burton, Reisch, Lewis, Lillie, Quinlan and Carousso, each defined as an
Executive.
The change in control severance agreements provide for severance benefits to
any Executive whose employment is terminated by World Color without cause or by
the Executive for good reason, as those terms are defined in the change in
control agreement, within two years after a change of control or in connection
with a potential change in control which results in a change in control, as
those terms are defined below, referred to here as a covered termination.
An Executive whose employment is subject to a covered termination is
entitled to receive:
- a lump sum payment equal to three times (two times in the cases of Messrs.
Quinlan and Carousso, and Ms. Hlavaty) the greater of base salary plus
target bonus in effect on (a) the date of the covered termination or (b)
the date of the change in control;
- immediate vesting of all equity-based awards and, if the Executive elects,
cash out of stock options, in lieu of issuing shares upon exercise of
those options, at the difference between the aggregate exercise price of
the options and the product of the aggregate number of options times the
greater of the (a) per share value received by stockholders upon change in
control and (b) fair market value per share upon change in control;
- continuation for the three-year period (two-year period in the cases of
Messrs. Quinlan and Carousso, and Ms. Hlavaty) after termination of life,
disability, accident, health and dental benefits substantially similar to
those received prior to notice of termination (reduced by comparable
benefits received or made available without cost to the Executive during
that period); and
33
<PAGE>
- a lump sum payment equal to the benefits under all defined benefit and
cash balance plans of World Color which the Executive would have accrued
had he or she remained employed for an additional three years, [two years
in the case of Messrs. Quinlan and Carousso and Ms. Hlavaty] assuming no
change in base salary and bonus potential, assuming full bonus payout and
without regard to amendments effective after the applicable change in
control or potential change in control.
An Executive shall also be entitled to legal fees and expenses as a result
of a covered termination, as well as an additional payment, if necessary, to
make the Executive whole for any excise or income tax, imposed by reason of a
payment under the change in control severance agreement being deemed to
constitute an "excess parachute payment" as defined in Section 280G of the
Internal Revenue Code of 1986, as amended.
Each change in control severance agreement also provides that the Executive
shall remain employed by World Color until the earliest of:
- six months after a potential change in control;
- change in control; or
- termination for good reason, death, disability, retirement or by World
Color for any reason.
The Executive shall also be subject to a noncompetition covenant for 18 months
(12 months in the case of Messrs. Quinlan and Carousso and Ms. Hlavaty)
following the initial receipt of severance benefits described above.
"Change in control" means:
- any Person (as defined in the Securities Exchange Act of 1934) other than
any employee benefit plan then maintained by World Color, becomes the
beneficial owner of shares of World Color common stock having 30 percent
or more of the total number of votes that may be cast for the election of
directors of World Color;
- as the result of, or in connection with, any contested election for the
board of directors of World Color, or any tender or exchange offer, merger
or other business combination or sale of assets or any combination of the
foregoing, a "transaction," the persons who were directors of World Color
before the transaction shall cease to constitute a majority of the board
of directors of World Color or any successor to World Color or its assets;
or
- at any time (a) World Color shall consolidate or merge with any other
Person and World Color shall not be the continuing or surviving
corporation, (b) any Person shall consolidate or merge with World Color
and World Color shall be the continuing or surviving corporation and in
connection therewith, all or part of the outstanding World Color common
stock shall be changed into or exchanged for stock or other securities of
any other Person or cash or any other property, (c) World Color shall be a
party to a statutory share exchange with any other Person after which
World Color is a subsidiary of any other Person, or (d) World Color shall
sell or otherwise transfer 50% or more of the assets or earning power of
World Color and its subsidiaries, taken as a whole, to any Person.
"Potential change in control" means:
- World Color enters agreement, the consummation of which would be change in
control;
- a public announcement is made of an intention to take or consider taking
actions which, if consummated, would be a change in control; or
- the board of directors of World Color adopts a resolution to the effect
that a potential change in control has occurred.
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<PAGE>
Other agreements between World Color and some of its executive officers,
including agreements relating to the treatment of employee stock options and
fiscal year 1999 bonuses, are described in the merger agreement. In addition,
pursuant to an engagement letter dated July 9, 1999, World Color agreed to pay
KKR $17,500,000 in consideration of its advisory services in connection with the
negotiation of the tender offer and the merger. As set forth in the description
of the tender, voting and option agreement below, World Color has also agreed to
indemnify stockholders affiliated with KKR against specified liabilities in
consideration for their entering into the tender, voting and option agreement.
See "THE MERGER AGREEMENT--Tender, Voting and Option Agreement."
EFFECTS OF THE TENDER OFFER AND THE MERGER UNDER WORLD COLOR STOCK PLANS
Under the merger agreement, each option to purchase shares of World Color
common stock that was outstanding upon the completion of the tender offer, and
each related stock appreciation rights issued by World Color that was
outstanding immediately prior to completion of the tender offer was canceled in
exchange for (A) a cash payment from the surviving company (less any applicable
withholding taxes) equal in value to (1) the product of (x) the total number of
shares of World Color common stock subject to the World Color stock option,
multiplied by (y) $22.00, multiplied by (z) the excess of $35.69 over the
exercise price per share of common stock subject to the World Color stock
option, divided by (2) $35.69, and (B) a number of shares of Quebecor Printing
subordinate voting shares to be issued promptly following the effective time of
the merger equal to (1) the product of (x) the number of shares of World Color
common stock subject to the stock option, multiplied by (y) 0.6311, multiplied
by (z) the excess of $35.69 over the exercise price per share subject to the
stock option, divided by (2) $35.69. The cash portion of the payment described
in clause (A) above was paid following the consummation of the tender offer.
DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE
The merger agreement provides that the certificate of incorporation of the
surviving corporation in the merger will contain provisions no less favorable
with respect to indemnification than are set forth in the certificate of
incorporation of World Color. Quebecor Printing agreed that these provisions
will not be amended, repealed or otherwise modified for a period of six years
from the effective time of the merger in any manner that would adversely affect
the rights under those provisions of individuals who at the effective time of
the merger were directors, officers or employees of World Color. Quebecor
Printing further agreed in the merger agreement to cause to be maintained in
effect for six years from the merger, the current policies, or appropriate
substitute policies, of the directors' and officers' liability insurance
maintained by World Color with respect to matters or events occurring before the
effective time of the merger to the extent available. Quebecor Printing is not
required to expend more than an amount per year equal to 200% of current annual
premiums paid by World Color. In addition, Quebecor Printing agreed in the
merger agreement, for six years after the effective time of the merger, that it
will or will cause the surviving corporation to indemnify each present and
former director and officer of World Color, determined as of the effective time
of the merger, against any costs or expenses incurred in connection with any
claims arising out of matters relating to their duties or actions in their
capacity as officers and directors and existing or occurring at or before the
effective time of the merger to the fullest extent permitted under applicable
law.
BOARD OF DIRECTORS
Under the merger agreement, Quebecor Printing appointed new directors to the
World Color board upon the completion of the tender offer. Two previous
directors of World Color, Robert G. Burton and Marc L. Reisch, continued as
directors following the completion of the tender offer. Biographical information
with respect to the new directors is set forth below. Unless otherwise
indicated, each of these individuals has held his present position as set forth
below for the past five
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years. Unless otherwise noted, each of these directors is a citizen of Canada
with a business address c/o Quebecor Printing Inc., 612 St. Jacques Street,
Montreal, Quebec, Canada, H3C 4M8. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT" on page 86 for information concerning beneficial
ownership of shares of World Color common stock and options to purchase shares
of World Color common stock held by the new directors of Quebecor Printing.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AND ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Charles G. Cavell......................... Mr. Cavell, 57, President of Printing Acquisition; President and
Chief Executive Officer of Quebecor Printing since January 1998;
previously President and Chief Operating Officer of Quebecor Printing
from 1989 to December 1997; Chairman of the Board of Sun Media
Corporation.
Pierre Karl Peladeau...................... Mr. Peladeau, 37, Chairman of the Board of Printing Acquisition;
President and Chief Executive Officer of Quebecor Inc. (Quebecor
Printing's parent company); Vice Chairman of the Board of Quebecor
Printing since May 1999; previously Executive Vice President and
Chief Operating Officer of Quebecor Printing from April 1998 until
April 1999; managing director of Quebecor Printing Europe from June
1994 until April 1998; President of Quebecor Group Inc. (currently
known as Quebecor Communications Inc.) from July 1991 until June
1994.
Christian M. Paupe........................ Mr. Paupe, 41, Treasurer of Printing Acquisition; Executive Vice
President, Chief Administrative Officer and Chief Financial Officer
of Quebecor Printing since May 1999; previously Executive Vice
President and Chief Financial Officer of Quebecor Printing from
January 1999 until April 1999; Senior Executive Vice President and
director of Levesque Beaubien Geoffrion Inc. from 1997 until January
1999; Senior Vice President of Southam Inc. from 1995 until 1997;
Vice President, corporate finance of Bell Canada International Inc.
from 1993 until 1995. Mr. Paupe is a Swiss and Canadian citizen.
Francois R. Roy........................... Mr. Roy, 44, Executive Vice President and Chief Financial Officer of
Quebecor Inc. since February 1999; previously Vice President and
Chief Financial Officer of Quebecor Inc. from August 1998 until
January 1999 and Vice President, Finance and Treasurer from August
1991 until August 1997; Executive Vice President and Chief Financial
Officer of Avenor Inc. from August 1997 until August 1998.
</TABLE>
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material U.S. federal income tax
consequences relating (1) to the exchange of shares of World Color common stock
for shares of Quebecor Printing subordinate voting shares and cash in the merger
and (2) the ownership and disposition of these shares.
In this section, when we refer to the term:
- "World Color stockholder," we mean a beneficial owner of shares of World
Color common stock;
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- "U.S. person," we mean a person who is (1) a citizen or resident of the
United States, (2) a corporation or partnership created or organized in or
under the laws of the United States or any of its political subdivisions,
(3) an estate the income of which is subject to United States federal
income taxation regardless of its source or (4) a trust (x) that is
subject to the supervision of a court within the United States and the
control of one or more United States persons (as defined in Section 7701
(a)(30) of the Internal Revenue Code) or (y) that has a valid election in
effect under applicable U.S. Treasury regulations to be treated as a
United States person; and
- "non-U.S. World Color stockholder," we mean a World Color stockholder who
is not a U.S. person.
Unless otherwise indicated, this summary deals only with World Color
stockholders who are U.S. persons and who hold their shares of World Color
common stock as capital assets. This discussion is based on the Internal Revenue
Code of 1986, as amended, applicable Treasury regulations, and any relevant
administrative rulings or pronouncements or judicial decisions, all as in effect
as of the filing of this document and all of which are subject to change,
possibly with retroactive effect. This discussion does not address all of the
tax consequences that may be relevant to a particular World Color stockholder in
light of that World Color stockholder's specific circumstances, nor does it
discuss the U.S. federal income tax consequences that may be applicable to some
types of World Color stockholders, such as:
- World Color stockholders who have received their shares of World Color
common stock pursuant to the exercise of employee stock options or
otherwise as compensation;
- dealers in securities;
- financial institutions;
- tax-exempt entities;
- life insurance companies;
- persons holding their shares of World Color common stock as a part of a
hedging, integrated, conversion or constructive sale transaction or as
part of a straddle; or
- persons whose functional currency is not the U.S. dollar.
In addition, the following discussion does not discuss the alternative
minimum tax consequences, if any, of an exchange of shares of World Color common
stock pursuant to the merger, or the state, local or foreign tax consequences of
that exchange. Consequently, each World Color stockholder is urged to consult
its own tax adviser in determining the federal, state, local and foreign income
and any other tax consequences of the merger.
THE EXCHANGE
An exchange of World Color common stock for Quebecor Printing subordinate
voting shares and cash in the merger will be a taxable transaction for U.S.
federal income tax purposes. Consequently, an exchanging World Color stockholder
will recognize gain or loss in an amount equal to the difference between (1) the
sum of (x) the fair market value, determined as of the effective time of the
merger, of the Quebecor Printing subordinate voting shares received in the
merger and (y) the amount of cash received in the merger, and (2) the aggregate
tax basis in the shares of World Color common stock exchanged for Quebecor
Printing stock and cash. This gain or loss generally will be:
- calculated separately for each block of shares of World Color common
stock, which means shares of World Color common stock acquired at the same
cost in a single transaction, exchanged in the merger;
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- capital gain or loss; and
- long-term capital gain or loss if the relevant World Color stockholder
held the shares of World Color common stock being exchanged in the merger
for more than one year as of the effective time of the merger.
The long-term capital gains of individuals, estates and specified trusts
generally are eligible for reduced rates of taxation. Capital losses generally
must be used only to offset capital gains.
The tax basis of the Quebecor Printing subordinate voting shares received by
a U.S. person will be equal to their fair market value on the date of the
exchange and the holding period for these shares will commence as of the day
after the date of the exchange.
Payment of the consideration in the merger to non-corporate U.S. persons who
exchange their World Color common stock will be subject to information reporting
requirements and may be subject to back-up withholding at the rate of 31% unless
the holder or beneficial owner provides a taxpayer identification number or
otherwise establishes an exemption.
Any gain realized by a non-U.S. World Color stockholder upon an exchange of
shares of World Color common stock pursuant to the merger generally will not be
subject to U.S. federal income or withholding tax unless:
- the gain is effectively connected with a U.S. trade or business conducted
by the non-U.S. World Color stockholder in the United States;
- in the case of a non-U.S. World Color stockholder who is an individual,
the individual is present in the United States for 183 days or more in the
taxable year during which the merger occurs and various other conditions
are met; or
- in the case of a non-U.S. World Color stockholder who held, directly or
indirectly, more than five percent of the shares of World Color common
stock at any time during the five-year period ending on the date of the
exchange of these shares in the merger, if World Color is or has been a
U.S. real property holding corporation within the meaning of Section
897(c)(2) of the Internal Revenue Code, which World Color does not believe
to be the case.
HOLDING AND DISPOSING OF QUEBECOR PRINTING SUBORDINATE VOTING SHARES
As described below, dividends paid or deemed paid by Quebecor Printing with
respect to subordinate voting shares held by U.S. persons may be subject to
income tax withholding in Canada. U.S. persons will be required to include as
ordinary income for U.S. federal income tax purposes the gross amount of any
dividend paid (before reduction for Canadian income tax withholding) out of
Quebecor Printing's current or accumulated earnings and profits. The dividend
will not be eligible for the dividends-received deduction generally available to
U.S. corporations that receive dividends from other U.S. corporations.
Distributions in excess of current and accumulated earnings and profits (as
determined for U.S. federal income tax purposes) will be treated as a return of
capital to the extent of the U.S. person's tax basis in the shares and
thereafter as capital gain.
Subject to specified limitations, the Canadian tax withheld will be
creditable against the U.S. person's U.S. federal income tax liability. For
foreign tax credit limitation purposes, the amount of the dividend will be
treated as income from sources outside the United States. The rules applicable
to the foreign tax credit are complex and U.S. persons should consult their own
tax advisors to determine whether and to what extent a credit would be
available.
Information reporting requirements will apply to dividends in respect of
Quebecor Printing subordinate voting shares and back-up withholding, at the rate
of 31%, may apply to dividend payments, or other taxable distributions, in
respect of the Quebecor Printing subordinate voting shares
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made within the United States to non-corporate U.S. persons who fail to provide
an accurate taxpayer identification number or if there has been notification by
the Internal Revenue Service of a failure by a holder or beneficial owner to
report interest or dividends required to be shown on its U.S. federal income tax
returns.
Upon a disposition of Quebecor Printing subordinate voting shares, a U.S.
person will recognize gain or loss, which will generally be treated as capital
gain or loss from U.S. sources. The gain or loss will be long-term if the U.S.
person has held the Quebecor Printing subordinate voting shares for more than
one year at the time of disposition. Proceeds on the disposition to or through a
U.S. office of a broker are also subject to information reporting requirements,
and may be subject to back-up withholding unless one U.S. person provides a tax
identification number or otherwise establishes an exemption.
The amount of any back-up withholding from a payment to a U.S. person will
be allowed as a credit against the U.S. person's United States federal income
tax liability.
MATERIAL CANADIAN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Martineau Walker, special Canadian counsel to Quebecor
Printing, the following is a summary of the material Canadian federal income tax
considerations generally applicable to a U.S. person who acquires Quebecor
Printing subordinate voting shares in the merger and who, for the purposes of
the Income Tax Act (Canada) (the "ITA") and the Canada-United States Income tax
Convention (the "Convention"), as applicable and at all relevant times, (1) is
resident in the United States and not resident in Canada, (2) holds Quebecor
Printing subordinate voting shares as capital property, (3) does not have a
"permanent establishment" or "fixed base" in Canada (as defined in the
Convention) and (4) deals at arm's length with Quebecor Printing. Special rules,
which are not discussed below, may apply to "financial institutions" (as defined
in the ITA) and to non-resident insurers carrying on an insurance business in
Canada and elsewhere. A limited liability company may not be, and a partnership
will not be, a resident of the United States for the purposes of the Convention.
This discussion is based on the current provisions of the ITA and the
regulations promulgated under the ITA and the Convention, all specific proposals
to amend the ITA or the regulations promulgated under the ITA announced by or on
behalf of the Canadian Minister of Finance prior to the date of this
registration statement, and the current published administrative practices of
Revenue Canada. It does not otherwise take into account or anticipate any
changes in law or administrative practice nor any income tax laws or
considerations of any province or territory of Canada or any jurisdiction other
than Canada, which may differ from the Canadian federal income tax consequences
described in this document. Accordingly, U.S. persons who hold World Color
common stock should consult their own tax advisors as to the particular Canadian
tax consequences to them of acquiring and holding Quebecor Printing subordinate
voting shares.
Under the ITA and the Convention, dividends paid or credited, or deemed to
be paid or credited, on the Quebecor Printing subordinate voting shares to a
U.S. person who owns less than 10% of Quebecor Printing's voting shares will be
subject to Canadian withholding tax at the rate of 15% of the gross amount of
those dividends or deemed dividends. If a U.S. person is a corporation and owns
10% or more of Quebecor Printing's voting shares, the rate is reduced from 15%
to 5%. As described above, and subject to specified limitations, a U.S. person
may be entitled to credit against U.S. federal income tax liability for the
amount of tax withheld by Canada.
Under the Convention, dividends paid to specified religious, scientific,
charitable and similar tax exempt organizations and specified organizations that
are resident and exempt from tax in the United States and that have complied
with specified administrative procedures are exempt from this Canadian
withholding tax.
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A capital gain realized by a U.S. person on a disposition or deemed
disposition of Quebecor Printing subordinate voting shares will not be subject
to tax under the ITA unless the Quebecor Printing subordinate voting shares
constitute taxable Canadian property within the meaning of the ITA at the time
of the disposition or deemed disposition. In general, the Quebecor Printing
subordinate voting shares will not be "taxable Canadian property" to a U.S.
person if they are listed on a prescribed stock exchange (which includes the
NYSE, The Montreal Exchange and The Toronto Stock Exchange), unless, at any time
within the five-year period immediately preceding the dispositions, the U.S.
person, persons with whom the U.S. person did not deal at arm's length, or the
U.S. person together with those persons, owned or had an interest in or a right
to acquire more than 25% of any class or series of Quebecor Printing's shares.
If the Quebecor Printing subordinate voting shares are taxable Canadian
property to a U.S. person, any capital gain realized on a disposition or deemed
disposition of those Quebecor Printing subordinate voting shares will generally
be exempt from tax under the ITA by virtue of the Convention if the value of the
Quebecor Printing subordinate voting shares at the time of the disposition or
deemed disposition is not derived principally from real property (as defined by
the Convention) situated in Canada. The determination as to whether Canadian tax
would be applicable on a disposition or deemed disposition of Quebecor Printing
subordinate voting shares must be made at the time of the disposition or deemed
disposition.
WORLD COLOR STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM, INCLUDING THE APPLICATION AND
EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS, OF THE MERGER.
PURCHASE ACCOUNTING TREATMENT
Quebecor Printing intends to account for the offer and merger as a purchase
of a business. The purchase price will be allocated to the acquired assets and
assumed liabilities of World Color on the basis of their estimated fair value.
Quebecor Printing's management believes that any excess of cost over the fair
value of the net tangible assets of World Color will be recorded as identified
intangible assets or goodwill.
Quebecor Printing has not yet made a final determination of the intangible
asset lives and required purchase accounting adjustments, including the
allocation of the purchase price to the assets acquired and liabilities assumed
based on their respective fair values. Accordingly, the purchase accounting
adjustments made in connection with the development of the unaudited pro forma
combined financial information appearing elsewhere in this document are
preliminary and were made solely for purposes of developing the unaudited pro
forma combined financial information. Quebecor Printing has completed a number
of preliminary studies to determine the fair value of some of World Color's
assets and liabilities and will make appropriate purchase accounting adjustments
upon finalization of the studies. For financial reporting purposes, we will
include the results of operations of World Color in the Quebecor Printing
consolidated statement of operations following the completion of the offer. See
"UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS."
REGULATORY APPROVALS
HART-SCOTT-RODINO ACT APPROVALS
On July 27, 1999, the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 expired. At any time before or after the effective time
of the merger, and notwithstanding that the Hart-Scott-Rodino waiting period
expired or the merger may have been completed, the Federal Trade Commission, the
Department of Justice, or any state could take any action under the applicable
antitrust or competition laws as it deems necessary or desirable. This type of
action could include seeking to enjoin the completion of the merger or seeking
divestiture of World Color or businesses of
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Quebecor Printing or World Color acquired as a result of the merger. Private
parties may also institute legal actions under the antitrust laws under some
circumstances.
NEW YORK STOCK EXCHANGE, THE TORONTO STOCK EXCHANGE AND THE MONTREAL
EXCHANGE LISTINGS
It is a condition to the completion of the merger that the subordinate
voting shares of Quebecor Printing to be issued in the merger be approved for
listing on the New York Stock Exchange, subject to official notice of issuance,
and on The Toronto Stock Exchange and The Montreal Exchange subject to customary
requirements. The merger agreement provides that Quebecor Printing will use its
reasonable best efforts to cause these shares to be approved for listing on
those exchanges.
REGISTRATION AND RESALES OF QUEBECOR PRINTING SUBORDINATE VOTING SHARES
The Quebecor Printing subordinate voting shares to be issued to stockholders
of World Color under the merger agreement have been registered under the
Securities Act, so these shares may be freely traded without restriction by
people who will not be affiliates, as that term is defined under the Securities
Act, of Quebecor Printing after the merger or who were not affiliates of World
Color on the date of the World Color special meeting. All directors and
specified officers of World Color may be deemed to have been affiliates of World
Color within the meaning of the Securities Act. Affiliates may resell the
Quebecor Printing subordinate voting shares that they receive in the merger only
if the shares are registered for resale under the Securities Act or an exemption
from registration under the Securities Act is available. Those people may be
permitted to resell their shares under the safe harbor provisions of Rule 145
under the Securities Act, or Rule 144 in the case of people who become
affiliates of Quebecor Printing, or as otherwise permitted under the Securities
Act. We recommend that any people who may be deemed to be affiliates obtain
advice of securities counsel before making any resales.
The merger agreement provides that, prior to the effective time of the
merger, World Color will deliver to Quebecor Printing a letter identifying all
people who are affiliates of World Color for purposes of Rule 145 under the
Securities Act and that, prior to the closing of the merger, World Color will
use its reasonable best efforts to cause each of its affiliates to deliver a
written agreement to the effect that person will not offer or sell or otherwise
dispose of any of the Quebecor Printing subordinate voting shares received in
the merger in violation of the Securities Act or the rules and regulations under
the Securities Act.
This document does not cover resales of Quebecor Printing subordinate voting
shares received by any person who may be deemed to be an affiliate of Quebecor
Printing or World Color.
By virtue of available statutory prospectus exemptions under the securities
laws of certain provinces of Canada, Quebecor Printing subordinate voting shares
to be issued to World Color stockholders in connection with the merger will be
freely resalable in Canada by a former holder of World Color common stock, other
than a holder who is a "control person," provided that no unusual effort is made
to prepare the market for any resale of that type or to create a demand for the
securities which are the subject of any such resale and no extraordinary
commission or consideration is paid in respect of that resale. Applicable
Canadian securities legislation establishes a rebuttable presumption that a
person or company is a "control person" in relation to an issuer where the
person or company alone or in combination with others holds more than 20% of the
outstanding voting securities of the issuer.
In addition, Quebecor Printing has agreed to obtain and to provide evidence
reasonably satisfactory to World Color of all necessary rulings or orders of
Canadian securities regulatory authorities exempting the distribution by
Quebecor Printing of the subordinate voting shares issuable in connection with
the merger and the resale of those shares from the registration and prospectus
delivery requirements and resale restrictions of other applicable Canadian
securities laws on terms reasonably satisfactory to World Color.
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APPRAISAL RIGHTS
The following discussion is not a complete statement of the law pertaining
to appraisal rights under the Delaware General Corporation Law and is qualified
in its entirety by the full text of Section 262, which is reprinted in its
entirety as Annex C to this proxy statement/prospectus. All references in
Section 262 and in this summary to a "stockholder" are to the record holder of
shares of World Color stock as to which appraisal rights are asserted.
Holders of shares of World Color stock who do not vote in favor of the
adoption of the merger agreement and who properly demand appraisal of their
shares are entitled to appraisal rights under Section 262 of the Delaware
General Corporation Law. A World Color stockholder having a beneficial interest
in shares of World Color stock held of record in the name of another person,
such as a broker or nominee, must act promptly to cause the record holder to
follow the steps summarized below properly and in a timely manner to perfect
whatever appraisal rights the beneficial owner may have.
Under the Delaware General Corporation Law, World Color stockholders who do
not wish to accept, pursuant to the merger, the cash and Quebecor Printing
subordinate shares in exchange for their shares of World Color stock and who
follow the procedures set forth in Section 262 will be entitled to have their
shares of World Color stock appraised by the Delaware Court of Chancery and to
receive payment in cash of the "fair value" of their shares of World Color
stock, exclusive of any element of value arising from the accomplishment or
expectation of the merger, together with a fair rate of interest, if any, as
determined by that court.
Under Section 262, where a merger is to be submitted for adoption at a
meeting of stockholders, as in the case of the adoption of the merger agreement
by World Color stockholders, the corporation, not less than 20 days prior to the
meeting, must notify each of its stockholders entitled to appraisal rights that
such appraisal rights are available and include in that notice a copy of Section
262. THIS PROXY STATEMENT/PROSPECTUS SHALL CONSTITUTE THE REQUIRED NOTICE TO THE
HOLDERS OF WORLD COLOR STOCK AND THE APPLICABLE STATUTORY PROVISIONS OF THE
DELAWARE GENERAL CORPORATION LAW ARE ATTACHED TO THIS DOCUMENT AS ANNEX C.
Any stockholder who wishes to exercise his appraisal rights, or who wishes
to preserve his right to do so, should review the following discussion and Annex
C carefully because failure to timely and properly comply with the specified
procedures will result in the loss of appraisal rights under the Delaware
General Corporation Law.
A World Color stockholder wishing to exercise his appraisal rights must:
- deliver to the Secretary of the World Color, before the vote on the merger
agreement at the special meeting, a written demand for appraisal of his
shares of World Color stock and
- not vote his shares of stock in favor of the adoption of the merger
agreement. Because a proxy which does not contain voting instructions
will, unless revoked, be voted for adoption of the merger agreement, a
holder of shares of World Color stock who votes by proxy and who wishes to
exercise his appraisal rights must
- vote in person against adoption of the merger agreement
- abstain from voting in person on the adoption of the merger agreement.
- not return a proxy card and not vote in person in favor of the
adoption of the merger agreement or
- return a proxy card with the "Against" or "Abstain" box checked.
Neither voting (in person or by proxy) against, abstaining from voting on or
failing to vote on the proposal to adopt the merger agreement will constitute a
written demand for appraisal within the
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meaning of Section 262. The written demand for appraisal must be in addition to
and separate from any such proxy or vote. In addition, a World Color stockholder
wishing to exercise his or her appraisal rights must hold of record such shares
of World Color stock on the date the written demand for appraisal is made and
must continue to hold these shares of World Color stock until the effective time
of the merger.
Only a holder of record of shares of World Color stock is entitled to assert
appraisal rights for the shares of World Color stock registered in that holder's
name. A demand for appraisal should be executed by or on behalf of the holder of
record, fully and correctly, as his or her name appears on the stock
certificate(s). If the shares of World Color stock are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian, execution of
the demand should be made in that capacity, and if the shares of World Color
stock are owned of record by more than one person, as in a joint tenancy and
tenancy in common, the demand should be executed by or on behalf of all joint
owners. An authorized agent, including one or more joint owners, may execute a
demand for appraisal on behalf of a holder of record; however, the agent must
identify the record owner or owners and expressly disclose the fact that, in
executing the demand, the agent is agent for such owner or owners. A record
holder such as a broker who holds shares of World Color stock as nominee for
several beneficial owners may exercise appraisal rights with respect to the
shares of World Color stock held for one or more beneficial owners while not
exercising such rights with respect to the shares of World Color stock held for
other beneficial owners. In that case, the written demand should set forth the
number of shares of World Color stock as to which appraisal is sought and when
no number of shares of World Color stock is expressly mentioned the demand will
be presumed to cover all shares of World Color stock held in the name of the
record owner. World Color stockholders who hold their shares of World Color
stock in brokerage accounts or other nominee forms and who wish to exercise
appraisal rights are urged to consult with their brokers to determine the
appropriate procedures for the making of a demand for appraisal by such a
nominee.
ALL WRITTEN DEMANDS FOR APPRAISAL SHOULD BE DELIVERED TO JENNIFER L. ADAMS,
SECRETARY OF WORLD COLOR, EITHER IN PERSON OR BY MAIL (CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, BEING THE RECOMMENDED FORM OF TRANSMITTAL) ADDRESSED TO HER
AT: WORLD COLOR PRESS, INC., THE MILL, 340 PEMBERWICK ROAD, GREENWICH,
CONNECTICUT 06831. WITHIN TEN DAYS AFTER THE EFFECTIVE TIME, THE SURVIVING
CORPORATION MUST SEND A NOTICE AS TO THE EFFECTIVENESS OF THE MERGER TO EACH
FORMER STOCKHOLDER OF WORLD COLOR WHO HAS MADE A WRITTEN DEMAND FOR APPRAISAL
AND WHO HAS NOT VOTED IN FAVOR OF THE ADOPTION OF THE MERGER AGREEMENT.
Within ten days after the effective time of the merger, the surviving
corporation must notify each holder of World Color common stock who has complied
with Section 262 and who has not voted in favor of the adoption of the merger
agreement of the date the merger became effective.
Within 120 days after the effective time of the merger, but not thereafter,
the surviving corporation, or any World Color stockholder who is entitled to
appraisal rights under Section 262 and has complied with the requirements of
Section 262, may file a petition in the Delaware Court of Chancery demanding a
determination of the fair value of the shares of World Color stock. The
corporation surviving the merger is under no obligation to and has no present
intention to file a petition in respect to the appraisal of the fair value of
the shares of World Color stock. Accordingly, it is the obligation of the World
Color stockholders to initiate all necessary action to perfect their appraisal
rights within the time prescribed in Section 262.
Within 120 days after the effective time of the merger, any World Color
stockholder who complied with the requirements under Section 262 for exercise of
appraisal rights will be entitled, upon written request, to receive from the
surviving corporation a statement listing the aggregate number of shares of
World Color stock with respect to which demands for appraisal have been received
and which have not voted in favor of approval and adoption of the merger and the
merger agreement, and the aggregate
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number of holders of those shares of World Color stock. Those statements must be
mailed within ten days after the surviving corporation receives a written
request for the statements.
If a petition for appraisal is correctly filed by a holder of shares of
World Color stock and a copy of that petition is delivered to the surviving
corporation, the surviving corporation will then be obligated within 20 days to
provide the Delaware Court of Chancery with a duly verified list containing the
names and addresses of all holders of shares of World Color stock who have
demanded appraisal of their shares. After notice to those holders of shares of
World Color stock, the Delaware Court of Chancery is empowered to conduct a
hearing on the petition to determine those shareholders who have complied with
Section 262 and who have become entitled to appraisal rights under that section.
The Delaware Court of Chancery may require the World Color stockholders who have
demanded payment for their shares of World Color stock to submit their stock
certificates to the Register in Chancery for a notation on the certificates of
the pendency of the appraisal proceedings; and if any World Color stockholder
fails to comply with such direction, the Delaware Court of Chancery may dismiss
the proceedings as to that World Color stockholder.
After determining the World Color stockholders entitled to an appraisal, the
Delaware Court of Chancery will appraise the "fair value" of their shares,
exclusive of any element of value arising from the accomplishment or expectation
of the merger, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. World Color stockholders considering
seeking appraisal should be aware that the fair value of their shares of World
Color stock as determined under Section 262 could be more than, the same as or
less than the consideration they would receive pursuant to the merger agreement
if they did not seek appraisal of their shares of World Color stock and that
investment banking opinions as to fairness from a financial point of view are
not necessarily opinions as to fair value under Section 262.
The Delaware Supreme Court has stated that "proof of value by any techniques
or methods which are generally considered acceptable in the financial community
and otherwise admissible in court" should be considered in the appraisal
proceedings. In addition, Delaware courts have decided that the statutory
appraisal remedy, depending on factual circumstances, may or may not be a
dissenter's exclusive remedy. The Court also will determine the amount of
interest, if any, to be paid upon the amounts to be received by persons whose
shares of World Color stock have been appraised. The costs of the action may be
determined by the Court and taxed upon the parties as the Court deems equitable.
The Court also may order that all or a portion of the expenses incurred by any
stockholder in connection with an appraisal, including, without limitation,
reasonable attorneys' fees and the fees and expenses of experts utilized in the
appraisal proceeding, be charged pro rata against the value of all of the World
Color shares that have effectively pursued appraisal.
Any World Color stockholder who has demanded an appraisal in compliance with
Section 262 will not be entitled, after the effective time of the merger, to
vote the shares subject to the appraisal demand for any purpose or be entitled
to the payment of dividends or other distributions, if any, on those shares,
except dividends or other distributions, other than the merger consideration,
payable to holders of record of shares of World Color stock as of a date prior
to the effective time.
If any World Color stockholder who demands appraisal of his shares of World
Color stock under Section 262 fails to perfect, or effectively withdraws or
loses, his right to appraisal as provided in the Delaware General Corporation
Law, the shares of World Color stock of that stockholder will be converted into
the right to receive the merger consideration under with the merger agreement. A
World Color stockholder will fail to perfect, or effectively lose or withdraw,
his right to appraisal if he votes for the adoption of the merger agreement,
submits a proxy without voting instructions, if no petition for appraisal is
filed within 120 days after the effective time of the merger or if the World
Color stockholder delivers to World Color a written withdrawal of his demand for
appraisal and an acceptance of the merger. Any World Color stockholder who has
demanded appraisal rights may
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withdraw his demand up to sixty days after the effective time of the merger. Any
attempt to withdraw made more than 60 days after the effective time will require
the written approval of the surviving corporation. Notwithstanding the above, no
Court of Chancery appraisal proceeding may be dismissed without the Court's
approval, which may be conditioned on terms the Court deems just.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DELAWARE GENERAL
CORPORATION LAW FOR PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH
RIGHTS.
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THE MERGER AGREEMENT
This section describes the material terms of the merger agreement and other
agreements entered into among various other parties in connection with the
proposed transaction. This description is not complete and is qualified by
reference to the copy of the merger agreement attached as Annex A to this
document, and which is incorporated by reference. World Color stockholders are
encouraged to read the merger agreement in its entirety.
THE TENDER OFFER
The terms of the merger agreement provide for Quebecor Printing, through its
indirect wholly owned subsidiary, Printing Acquisition to make a tender offer
for up to 23,500,000 shares of World Color common stock. Printing Acquisition
began the tender offer on July 16, 1999. On August 20, 1999, Printing
Acquisition purchased 19,179,495 shares of World Color common stock,
representing approximately 50.4% of the shares of World Color common stock
outstanding.
BOARD OF DIRECTORS
Under the merger agreement, Quebecor Printing appointed new directors to the
World Color board upon the completion of the tender offer and two previous
directors of World Color continued as directors following the tender offer.
Biographical information with respect to the new directors is set forth under
"THE MERGER--Board Of Directors".
THE MERGER
When the merger occurs, Printing Acquisition will be merged with and into
World Color. The separate corporate existence of Printing Acquisition will end,
World Color will continue as the surviving corporation and will succeed to and
assume all the rights and obligations of Printing Acquisition. As a result of
the merger, World Color will continue as the surviving corporation and a wholly
owned subsidiary of Quebecor Printing. At the effective time of the merger:
- the World Color certificate of incorporation as in effect immediately
before the effective time of the merger will be amended to read in its
entirety as set forth in exhibit A to the merger agreement, a copy of
which is included in Annex A, and, as so amended, will be the certificate
of incorporation of the surviving corporation;
- the by-laws of Printing Acquisition will be the by-laws of the surviving
corporation; and
- the directors of Printing Acquisition immediately before the effective
time of the merger will be the initial directors of the surviving
corporation and the officers of World Color immediately before the
effective time of the merger will be the initial officers of the surviving
corporation.
EFFECTIVE TIME OF THE MERGER
The merger will become effective when we file the certificate of merger with
the Secretary of State of the State of Delaware. We may, however, agree to a
later time, and specify that time in the certificate of merger. We will file the
certificate of merger as soon as practicable after the satisfaction or waiver of
the conditions contained in the merger agreement. We expect to complete the
merger shortly after the stockholder meetings. See "--Conditions Precedent To
Merger."
STOCK OPTIONS
We have described the merger agreement's treatment of options to purchase
shares of World Color common stock in "Interests of World Color Officers And
Directors in the Merger." The merger agreement also provides that, except as
provided in the merger agreement or as otherwise agreed to by
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the parties, the stock plans and any other plan, program or arrangement
providing for the issuance or grant of any other interest in respect of the
capital stock of World Color or any subsidiary will terminate as of the
effective time of the merger. World Color will ensure that after the effective
time of the merger, no holder of a World Color stock option nor any participant
in any stock plan will have any right under the plan to acquire equity
securities of World Color or the surviving corporation. With respect to World
Color stock options, according to the merger agreement, Quebecor Printing, at
the expiration of the tender offer, paid the cash portion of the amount payable
in consideration of the cancellation of the World Color stock options.
PROCEDURES FOR EXCHANGE OF CERTIFICATES
Promptly after the effective time of the merger, Harris Trust Company of New
York, as the exchange agent, will mail a letter of transmittal to each record
holder of World Color common stock as of the effective time of the merger. You
should use this letter of transmittal in forwarding World Color stock
certificates or, if you hold shares in book-entry form, you should return this
letter. This letter will include instructions for exchanging World Color share
certificates and book-entry shares for Quebecor Printing share certificates and
cash. After surrendering to the exchange agent a duly executed letter of
transmittal, together with a World Color stock certificate if you hold
certificates, you will be entitled to receive a Quebecor Printing share
certificate and cash.
Neither Quebecor Printing nor the exchange agent will pay or accrue any
interest for the benefit of holders of World Color common stock on cash payable
as merger consideration or cash payable pursuant to dividends or distributions
with respect to unexchanged shares.
If you want any certificate for Quebecor Printing subordinate voting shares
to be issued to, or any cash paid to, a person other than the registered holder
of the World Color shares being exchanged for those certificates and cash, the
surrendered World Color certificates or, in the case of holders of shares in
book-entry form, the letter of transmittal must be properly endorsed or
otherwise in proper form for transfer. In addition, the person requesting the
payment must have paid any transfer and other taxes required by reason of the
issuance of Quebecor Printing subordinate voting shares certificates to a person
other than the registered holder of the World Color shares, or must have
established to the satisfaction of the surviving corporation that the required
tax either has been paid or is not applicable. In the event of a transfer of
ownership of World Color common stock that is not registered in the transfer
records of World Color, the exchange agent may issue to the transferee one or
more Quebecor Printing subordinate voting shares evidencing, in the aggregate,
the proper number of shares of Quebecor Printing stock and a check in the proper
amount of cash to which the record holder is entitled pursuant to the merger
agreement, if the certificate representing the shares of World Color common
stock, or in the case of book-entry holders, the letter of transmittal, is
presented to the exchange agent, accompanied by all documents required to
evidence and effect the transfer and to evidence that any applicable stock
transfer taxes have been paid.
Any share certificates and cash deposited with the exchange agent that
remain unclaimed by former World Color stockholders one year after the effective
time of the merger will be delivered to the surviving corporation. Any former
World Color stockholder who has not complied with the exchange procedures before
the first anniversary of the merger may look only to the surviving corporation,
subject to abandoned property, escheat or other similar laws, for payment of the
merger consideration and any dividends or distributions with respect to the
Quebecor Printing subordinate voting shares payable upon due surrender of their
shares.
Any portion of the exchange fund remaining unclaimed by former World Color
stockholders five years after the effective time of the merger or an earlier
date immediately before the time that any amounts would otherwise escheat to or
become property of any governmental entity, will, to the extent permitted by
law, become the property of the surviving corporation free and clear of any
claims or
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interest of any person previously entitled to it. None of Quebecor Printing,
Printing Acquisition, World Color, the surviving corporation or the exchange
agent will be liable to any person for any merger consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
At the effective time of the merger, World Color will close its stock
transfer books and there will be no further transfers on the transfer books of
shares of World Color common stock that were outstanding immediately before the
merger.
From and after the effective time of the merger, the holders of certificates
or book-entry shares, evidencing ownership of shares of World Color common stock
outstanding immediately before the effective time of the merger will cease to
have any rights with respect to those shares except as otherwise provided for in
the merger agreement or by applicable law.
In addition to the merger consideration, the holder surrendering a World
Color stock certificate or book-entry shares will receive dividends or other
distributions on the Quebecor Printing shares that have a record date after the
effective time of the merger and a payment date before the holder surrenders the
World Color common stock certificate or, in the case of book-entry holders, the
letter of transmittal. However, Quebecor Printing will not pay any dividends or
other distributions until the holder of the World Color common stock certificate
surrenders that certificate or, in the case of book-entry holders, the letter of
transmittal.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains various customary representations and
warranties of Quebecor Printing and World Color, including representations as
to:
- organization, qualification and authority;
- subsidiaries;
- capitalization;
- Securities Act and Exchange Act filings;
- litigation;
- employee relations and benefits;
- taxes;
- required compliance with laws;
- properties;
- environmental matters;
- intellectual property;
- insurance; and
- Year 2000 compliance.
Quebecor Printing also made representations and warranties to World Color
that it would have sufficient funds available to it to purchase the shares of
World Color common stock as well as to its non-ownership of shares of World
Color stock at the time of signing the merger agreement.
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COVENANTS RELATING TO THE CONDUCT OF BUSINESS
WORLD COLOR
World Color agreed that prior to the effective time of the merger, unless
Quebecor Printing otherwise agrees in writing, such agreement not be
unreasonably withheld, except as set forth in the merger agreement, it will use
its reasonable efforts to carry on, its and its subsidiaries' respective
businesses in the ordinary course of business and consistent with past practice,
and has agreed that except in connection with the adoption by World Color of a
shareholder rights plan that would not be applicable to, or adversely affect the
transactions contemplated by the merger agreement, neither World Color nor any
of its subsidiaries would:
- issue, sell, pledge, dispose of or encumber:
- any additional shares of, or any options, warrants, conversion
privileges or rights of any kind to acquire any shares of, its capital
stock, or
- material assets except in the ordinary course of business;
- amend or propose to amend its certificate or articles of incorporation or
similar governing instruments;
- split, combine or reclassify any outstanding shares, or declare, set aside
or pay any dividend or other distribution, payable in cash, stock,
property or otherwise redeem, purchase or acquire, or offer to acquire any
shares of World Color common stock or other securities of World Color; or
- enter into or modify any contract, agreement, commitment or arrangement
with respect to any of the matters set forth in this section.
World Color also agreed that neither it nor any of its subsidiaries would:
- acquire any corporation, partnership or other business organization or
division or material assets of such an entity for aggregate consideration
in excess of $25,000,000;
- incur indebtedness for borrowed money or issue any debt securities except
the borrowing of working capital in the ordinary course of business and
consistent with past practice;
- enter into or materially modify any contract, agreement, commitment or
arrangement with respect to any of the foregoing;
- enter into or modify any employment, severance or similar agreements or
arrangements with, or grant any bonuses, salary increases, severance or
termination pay to, any officers, directors or employees; or
- adopt or amend any bonus, profit sharing, compensation, stock option,
pension, retirement, deferred compensation, employment or other employee
benefit plan, agreement, trust, fund or arrangement for the benefit or
welfare of any officer, director or employee, other than:
- in the ordinary course of business consistent with past practice for
the benefit or welfare of any employee,
- for the purpose of accelerating the vesting of restricted stock and
stock options,
- to the extent required by law, or
- with respect to new hires or promotions in the ordinary course of
business.
World Color agreed to use reasonable efforts to:
- cause its current insurance (or reinsurance) policies not to be canceled
or terminated;
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- not permit any of the coverage under the policies to lapse, unless
replaced with policies underwritten by insurance and reinsurance companies
of nationally recognized standing;
- cause each of its subsidiaries to use reasonable efforts, to keep
substantially intact their respective business organizations and goodwill;
and
- keep available the services of their officers and employees as a group and
maintain their present relationships with suppliers and customers and
others having business relationships with them.
World Color also agreed not to make awards of restricted stock or grants of
options.
QUEBECOR PRINTING
Quebecor Printing agreed that prior to the effective time of the merger,
unless World Color otherwise agreed in writing, such consent not to be
unreasonably withheld, Quebecor Printing would not:
- declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, except that it may
continue the declaration and payment of regular quarterly cash dividends,
with usual record and payment dates and in accordance with its past
dividend policy;
- split, combine or reclassify or otherwise alter the Quebecor Printing
subordinate voting shares or any other class 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;
- purchase, redeem or otherwise acquire Quebecor Printing subordinate voting
shares or any other class of its capital stock or other securities
convertible into or exchangeable for those shares; or
- authorize for issuance, issue, deliver or sell for below market value any
Quebecor Printing subordinate voting shares or any other class of its
capital stock other then non-voting preferred stock or other securities
convertible into or exchangeable for such shares, except upon the
conversion of Quebecor Printing multiple voting shares, the grant of
options issued in the ordinary course of business pursuant to existing
Quebecor Printing options plans or the exercise of stock options.
MEETINGS
World Color agreed to take all action necessary in accordance with and
subject to applicable law and its charter and by-laws to convene a meeting of
its stockholders promptly after the consummation of the tender offer, or if the
parties terminated the tender offer and decided to complete a one-step merger,
as promptly as practicable, to consider and vote upon the merger agreement.
World Color agreed to use all reasonable efforts to obtain the necessary
adoption of the merger agreement by the stockholders of World Color, subject to
the exercise of fiduciary duties by World Color's board of directors under
applicable law. Quebecor Printing agreed to vote all of its World Color shares
for the adoption of the merger agreement.
NO PURCHASE OF SHARES AND VOTING AGREEMENTS
Between August 20, 1999, the date of the completion of the tender offer, and
the date of the World Color stockholders meeting, Quebecor Printing agreed to
not sell, transfer, dispose of or encumber in any manner or otherwise subject to
any voting or other agreement with any party any of the shares of World Color
common stock they purchased in the tender offer or any voting rights with
respect to those shares.
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Between July 12, 1999 and the effective time of the merger, Quebecor
Printing agreed that neither it nor any of its subsidiaries will acquire, or
agree to acquire, whether in the open market or otherwise, any rights in any
securities of World Color other than pursuant to the tender offer or the merger.
PROXY STATEMENT AND REGISTRATION STATEMENT; CANADIAN EXEMPTION
World Color agreed to file, and filed, this proxy statement with the SEC
under the Securities Exchange Act by August 6, 1999, and agreed to use all
reasonable efforts to have it cleared by the SEC, in each case at the earliest
practicable date. Quebecor Printing and World Color agreed to cooperate with
each other and exchange information in the preparation of this proxy statement.
Subject to fiduciary duties, World Color agreed that the proxy statement shall
contain the determination and recommendation of the board of directors of World
Color.
Quebecor Printing agreed to register the subordinate voting shares to be
issued in the merger under the Securities Act on a Form F-4 registration
statement of which this proxy statement/prospectus is a part. As soon as
practicable following the date of the merger agreement, but in no event later
than August 6, 1999, Quebecor Printing agreed to prepare and file, and filed,
with the SEC the Form F-4. Quebecor Printing agreed to use its reasonable best
efforts to respond promptly to any comments of the SEC and to have the Form F-4
declared effective under the Securities Act as promptly as practicable after
filing and to use its reasonable best efforts to include the World Color proxy
statement in the submission of the Form F-4 to the SEC. Quebecor Printing agreed
to advise World Color, promptly after it receives notice, of:
- the time when this registration statement becomes effective;
- when it files any supplement or amendment to this registration statement;
- the issuance of any stop order, the suspension of the qualification of the
Quebecor Printing subordinate voting shares issuable in connection with
the merger for offering or sale in any jurisdiction;
- any request by the SEC for amendment of the Form F-4 or any related
comments and responses; and
- requests by the SEC for additional information.
Quebecor Printing agreed to obtain and to provide evidence reasonably
satisfactory to World Color of all necessary rulings or orders of Canadian
securities regulatory authorities exempting the distribution by Quebecor
Printing of the subordinate voting shares issuable in connection with the merger
and the resale of those shares from the registration and prospectus delivery
requirements and resale restrictions of Canadian securities laws on terms
reasonably satisfactory to World Color.
Quebecor Printing agreed to use its reasonable best efforts to have any
approval by the shareholders of Quebecor Printing that may be required by the
rules and regulations of the New York Stock Exchange, The Montreal Exchange and
The Toronto Stock Exchange waived by the exchanges, and if any such waiver is
not obtained, Quebecor Printing agreed to, as soon as practicable following the
date of the merger agreement, take all action necessary in accordance with
applicable law or exchange rules to obtain the required shareholder approval.
ADDITIONAL EFFORTS
World Color, Printing Acquisition and Quebecor Printing agreed to use all
reasonable efforts to take all actions and to do all things necessary, proper or
advisable to consummate and make effective, as promptly as practicable, the
transactions contemplated by the tender offer and the merger agreement,
including cooperating with each other, using reasonable efforts to obtain all
necessary
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waivers, consents and approvals and making all necessary registrations and
filings, including all submissions of information requested by governmental
authorities.
ACQUISITION PROPOSALS
World Color agreed that, from the date of the merger agreement until its
termination, except as described below:
- it and its subsidiaries will not directly or indirectly make, solicit,
initiate or encourage submission of proposals or offers from any persons,
including any of its officers or employees, with respect to an acquisition
proposal;
- will immediately cease and cause the termination of all discussions or
negotiations with third parties with respect to any acquisition proposal;
- promptly notify Quebecor Printing after receipt of any actual acquisition
proposal or any inquiry from any person relating to an acquisition
proposal; and
- promptly provide Quebecor Printing with a reasonable summary of the
financial and other material terms of the acquisition proposal.
For the purposes of the merger agreement, an acquisition proposal means any
proposal or offer involving liquidation, dissolution, recapitalization, merger,
consolidation or acquisition or purchase of all or substantially all of the
assets of, or equity interest in, World Color or other similar transaction or
business combination involving World Color or its material subsidiaries.
To the extent that World Color's board of directors concludes, acting in
good faith, after receiving advice from outside legal counsel or its financial
advisors that the following action is necessary or appropriate in order to act
in a manner which is consistent with its fiduciary duties under applicable law,
it may:
- furnish or cause to be furnished information to third parties concerning
itself and its businesses, properties or assets;
- engage in discussions or negotiations with a third party regarding an
acquisition proposal initiated by a third party;
- following receipt of an acquisition proposal, take or disclose to its
stockholders a position contemplated by Rule 14e-2(a) under the Exchange
Act or otherwise make disclosure to World Color's stockholders; and
- withdraw, modify or amend its recommendation of the transactions
contemplated by the merger agreement, and/or enter into an agreement
providing for the consummation of an acquisition proposal.
EMPLOYEE COMPENSATION AND BENEFITS
Effective no later than the effective time of the merger, World Color, or
Quebecor Printing as applicable, will enter into agreements and adopt plans or
programs, the terms and conditions of which are set forth in a schedule to the
merger agreement. The terms of the agreements are described elsewhere in this
document. See "THE MERGER--Employment Agreements."
QUEBECOR PRINTING GUARANTEE
Quebecor Printing unconditionally and irrevocably guaranteed to World Color
the due, prompt and faithful performance of, and compliance with, all agreements
and obligations of its subsidiary Printing
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Acquisition under the merger agreement. Quebecor Printing agreed that World
Color will have the right to enforce this guarantee without first having to
proceed against Printing Acquisition.
CONDITIONS PRECEDENT TO MERGER
The respective obligations of World Color, Printing Acquisition and Quebecor
Printing to complete the merger are subject to the following conditions:
- obtaining the approval of the World Color stockholders, which is assured;
- this Form F-4 will be effective under the Securities Act and will not be
the subject of any actual or threatened stop order or proceedings seeking
a stop order by the SEC or any state securities administration preventing
the merger, and Quebecor Printing will have received all necessary rulings
or orders of Canadian securities authorities exempting the distribution by
Quebecor Printing of the Quebecor Printing subordinate voting shares
issuable in connection with the merger and the resale of those shares from
the registration and prospectus delivery requirements and resale
restrictions of applicable Canadian securities laws;
- the Quebecor Printing subordinate voting shares issuable to World Color's
stockholders and holders of World Color stock options will be approved for
listing on the New York Stock Exchange subject to official notice of
issuance, and on The Toronto Stock Exchange and The Montreal Exchange
subject to customary requirements;
- no law, statute, rule or regulation in the United States, Canada, the
European Union or any member state of the European Union was enacted or
promulgated which is in effect and, in the judgment of a majority of the
continuing directors, has the effect of making the acquisition of shares
of World Color common stock illegal or otherwise prohibits consummation of
the merger; and
- there is not in effect any preliminary or final injunction or temporary
restraining order or other order or decree issued by any federal,
provincial or state court or administrative agency or authority in the
United States, Canada, the European Union or any member state of the
European Union enjoining, restraining or otherwise prohibiting the tender
offer, the merger or the acquisition by Printing Acquisition Inc. of
shares of World Color common stock.
TERMINATION
Either company can terminate the merger agreement at any time if any federal
or state court in the United States or federal or provincial court in Canada
issues a permanent injunction or other final, non-appealable order which
prohibits the completion of the merger, which order is issued and remains in
effect, however, prior to invoking this right of termination each party agrees
to comply with the actions described in "--Additional Efforts."
Neither party can terminate the merger agreement if the event which gave
rise to the right to terminate is a result of or arose in connection with any
action or inaction of the party seeking to terminate in breach of the terms of
the merger agreement.
TERMINATION FEES
The merger agreement provided for World Color to pay a termination fee of
either $10,622,000 or $42,648,000 under specified circumstances if the merger
agreement had been terminated prior to the completion of the offer. The
termination fee would have been payable, among other circumstances, if the World
Color board of directors withdrew or modified its recommendation or approved or
recommended a competing transaction.
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EXPENSES
Each party will bear its own expenses in connection with the merger
agreement and the transactions contemplated by the merger agreement.
AMENDMENTS
The parties may amend the merger agreement before the merger, if the
amendment is in writing and signed by each of the parties. After the World Color
stockholders have approved the merger, the parties cannot make any amendment to
the merger agreement which would reduce the amount or change the type of merger
consideration.
TENDER, VOTING AND OPTION AGREEMENT
KKR Partners II, L.P., APC Associates, L.P., GR Associates L.P., KKR
Associates and Robert G. Burton, Marc L. Reisch, Jennifer L. Adams, Robert B.
Lewis and James E. Lillie, who are employees and executive officers of World
Color entered into a tender, voting and option agreement dated as of July 12,
1999 with Quebecor Printing. In this agreement, the parties, other than Quebecor
Printing, agreed to validly tender in the offer, and not withdraw, all shares
which they owned, which constituted approximately 24% of the shares of World
Color stock currently outstanding. No party would be required to tender their
shares if so doing would subject them to liability under Section 16 of the
Securities Exchange Act. Each stockholder agreed that, at any meeting of World
Color's stockholders, however called, they would:
- attend in person or via proxy;
- vote the their shares of World Color common stock in favor of the merger
and the merger agreement; and
- vote their shares of World Color common stock against any action which
would reasonably be expected to result in a failure of the conditions to
closing described in the merger agreement.
The tender, voting and option agreement also provides that the obligations
of the stockholders would terminate on the first to occur of the:
- consummation of the merger;
- termination of the merger agreement;
- irrevocable approval of the respective shareholders of Quebecor Printing,
if required; or
- termination of the tender offer without the purchase of the shares of
World Color common stock.
The stockholders also granted Quebecor Printing an irrevocable option to
purchase all, but not less than all, of the stockholders' shares or World Color
stock, at a price of $35.69 per share, exercisable only in the event of a
triggering event, as explained in the next paragraph, and notice of the exercise
is timely delivered.
In consideration of certain stockholders affiliated with KKR entering into
the tender, voting and option agreement, World Color has agreed to indemnify
these stockholders against various liabilities relating to or arising out of the
transactions contemplated by the merger agreement or any acquisition proposal as
described above in "--Acquisition Proposals."
STOCK OPTION AGREEMENT
Quebecor Printing and World Color entered into a stock option agreement
dated as of July 12, 1999 under which World Color granted Quebecor Printing the
option to purchase up to a specified
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amount of shares of World Color common stock at $35.69 per share. The option
would have been exercisable only if a termination fee as described in
"--Termination Fees" became payable and notice of such exercise was timely
received by World Color. The number of shares underlying the option was to be
determined based on the event triggering the right to exercise the option,
ranging from 9.9% to 19.9% of the then outstanding shares of World Color.
REGISTRATION RIGHTS AGREEMENT
Quebecor Printing and KKR Partners II, L.P., APC Associates, L.P., GR
Associates L.P., KKR Associates entered into a registration rights agreement
dated as of July 12, 1999 pursuant to which Quebecor Printing agreed, at its
expense, to file a shelf registration statement with the appropriate authorities
covering shares of Quebecor Printing issued to the KKR affiliates pursuant to
the merger agreement. The agreement contains customary terms for such
agreements, including indemnification provisions and provisions granting the KKR
affiliates the right to request inclusion of the issued shares in a registration
of Quebecor Printing securities, other than a registration with the SEC under
Form F-4 or F-8, if the shelf registration is not effective at the time of such
registration. The registration rights agreement will become effective upon the
issuance of shares of Quebecor Printing to World Color stockholders. Because the
KKR affiliates tendered all of their shares in the tender offer, they will not
receive any Quebecor Printing subordinate voting shares in the merger, and will
therefore not own any shares of Quebecor Printing to register under this
registration rights agreement.
AGREEMENTS OF CERTAIN QUEBECOR PRINTING SHAREHOLDERS
Quebecor Inc., which holds a majority of the voting securities of Quebecor
Printing, has agreed that, if the transactions contemplated by the merger
agreement are subject to the approval of the shareholders of Quebecor Printing,
Quebecor Inc. would consent to these transactions either by voting in favor of
them at a duly convened meeting of shareholders, consenting in writing or
otherwise.
Caisse de depot et placement du Quebec, a Quebec governmental entity that
manages provincial pension funds, has an equity investment in Quebecor Printing,
as well as rights under a shareholder's agreement with Quebecor Inc., which
entitles Caisse to at least two representatives on Quebecor Printing's board of
directors, as well as other rights. Caisse has consented to the merger and the
issuance and listing on the New York Stock Exchange, The Toronto Stock Exchange
and The Montreal Exchange of the Quebecor Printing subordinate voting shares
that will be issued in connection with the merger. In addition, Quebecor Inc.
and Caisse have waived preemptive rights that they have in connection with the
issuance of these shares. See "DESCRIPTION OF SHARE CAPITAL" for a more detailed
description of these agreements and rights.
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UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Quebecor Printing's fiscal year ends on December 31 and its second quarter
ends on June 30. World Color's 1998 fiscal year comprised the 52 week period
ended on December 27, 1998 and its second quarter comprised the 26 week period
ended on June 27, 1999.
The unaudited pro forma combined income statement for fiscal 1998 combines
Quebecor Printing's results for the twelve months ended December 31, 1998 with
World Color's results for the 52 weeks ended December 27, 1998, giving effect to
the offer and merger as if both transactions had occurred as of January 1, 1998.
The unaudited pro forma combined income statement for the first two quarters of
1999 combines Quebecor Printing's results for the six months ended June 30, 1999
with World Color's results for the 26 weeks ended June 27, 1999, giving effect
to the offer and merger as if both transactions had occurred as of January 1,
1998.
The unaudited pro forma combined balance sheet as at June 30, 1999, gives
effect to the offer and merger as if both transactions had occurred on June 30,
1999 by combining the balance sheet for Quebecor Printing at June 30, 1999 and
World Color at June 27, 1999.
The offer and merger are to be accounted for as a purchase of World Color by
Quebecor Printing. Accordingly, the accompanying unaudited pro forma combined
financial statements gives effect to the offer and merger in accordance with the
purchase method of accounting.
The following unaudited pro forma combined financial statements have been
derived from the application of pro forma adjustments to the combined historical
financial statements of Quebecor Printing and World Color, which are
incorporated by reference into this document. This information is provided for
illustrative purposes only. Quebecor Printing has not yet made a final
determination of the intangible asset lives and required purchase accounting
adjustments, including the allocation of the purchase price to the assets
acquired and liabilities assumed based on their respective fair values.
Accordingly, the purchase accounting adjustments made in connection with the
development of the unaudited pro forma combined financial information appearing
elsewhere in this document are preliminary and were made solely for purposes of
developing the unaudited pro forma combined financial information. These pro
forma financial statements do not show what our results of operations or
financial position would have been if the offer and merger had actually occurred
on the dates assumed or indicate what our future operating results or
consolidated financial position will be. The pro forma results do not reflect
synergies and, accordingly, do not account for any potential increase in
operating income, any estimated cost savings or adjustments to conform
accounting practices. You should read the unaudited pro forma combined financial
statements in conjunction with the historical consolidated financial statements
of Quebecor Printing and World Color, including the notes, that are incorporated
by reference in this document.
Quebecor Printing's consolidated financial statements are prepared in
accordance with generally accepted accounting principles in Canada, which differ
in some respects from generally accepted accounting principles in the United
States. Note 18 to Quebecor Printing's December 31, 1998 consolidated financial
statements provides a description of the principal differences between Canadian
GAAP and US GAAP. For the purposes of presenting the selected unaudited pro
forma combined financial information, financial information relating to Quebecor
Printing has been adjusted to conform to US GAAP.
56
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS AT JUNE 30, 1999
(IN MILLIONS)
<TABLE>
<CAPTION>
COMBINED
QUEBECOR QUEBECOR PRO FORMA
PRINTING PRINTING QUEBECOR QUEBECOR
CANADIAN US GAAP PRINTING WORLD COLOR PRO FORMA PRINTING AND
GAAP ADJUSTMENT(A) US GAAP US GAAP ADJUSTMENTS WORLD COLOR
----------- ----------------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Current and other assets.................... $ 975 $ 8 $ 983 $ 649 $ (7)(E) $ 1,625
Fixed assets (net).......................... 2,167 11 2,178 930 0 3,108
Goodwill.................................... 625 44 669 788 990(H) 2,447
----------- --- ----------- ----------- ------ ------
TOTAL ASSETS................................ $ 3,767 $ 63 $ 3,830 $ 2,367 $ 983 $ 7,180
----------- --- ----------- ----------- ------ ------
----------- --- ----------- ----------- ------ ------
Current and other liabilities............... $ 735 $ 35 $ 770 $ 423 $ 126(D) $ 1,319
Long-term debt (including current
portion).................................. 1,040 0 1,040 1,265 972(C) 3,277
Deferred income taxes....................... 234 30 264 73 (40)(F) 297
Non-controlling interest.................... 21 0 21 0 0 21
Shareholder's equity........................ 1,737 (2) 1,735 606 (75) 2,266
----------- --- ----------- ----------- ------ ------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY.................................... $ 3,767 $ 63 $ 3,830 $ 2,367 $ 983 $ 7,180
----------- --- ----------- ----------- ------ ------
----------- --- ----------- ----------- ------ ------
</TABLE>
57
<PAGE>
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
FOR THE FIRST TWO QUARTERS OF 1999
(IN MILLIONS, EXCEPT PER SHARE DATA OR AS OTHERWISE NOTED)
<TABLE>
<CAPTION>
COMBINED
QUEBECOR QUEBECOR PRO FORMA
PRINTING PRINTING QUEBECOR QUEBECOR
CANADIAN US GAAP PRINTING WORLD COLOR PRO FORMA PRINTING AND
GAAP ADJUSTMENT(A) US GAAP US GAAP ADJUSTMENTS WORLD COLOR
----------- --------------- ----------- ----------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues.............................. $ 1,855 $ 0 $ 1,855 $ 1,172 $ 0 $ 3,027
Cost of sales......................... 1,446 1 1,447 911 0 2,358
Selling, general and administration
expenses............................ 150 0 150 100 0 250
Depreciation and amortization......... 124 0 124 77 12(B) 213
Restructuring and other special
charges............................. 0 0 0 62 0 62
----------- ------ ----------- ----------- --- ------
Operating income...................... 135 (1) 134 22 (12) 144
Financial expenses.................... 34 0 34 49 26 109
----------- ------ ----------- ----------- --- ------
Income (loss) before income taxes,
extraordinary items and change in
accounting principle................ 101 (1) 100 (27) (38) 35
Income taxes.......................... 30 (1) 29 (11) (8) 10
----------- ------ ----------- ----------- --- ------
Income (loss) before extraordinary
items and change in accounting
principle........................... 71 0 71 (16) (30) 25
Extraordinary items, net of tax....... 0 0 0 (11) 0 (11)
Cumulative effect of change in
accounting principle, net of tax.... 0 0 0 (11) 0 (11)
----------- ------ ----------- ----------- --- ------
Net income (loss) before non-
controlling interest................ 71 0 71 (38) (30) 3
Non-controlling interest.............. 1 0 1 0 0 1
----------- ------ ----------- ----------- --- ------
Net income (loss)..................... 70 0 70 (38) (30) 2
Net income available for holders of
preferred shares.................... 5 0 5 0 0 5
----------- ------ ----------- ----------- --- ------
Net income (loss) available for
holders of equity shares............ 65 0 65 (38) (30) (3)
----------- ------ ----------- ----------- --- ------
----------- ------ ----------- ----------- --- ------
Average number of equity shares
outstanding......................... 116.7 116.7 116.7 30.7(G) 147.4
Earnings (loss) per share............. $ 0.56 $ 0.00 $ 0.56 $ (0.02)
</TABLE>
58
<PAGE>
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
FOR FISCAL YEAR 1998
(IN MILLIONS, EXCEPT PER SHARE DATA OR AS OTHERWISE NOTED)
<TABLE>
<CAPTION>
COMBINED
QUEBECOR QUEBECOR PRO FORMA
PRINTING PRINTING QUEBECOR QUEBECOR
CANADIAN US GAAP PRINTING WORLD COLOR PRO FORMA PRINTING AND
GAAP ADJUSTMENT(A) US GAAP US GAAP ADJUSTMENTS WORLD COLOR
----------- --------------- ----------- ----------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues.............................. $ 3,808 $ 0 $ 3,808 $ 2,357 $ 0 $ 6,165
Cost of sales......................... 2,979 0 2,979 1,810 0 4,789
Selling, general and administrative
expenses............................ 288 0 288 192 0 480
Depreciation and amortization......... 239 0 239 141 25 405
----------- ------ ----------- ----------- --- ------
Operating income...................... 302 0 302 214 (25) 491
Financial expenses.................... 64 0 64 88 53(C) 205
----------- ------ ----------- ----------- --- ------
Income before income taxes............ 238 0 238 126 (78) 286
Income taxes.......................... 75 (1) 74 52 (16)(F) 110
----------- ------ ----------- ----------- --- ------
Income before non-controlling
interest............................ 163 1 164 74 (62) 176
Non-controlling interest.............. 3 0 3 0 0 3
----------- ------ ----------- ----------- --- ------
Net income............................ 160 1 161 74 (62) 173
Net income available for holders of
preferred shares.................... 10 0 10 0 0 10
----------- ------ ----------- ----------- --- ------
Net income available for holders of
equity shares....................... $ 150 $ 1 $ 151 $ 74 $ (62) $ 163
----------- ------ ----------- ----------- --- ------
----------- ------ ----------- ----------- --- ------
Average number of equity shares
outstanding......................... 115.7 115.7 115.7 31.5(G) 147.2
Earnings per share.................... $ 1.29 $ 0.01 $ 1.30 $ 1.11
</TABLE>
59
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(A) Quebecor Printing files reports under the Multijurisdictional Disclosure
System adopted by the United States including, among other documents, annual
financial statements prepared under generally accepted accounting principles
in Canada ("Cdn GAAP"), along with a reconciliation of such financial
statements to generally accepted accounting principles in the United States
("US GAAP") (see note 18 to the December 31, 1998 consolidated financial
statements). Quebecor Printing's reporting and functional currency is the
U.S. dollar. World Color prepares its financial statements under US GAAP and
does not prepare Cdn GAAP financial statements. For purposes of these pro
forma combined financial statements, Quebecor Printing's statutory financial
information has therefore been adjusted to give effect to such GAAP
differences and to present Quebecor Printing data under US GAAP.
(B) The purchase price for World Color will be allocated to the assets acquired
and liabilities assumed based on their estimated fair market value. An
initial purchase price allocation (see note (H) below) resulted in an annual
increase in amortization of goodwill of $25 million for fiscal year 1998 and
$12 million for the first two quarters of 1999. The purchase price will be
allocated at the consummation of the acquisition and may be revised for a
period of up to one year as additional information is obtained. As a result,
the final purchase price allocation could be different from the amounts
included in note (H) below. For purposes of the pro forma unaudited combined
financial statements, it has been assumed that the carrying values of net
assets after giving effect to the write-downs described in note (D) below
approximate their fair value and, accordingly, the excess purchase price has
been entirely allocated to goodwill, which is to be amortized over a 40 year
period. Management believes the final impact on its results will not be
materially different from the amounts included in the pro forma combined
financial statements.
(C) The US dollar tender offer in the amount of $839 million, the 61% portion of
outstanding stock options of $171 million expected to be settled for $41
million cash, being the difference between the share offer price and the
option exercise price, and the estimated transaction costs of $75 million
(see note (H) below), are expected to be financed partially through the
issuance of 6,500,000 subordinate voting shares of Quebecor Printing, having
occurred on June 4, 1999 and for which net proceeds were approximately $154
million and through a variable rate bridge facility in the amount of $801
million for the remaining balance. Accordingly, the fiscal year 1998 pro
forma combined income statement has been adjusted to reflect a full year of
interest on $801 million, based on an assumed interest rate of 6.75% per
annum. The pro forma combined income statement for the first two quarters of
1999 has been adjusted to reflect six months of interest on the same basis.
A 0.125% change in the interest rate would cause total annual interest to
change by approximately $1.0 million.
Additionally, in conjunction with the allocation of the purchase price of
World Color, a long-term debt premium is reflected in the pro forma combined
balance sheet by re-evaluating World Color's debt to fair market value,
based on Quebecor Printing's estimated incremental borrowing rate subsequent
to the transaction. The premium in the amount of $17 million, will be
amortized over the assumed remaining service life of the related debt of 10
years as a decrease of interest expense.
Quebecor Printing anticipates that the bridge facility will be repaid from a
variety of sources, including, without limitation, funds generated
internally by Quebecor Printing and its subsidiaries and the public or
private sale of debt or equity securities. No final decisions have been made
concerning the sources and methods Quebecor Printing and its subsidiaries
will employ to repay such indebtedness. Such decisions will be made and may
be modified by Quebecor Printing based on prevailing market conditions and
such other factors as Quebecor Printing may deem appropriate.
60
<PAGE>
(D) The initial purchase price allocation also includes a change in control
liability of $51 million and an additional $75 million provision identified
by Quebecor Printing, representing the costs of effecting certain synergies
within the combined group. Under Cdn GAAP, substantially all of the
anticipated restructuring costs of $75 million would be provided for in the
purchase equation as an assumed liability against the fair value of net
assets acquired, whereas under US GAAP, the portion related to Quebecor
Printing's own facilities would be recognized as a non-recurring charge in
the statement of income. For purposes of these pro forma combined financial
statements, it has been assumed that 50%, or $38 million will represent the
costs to be incurred for Quebecor Printing's own operations. Accordingly,
this amount, net of income taxes, has been provided for in the pro forma
combined balance sheet as a reduction of Shareholders' Equity. The pro forma
combined income statement does not give effect to this non-recurring charge
nor to any of the expected recurring cost reductions resulting from these
restructuring measures.
The final amount of restructuring costs to be incurred by the combined
entities will be determined subsequent to the consummation date of the
transaction, as Quebecor Printing establishes a formal restructuring plan
and accordingly, these actual amounts may differ from those provided in
these pro forma combined income statements.
(E) The initial purchase price equation gives effect to the write-off of
deferred financing costs in the amount of $7 million.
(F) Income tax effect:
(i) The income tax effect of additional interest expense (see note (C)) is
$16 million for fiscal year 1998 and $8 million for the first two
quarters of 1999 and is calculated based on an assumed income tax rate
of 30%, being the effective marginal tax rate of Quebecor Printing. The
deferred income tax effect of the net premium amortization (see note
(C)), is $7 million, is calculated based on an assumed income tax rate
of 41%, being the assumed tax rate of World Color and is being amortized
over the term of the debenture for the purpose of the pro forma combined
income statement.
(ii) The deferred income tax effect of the various pro forma adjustments on
the combined pro forma balance sheet is as follows:
<TABLE>
<CAPTION>
JUNE 30,
1999
---------------
<S> <C>
(IN MILLIONS)
Premium on long-term debt (see note (C))................................................... $ 7
Additional restructuring costs of World Color of $37 million and change in control
liability of $51 million (see note (D)).................................................. 19
Additional restructuring costs of Quebecor Printing of $38 million (see note (D)).......... 11
Write-off of deferred financing costs of $7 million (see note (E))......................... 3
---
$ 40
---
---
</TABLE>
(G) The number of outstanding shares of Quebecor Printing used in the
determination of pro forma combined earnings per share include 115,703
weighted average outstanding equity shares of Quebecor Printing for fiscal
year 1998 (116,723 for the first two quarters of 1999), 25,000 subordinate
voting shares assumed to be issued in conjunction with the purchase of World
Color (see note (H)) and 6,500 subordinate voting shares issued on June 4,
1999 (adjusted to 5,705 for the first two quarters of 1999).
61
<PAGE>
(H) The purchase price is determined on the basis of an assumed Quebecor
Printing price of $22.32, a price of $35.69 for each share of World Color
common stock and 38.04 million shares of World Color common stock
outstanding.
<TABLE>
<CAPTION>
(IN MILLIONS)
-------------
<S> <C>
Cash tender offer (19.2 million shares of World Color at $35.69 per share)...................... $ 685
Shares not tendered in cash offer (18.856 million shares):
- Cash portion paid ($8.18 per share)......................................................... 154
- Exchange of shares of World Color common stock into Quebecor Printing subordinate voting
shares at an assumed exchange ratio of 1.2685 Quebecor Printing subordinate voting shares
for each World Color share upon an assumed Quebecor Printing average closing price of
$22.32...................................................................................... 532
Value of World Color outstanding options........................................................ 67
Transactions costs.............................................................................. 75
------
Pro forma purchase price........................................................................ $ 1,513
------
------
</TABLE>
The offer and merger will be accounted for as a purchase. The initial
allocation of the pro forma purchase price is as follows:
<TABLE>
<CAPTION>
JUNE 30, 1999
-------------
<S> <C>
(IN MILLIONS)
Pro forma purchase price........................................................................ $ 1,513
Net book value of assets acquired............................................................... (523)
------
Excess of purchase price over net assets acquired allocated to goodwill......................... $ 990
------
------
</TABLE>
The net book value of asset acquired is detailed as follows:
<TABLE>
<CAPTION>
FIRST
TWO QUARTERS
OF 1999
---------------
<S> <C>
(IN MILLIONS)
Net book value of assets per World Color unaudited financial statements for the first two
quarters of 1999............................................................................. $ 606
Effect of pro forma adjustments:
Debt premium (see note (C)).................................................................... (17)
Restructuring reserve (see note (D))........................................................... (37)
Change in control liability (see note (D))..................................................... (51)
Write-off of deferred financing costs (see note (E))........................................... (7)
Deferred income tax effect on the above (see note (F))......................................... 29
-----
$ 523
-----
-----
</TABLE>
62
<PAGE>
DESCRIPTION OF SHARE CAPITAL
THE FOLLOWING SUMMARY IS A DESCRIPTION OF THE MATERIAL TERMS OF QUEBECOR
PRINTING SHARE CAPITAL. THIS SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS
SUBJECT IN ALL RESPECTS TO THE APPLICABLE PROVISIONS OF APPLICABLE CANADIAN LAW,
THE QUEBECOR PRINTING ARTICLES OF AMALGAMATION AND THE QUEBECOR PRINTING
BY-LAWS. THE QUEBECOR PRINTING ARTICLES OF AMALGAMATION ARE INCORPORATED BY
REFERENCE AS EXHIBITS TO THE REGISTRATION STATEMENT OF WHICH THIS DOCUMENT IS A
PART.
The authorized share capital of Quebecor Printing consists of an unlimited
number of multiple voting shares, without par value, an unlimited number of
subordinate voting shares, without par value, and an unlimited number of
preferred shares, issuable in series, without par value. As of July 8, 1999,
62,984,552 multiple voting shares, 59,603,587 subordinate voting shares and
12,000,000 series 2 cumulative redeemable first preferred shares were
outstanding. The aggregate number of outstanding awards of shares of Quebecor
Printing stock that have been issued pursuant to Quebecor Printing's stock
option plans as of July 8, 1999 is 2,568,613. All of the outstanding shares of
Quebecor Printing's capital stock are validly issued, fully paid and
nonassessable. The multiple voting shares are not publicly traded.
EQUITY SHARES
Except as otherwise described, the equity shares, which means the multiple
voting shares and the subordinate voting shares, have the same rights, are equal
in all respects and are treated as if they were shares of one class. See
"--CONTROL BY QUEBECOR INC. AND CAISSE."
RANK
The equity shares rank junior to the preferred shares in the payment of
dividends, return of capital and distribution of assets upon liquidation,
dissolution or winding-up of Quebecor Printing.
DIVIDENDS
The holders of outstanding equity shares may receive dividends on a
share-for-share basis, in the amounts and at the times Quebecor Printing's board
of directors may determine, out of funds legally available for this purpose
without preference or distinction among or between the types of equity shares.
VOTING RIGHTS
The subordinate voting shares carry one vote per share. The multiple voting
shares carry ten votes per share. There is no cumulative voting. The holders of
the equity shares are entitled to receive notice of any meeting of shareholders
of Quebecor Printing and to attend and vote as a single class on all matters to
be voted on by the shareholders of Quebecor Printing, except where only the
holders of shares of one class or of a particular series are entitled to vote
separately.
CONVERSION
Each outstanding multiple voting share may at any time, at the option of the
holder, be converted into one subordinate voting share. The subordinate voting
shares cannot be converted into any other class of equity shares.
SUBSCRIPTION RIGHTS
Subordinate voting shares have no preemptive or subscription rights to
purchase any securities of Quebecor Printing.
63
<PAGE>
Multiple voting shares are entitled to subscribe for multiple voting shares
upon the issuance or distribution of voting securities under the following terms
and conditions:
If Quebecor Printing
(1) issues or distributes
(a) voting shares of Quebecor Printing OTHER THAN
- multiple voting shares,
- subordinate voting shares issued upon the conversion of
multiple voting shares, and
- voting shares issued pursuant to the exercise of a privilege
attached to any security of Quebecor Printing issued prior to
the such distribution or issuance, OR
(b) securities convertible or exchangeable into such voting shares;
OR
(2) gives the right to acquire such voting shares (other than options or
plans to purchase those voting shares or any other securities of
Quebecor Printing in favor of the management or employees of Quebecor
Printing);
THEN Quebecor Printing shall issue to the holder(s) of multiple voting shares
rights to subscribe for that number of multiple voting shares which carry, in
the aggregate, a number of voting rights equal to the number of voting rights
attached to the voting shares to be issued, distributed or acquired, or in the
case of a distribution of securities convertible or exchangeable into those
voting shares, to the number of voting rights attached to the voting shares
underlying the securities to be issued or distributed.
Quebecor Printing shall issue these rights to subscribe to the holder(s) of
multiple voting shares in a proportion equal to their respective holdings of
multiple voting shares. Quebecor Printing shall issue the rights to subscribe
concurrently with the resolution of the board of directors authorizing the
distribution of those multiple voting shares or securities convertible or
exchangeable into voting shares. The securities underlying such rights to
subscribe shall be issued and must be paid concurrently with the distribution of
and payment to Quebecor Printing of those voting shares or securities
convertible or exchangeable into voting shares.
The price of those voting shares or securities shall be:
- the lowest price permitted by the applicable securities and stock exchange
regulations and which has been given prior consent of those exchanges, but
at a price not lower than:
- if these securities are multiple voting shares, the price at which
subordinate voting shares are then being issued or distributed;
- if these securities are not multiple voting shares, the price at which
securities convertible or exchangeable into those voting shares are
then being issued or distributed; and
- if these securities are not subordinate voting shares, the higher of
(a) the weighted average price of the transactions on the subordinate
voting shares on The Montreal Exchange and The Toronto Stock Exchange
for the 20 trading days before the distribution of the voting shares
and (b) the weighted average price of transactions on the subordinate
voting shares on The Montreal Exchange and The Toronto Stock Exchange
the day before the distribution of the voting shares.
The rights to subscribe are only transferable among holders of multiple
voting shares, in any proportion deemed appropriate by those holders.
64
<PAGE>
In the case of securities convertible or exchangeable or giving the right to
acquire multiple voting shares issued pursuant to the rights to subscribe,
privileges attached to those securities may only be exercised:
- if and when the same privileges attached to the securities triggering the
issuance of the rights to subscribe are exercised; AND
- the exercise will not result in the issuance of a number of multiple
voting shares which carry, in the aggregate, a number of voting rights
greater than the number of voting rights attached to the voting shares
issued pursuant to the exercise of those convertible or exchangeable
securities.
In connection with the merger, Quebecor Inc. and Caisse de depot et
placement du Quebec, the only holders of multiple voting shares, have waived
their respective rights to receive subordinate voting shares. Accordingly,
Quebecor Printing has not and will not issue rights to subscribe to Quebecor
Inc. and Caisse in connection with the merger.
LIQUIDATION RIGHTS
The equity shares are not redeemable. On the liquidation, dissolution or
winding-up of Quebecor Printing, the holders of equity shares are entitled to
participate equally, share-for-share, in the remaining property and assets of
Quebecor Printing available for distribution to the holders of equity shares.
AGREEMENTS AND UNDERTAKINGS IN FAVOR OF HOLDERS OF SUBORDINATE VOTING
SHARES; TRUST AGREEMENT
Under applicable law, an offer to purchase multiple voting shares would not
necessarily require that an offer be made to purchase subordinate voting shares.
However, Quebecor Inc. has undertaken not to sell, directly or indirectly, any
multiple voting shares owned by Quebecor Inc. pursuant to a take-over bid where
securities legislation would have required that the same offer be made to
holders of subordinate voting shares as if those holders were holders of
multiple voting shares. This undertaking was made pursuant to Quebecor Inc.'s
trust agreement with Fiducie Desjardins Inc., as trustee, Caisse and Quebecor
Printing, in compliance with the rules of The Montreal Exchange and The Toronto
Stock Exchange.
Under current rules, such undertaking would include a sale of multiple
voting shares by Quebecor Inc. at a price per share in excess of 115% of the
market price of the subordinate voting shares as determined under such
legislation, generally the twenty day average trading price of such shares prior
to a bid.
This undertaking does not apply if such sale is:
- made pursuant to a partial offer to purchase multiple voting shares made
to all holders of multiple voting shares and an offer with terms at least
as favorable as the terms of the offer to purchase multiple voting shares,
and is made concurrently to all holders to purchase subordinate voting
shares at a price per share at least as high as the highest price per
share paid in connection with the take-over bid for the multiple voting
shares, which offer has no condition attached other than the right not to
take up and pay for the subordinate voting shares tendered if no shares
are purchased pursuant to the offer for multiple voting shares; OR
- there is a concurrent unconditional offer, all terms of which are at least
as favorable to purchase all of the subordinate voting shares at a price
per share at least as high as the highest price per share paid in
connection with the take-over bid for the multiple voting shares.
65
<PAGE>
The trust agreement permits, subject to compliance with applicable
securities legislation, some indirect sales resulting from the acquisition of
shares of a corporation which, directly or indirectly, controls Quebecor
Printing, or controls or is controlled by Quebecor Inc., IF:
- the transferor and transferee are each members of the Peladeau family,
except that any indirect sale within the Peladeau family, other than to
descendants in direct line will not be permitted; AND
- no transferee is a party to any agreement under which any other person
would participate in the ownership of, or control or direction over more
than 10% of the votes or 50% of the equity of the corporation, Quebecor
Inc. or Quebecor Printing.
The term "Peladeau family" means:
- Pierre Peladeau;
- his spouse, in fact or in law;
- any descendants of Pierre Peladeau, who is now deceased, and their
spouses, in fact or in law;
- any trust primarily for Pierre Peladeau, his spouse, in fact or in law,
his descendants and their spouses, in fact or in law; and
- any and all corporations where 90% of the votes attached to all
outstanding voting shares and at least 50% of all outstanding equity
shares are controlled by any one or more of the persons listed above.
A take-over bid for Quebecor Inc. is not deemed to be a take-over bid for
multiple voting shares under the trust agreement if the total assets of Quebecor
Printing, as a result of the consolidation of the assets of Quebecor Printing in
the books of Quebecor Inc., are not greater than 80% of the total consolidated
assets of Quebecor Inc. As of June 30, 1999, the total assets of Quebecor
Printing represented approximately 53.6% of the consolidated total assets of
Quebecor Inc.
As to Caisse, the trust agreement:
- applies to Caisse only on the date on which Quebecor Inc. shall cease to
hold, directly or indirectly, at least 80% of the issued and outstanding
multiple voting shares; AND
- ceases to apply to Caisse on the date on which the parent shall hold again
80% of the issued and outstanding multiple voting shares.
Accordingly, until such time as the trust agreement applies to Caisse,
Caisse can sell all of its shares in Quebecor Printing to any party without
triggering the application of the trust agreement, even if the sale constitutes
a take-over bid for purposes of applicable securities legislation, subject to
compliance with applicable securities legislation and the provisions of a
shareholders' agreement entered into on April 10, 1992 among Quebecor Inc.,
Caisse and Quebecor Printing.
Any disposition of:
- multiple voting shares, including a transfer to a pledgee as security; OR
- securities convertible into multiple voting shares by a holder of multiple
voting shares party to the agreement or any person or company which it
controls,
is conditioned, under the trust agreement, upon the transferee becoming a
party to an agreement with substantially similar terms and conditions as are
contained in the trust agreement. This provision of the trust agreement will
apply to Caisse immediately if it disposes of multiple voting shares or
securities convertible into multiple voting shares that would result in Quebecor
Inc. and Caisse owning, in the aggregate, less than 80% of the multiple voting
shares on a fully diluted basis. The conversion of
66
<PAGE>
multiple voting shares into subordinate voting shares, whether or not such
subordinate voting shares are subsequently sold, shall not constitute a
disposition for purposes of the trust agreement.
The trust agreement also provides that if:
- a person or company carries out an indirect sale in respect of any
multiple voting shares in contravention of the trust agreement; AND
- following such sale, Quebecor Inc. still owns such multiple voting shares,
THEN Quebecor Inc. shall not:
- dispose of any of such multiple voting shares or convert them into
subordinate voting shares, in either case without the prior written
consent of the trustee; OR
- exercise any voting rights attaching to such multiple voting shares except
in accordance with the written instructions of the trustee.
The trustee may attach conditions to its consent and must exercise its
rights in the best interest of the holders of the subordinate voting shares,
other than Quebecor Inc. and holders who, in the opinion of the trustee,
participated directly or indirectly in the transaction that triggered the
operation of this provision.
Quebecor Inc. will have no liability under the trust agreement for a sale of
shares which constitutes an indirect sale of multiple voting shares in
contravention of the trust agreement PROVIDED that Quebecor Inc. is in
compliance with all other provisions of the trust agreement including, without
limitation, the foregoing provision.
Under the shareholders agreement, Caisse has the right, subject to the trust
agreement and in compliance with applicable securities legislation, until
February 28, 2000, in the event of change of control of Quebecor Inc., to
acquire or cause the auction of equity shares of Quebecor Printing held by
Quebecor Inc.
The trust agreement contains provisions for the authorization of action by
the trustee to enforce the rights under the agreement on behalf of the holders
of the subordinate voting shares. The obligation of the trustee to take such
action is conditioned on the provision of required funds and indemnity by
Quebecor Printing, a holder of multiple voting shares alleged to be in default,
or holders of the subordinate voting shares. No holder of subordinate voting
shares will have the right, other than through the trustee, to institute any
action or proceeding or to exercise any other remedy to enforce any rights
arising under the trust agreement unless the trustee fails to act on a request
authorized by holders of not less than 10% of the outstanding subordinate voting
shares after provision of reasonable funds and indemnity to the trustee.
The trust agreement provides that it may not be amended, and no provision of
the agreement may be waived, without the approval of:
- the holders of multiple voting shares party to the agreement; AND
- at least two-thirds of the votes cast by the holders of subordinate voting
shares present or represented at a meeting duly called for the purpose of
considering such amendment or waiver, which two-thirds majority shall
include a simple majority of the votes cast by holders of subordinate
voting shares, excluding the holders of multiple voting shares party to
the agreement and their affiliates and any persons who have an agreement
to purchase multiple voting shares on terms which would constitute a sale
in contravention of the trust agreement.
No provision of the trust agreement shall limit the rights of any holder of
subordinate voting shares under applicable securities legislation.
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CONTROL BY QUEBECOR INC. AND CAISSE
The by-laws of Quebecor Printing and the shareholders agreement provide that
Quebecor Printing will not, without the prior written consent of Quebecor Inc.
and Caisse, take, among other things, the following actions:
- a substantial change in the nature of the business of Quebecor Printing
and its subsidiaries, taken as a whole;
- an amendment to the articles or by-laws of Quebecor Printing and its
subsidiaries;
- the amalgamation of Quebecor Printing or any of its subsidiaries with a
corporation with which it is not affiliated;
- the winding-up or dissolution of Quebecor Printing or any of its
subsidiaries which is not a wholly owned subsidiary;
- subject to various exceptions, the issuance by Quebecor Printing or any of
its major subsidiaries of shares or convertible securities;
- the distribution of assets by Quebecor Printing or any of its major
subsidiaries other than by a dividend;
- any transaction out of the ordinary course of business involving a
consideration exceeding Cdn. $35 million;
- the disposal by Quebecor Printing or any of its subsidiaries of shares
which it holds in any of its major subsidiaries;
- the declaration, setting aside and payment by Quebecor Printing, during
any fiscal year, of dividends on any share of its capital if the total
amount of the dividends so declared, set aside or paid during such year
were to exceed 25% of the consolidated net income of the previous fiscal
year;
- transactions with shareholders or their affiliates;
- subject to various exceptions, the listing on any stock exchange of any
shares; and
- the acquisition of a business in an unrelated sector.
Under the by-laws of Quebecor Printing, these restrictions will cease to be in
force after the expiration of a 30 consecutive day period during which either:
- Quebecor Inc. and Caisse shall no longer be the beneficial owners, neither
together nor one or the other individually, of shares of Quebecor Printing
carrying at least 50.1% of the voting rights attached to all outstanding
voting shares of Quebecor Printing; OR
- either Caisse or Quebecor Inc. ceases to hold equity shares which
represent 5% or more of the equity shares on a fully diluted basis.
The shareholders' agreement terminates immediately upon either Quebecor Inc.
or Caisse ceasing to hold equity shares representing 5% or more of the equity
shares on a fully diluted basis.
All of the consents needed by Quebecor Printing from Quebecor Inc. and
Caisse in connection with the merger have been obtained.
Upon completion of the merger, it is expected that Caisse will hold less
than 5% of the equity shares, thus terminating the shareholders' agreement as of
such date and causing the veto rights of Quebecor Inc. and Caisse under Quebecor
Printing's by-laws to cease in 30 days.
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PREFERRED SHARES
The board of directors of Quebecor Printing may from time to time, under its
articles of amalgamation, issue one or more series of first preferred shares.
The board may designate the number of shares, the consideration per share, and
any other provisions attaching to each series such as dividends, redemption
rights, voting rights and conversion rights, if any. The shares of each series
of first preferred shares will rank prior to all other shares of Quebecor
Printing, including the multiple voting shares and the subordinate voting
shares, with respect to dividends, return of capital and distribution of assets
in the event of the liquidation, dissolution or winding-up of Quebecor Printing.
SERIES 2 CUMULATIVE REDEEMABLE FIRST PREFERRED SHARES
The series 2 cumulative redeemable first preferred shares are entitled to a
fixed cumulative preferential cash dividend of $1.25 per share per annum,
payable quarterly from March 1, 1998 to November 30, 2002, if declared.
Thereafter, the annual dividend will be a floating adjustable cumulative
preferential cash dividend based on prime rate and payable on a monthly basis,
if declared.
These preferred shares are redeemable in whole but not in part, at Quebecor
Printing's option, on December 1, 2002. Thereafter, these preferred shares may
be converted into series 3 cumulative redeemable first preferred shares under
certain conditions.
The series 3 cumulative redeemable first preferred shares will be entitled
to a cumulative fixed dividend set by Quebecor Printing for a five-year period
determined before the first initial quarterly dividend which would begin on
December 1, 2002. These shares also will have redemption and conversion
characteristics similar to the first preferred shares series 2.
MATERIAL DIFFERENCES BETWEEN RIGHTS OF STOCKHOLDERS OF WORLD COLOR AND RIGHTS OF
STOCKHOLDERS OF QUEBECOR PRINTING
Upon completion of the merger, holders of World Color common stock will
become entitled to receive Quebecor Printing subordinate voting shares. World
Color is incorporated under the laws of Delaware and Quebecor Printing is
amalgamated under the laws of Canada. The Delaware General Corporation Law is
the statute which governs Delaware corporations, and the Canada Business
Corporations Act is the statute which governs federally amalgamated Canadian
corporations.
The following is a summary of the material differences between the rights of
holders of World Color common stock and the rights of holders of Quebecor
Printing subordinate voting shares. These differences arise from differences
between:
- the corporate and securities laws of Canada and the State of Delaware
corporate law and U.S. securities laws; and
- the World Color certificate of incorporation and by-laws and the Quebecor
Printing articles of amalgamation and by-laws.
This discussion is not, and does not purport to be, complete, or to identify
all differences that may, under given situations, be material to stockholders.
The following summaries are qualified in their entirety by reference to the
Quebecor Printing articles of amalgamation and by-laws, which are filed as
exhibits to the registration statement that includes this document, and the
World Color certificate of incorporation and by-laws, which are filed as
exhibits to World Color's Annual Report on Form 10-K for the year ended December
29, 1996.
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SIZE AND CLASSIFICATION OF THE BOARD OF DIRECTORS
Under the Delaware General Corporation Law, directors are elected at each
annual stockholder meeting, unless their terms are staggered. The certificate of
incorporation may authorize the election of directors by one or more classes or
series of shares and the certificate of incorporation, an initial by-law or a
by-law adopted by a vote of the stockholders may provide for staggered terms for
the directors. The certificate of incorporation or the by-laws also may allow
the stockholders or the board of directors to fix or change the number of
directors, but a corporation must have at least one director. The certificate of
incorporation and the by-laws of World Color do not provide for a classified
board of directors. World Color's by-laws provide for no less than three and no
more than 15 directors on the board of directors, as may be fixed from time to
time by the board of directors. Currently, the number of directors serving on
the World Color board of directors is 6.
Neither the Quebecor Printing articles of amalgamation nor the Quebecor
Printing by-laws provide for a classified board of directors. The Quebecor
Printing articles of amalgamation provide for no less than three and no greater
than fifteen directors on the Quebecor Printing board of directors as may be
fixed from time to time by resolution of the Quebecor Printing board of
directors. Currently, the number of directors serving on the Quebecor Printing
board of directors is 11.
DIRECTOR QUALIFICATIONS
The Delaware General Corporation Law does not have any residency or other
qualifications required for eligibility to be a board member.
Generally, under the Canada Business Corporations Act, a majority of the
directors of a Canadian corporation must be residents of Canada. Furthermore,
the Act provides that, except in limited circumstances, directors may not
transact business at a meeting of directors unless a majority of the directors
present are resident Canadians. The Act also requires that a corporation whose
securities are publicly traded will have not fewer than three directors, at
least two of whom are not officers or employees of the corporation or any of its
affiliates. In addition, Quebecor Printing's by-laws prohibit the election of a
director if he is less than 18 years of age, found to be of unsound mind, is not
an individual or has the status of a bankrupt.
REMOVAL OF DIRECTORS; VACANCIES
The Delaware General Corporation Law provides, generally, that the holders
of a majority of the shares then entitled to vote in an election of directors
may remove any director or the entire board of directors with or without cause.
A vacancy on the World Color board of directors may be filled by the affirmative
vote of a majority of the remaining directors. The directors so chosen shall
hold office until the next annual election of directors at a stockholders'
meeting.
Under the Canada Business Corporations Act, the stockholders may, by
ordinary resolution at a special meeting, remove any director or directors from
office and may fill the vacancies so created. A quorum of directors may also
fill a vacancy among the directors except a vacancy resulting from an increase
in the number or minimum number of directors or from a failure to elect the
number or minimum number of directors required by the articles of the
corporation.
The by-laws of Quebecor Printing provide for the removal of a director as
provided for by law, and that a majority of the directors may fill a vacancy in
the board of directors, except as otherwise provided by law.
SPECIAL MEETING OF STOCKHOLDERS
Under the Delaware General Corporate Law, each stockholder entitled to vote
at a meeting must receive written notice of the meeting not less than 10 nor
more than 60 days before the date of the meeting. For a merger, a minimum of 20
days notice is required and the holders of all stock, both
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voting and non-voting, are entitled to a notice. Under the Delaware General
Corporate Law, a special stockholders' meeting may be called by the board of
directors or by such person or persons as may be authorized by the certificate
of incorporation or by the by-laws. World Color's by-laws provide that special
meetings of the stockholders may be called by the president and shall be called
by the president or the secretary at the request in writing of a majority of the
board of directors. In addition, a special meeting will be called at the request
in writing of stockholders owning a majority of the issued and outstanding
capital stock of World Color and entitled to vote.
Quebecor's by-laws provide that written notice of any meeting of
stockholders shall be given not less than 21 days and not more than 50 days
prior to the date fixed for such meeting. Unless the stockholders entitled to
vote in the meeting agree otherwise, the meeting must be held in Canada. The
by-laws of Quebecor Printing further provide that special meetings of the
stockholders may be called at any time by or by order of the president or
directors of Quebecor Printing. In addition, a special stockholder meeting shall
be called when required by the stockholders in conformity with the law. The
Canada Business Corporations Act provides that special meetings of stockholders
may be called by the board of directors. In addition, the holders of not less
than 5% of the issued voting shares of the corporation may request that the
directors call a meeting of stockholders. If the directors do not call a meeting
within 21 days after receiving the requisition, any stockholder who so requested
may call the meeting.
ACTION BY WRITTEN CONSENT OF STOCKHOLDERS
The Delaware General Corporation Law and World Color's by-laws provide that,
unless limited by the certificate of incorporation, any action that could be
taken by stockholders at a meeting may be taken without a meeting by written
consent of the stockholders. The written consent should state the action so
taken and be signed by the holders of record of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take that action at a meeting at which all shares entitled to vote thereon were
present and voted.
Under the Canada Business Corporations Act and Quebecor Printing's by-laws,
stockholder action without a meeting may be taken only by written resolution
signed by all stockholders who would be entitled to vote on that action at the
meeting.
VOTE REQUIRED FOR EXTRAORDINARY CORPORATE TRANSACTIONS
The Delaware General Corporation Law provides that a sale, lease or exchange
of all or substantially all of the corporation's assets, a merger or
consolidation of the corporation with another corporation or a dissolution of
the corporation requires the affirmative vote of the board of directors, plus,
with some exceptions, the affirmative vote of a majority of the outstanding
stock entitled to vote for that type of proposal. The foregoing provisions apply
to World Color and its stockholders.
Under the Canada Business Corporations Act, extraordinary corporate actions,
such as amalgamations, continuances, sales, leases or exchanges of all or
substantially all of the property of a corporation other than in the ordinary
course of business, and other extraordinary corporate actions such as
liquidations or dissolutions are required to be approved by a special
resolution. A special resolution is a resolution passed by a majority of not
less than two-thirds of the votes cast by the stockholders entitled to vote on
the resolution. There are cases where a special resolution to approve an
extraordinary corporate action is also required to be approved separately by the
holders of a class or series of shares. A corporation may also apply to a court
for an order approving an arrangement, which includes an amalgamation, a
transfer of all or substantially all the property of a corporation, or
liquidation and dissolution, where it is not insolvent and where it is not
practicable for the corporation to make such fundamental change in accordance
with the provisions of the Canada Business Corporations Act. The court may make
any interim or final order it thinks fit with respect to such proposed
arrangement. In addition, Quebecor Printing's by-laws provide for the
pre-approval, in
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writing, by Quebecor Inc. and by Caisse of extraordinary corporate transactions
before they are submitted to the board of directors.
BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
Section 203 of the Delaware General Corporation Law prohibits a corporation
from engaging in various business combinations with an interested stockholder
for a three-year period beginning on the date the person became an "interested
stockholder." An interested stockholder is defined generally as a person
beneficially owning 15% or more of the corporation's outstanding voting stock,
or an interested stockholder's affiliates or associates. The restrictions on
business combinations, including a merger, sale of substantial assets, loan or
substantial issuance of stock, applies to a corporation which has securities
traded on a national securities exchange, is designated on the Nasdaq National
Market or is held of record by more than 2,000 stockholders. The restrictions do
not apply if:
- the board of directors gives prior approval to the business combination or
to the transaction which resulted in the stockholder becoming an
interested stockholder;
- the interested stockholder acquires 85% or more of the corporation's
outstanding stock in the same transaction in which the stockholder's
ownership first exceeds 15%. This percentage excludes those shares owned
by persons who are directors and also officers as well as by employee
stock plans in which employees do not have the right to determine whether
shares held subject to the plan will be tendered in a tender or exchange
offer; or
- on or following the date on which the stockholder became an interested
stockholder, the board of directors approves the business combination and
the holders of at least two-thirds of the outstanding voting stock,
excluding shares owned by the interested stockholder, authorize the
business combination at a meeting of stockholders.
Although a Delaware corporation may elect, in its certificate of
incorporation or by-laws, not to be governed by this provision, World Color's
certificate of incorporation and the by-laws do not contain these elections.
The Canada Business Corporations Act does not contain a comparable provision
with respect to business combinations. However, policies of Canadian securities
regulatory authorities, including Policy Q-27 of the Quebec Securities
Commission and Policy 9.1 of the Ontario Securities Commission, contain
requirements in connection with related party transactions. A related party
transaction means, generally, any transaction by which an issuer, directly or
indirectly, acquires or transfers an asset or acquires or issues treasury
securities or assumes or transfers a liability from or to, as the case may be, a
related party. "Related parties" include directors, senior officers and holders
of at least 10% of the voting securities of the issuer.
The proxy materials sent to stockholders in connection with a related party
transaction require more detailed disclosure, including a summary of a formal
valuation of the subject matter of the related party transaction and any
non-cash consideration offered in exchange. In addition, the minority
stockholders of the issuer must separately approve the transaction, by either a
simple majority or two-thirds of the votes cast, depending on the circumstances.
STOCKHOLDER SUITS
Under Delaware law, a stockholder may institute a lawsuit against one or
more directors, either on his own behalf, or derivatively on behalf of the
corporation. An individual stockholder may also commence a lawsuit on behalf of
himself and other similarly situated stockholders when the requirements for
maintaining a class action under Delaware law have been met. With respect to a
derivative action, the Delaware General Corporation Law provides that a
stockholder must state in the complaint that he was a stockholder of the
corporation at the time of the transaction of which he complains. A stockholder
must first make a demand on the board of directors of the corporation to
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bring suit. Only when the demand is refused or it is shown that a demand would
be futile may a stockholder sue derivatively.
Section 102(b)(7) of the Delaware General Corporation Law enables a
corporation in its certificate of incorporation to eliminate or limit, and the
World Color certificate of incorporation in fact eliminates, the personal
liability of a director to the corporation and its stockholders for monetary
damages for violations of the director's fiduciary duties. This does not include
liability, however, for any breach of the director's duty of loyalty to the
corporation or its stockholders, for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, for unlawful
payments of dividends, stock repurchases and redemptions, or for any transaction
from which the director derived an improper personal benefit.
Under the Canada Business Corporations Act, a complainant may apply to the
court for leave to bring an action in the name of and on behalf of a corporation
or any subsidiary, or to intervene in an existing action to which the
Corporation is a party, for the purpose of prosecuting, defending or
discontinuing the action on behalf of the Corporation. Under the Canada Business
Corporations Act, a complainant cannot begin an action unless the complainant
has given reasonable notice to the directors of the corporation or its
subsidiary of his intention to apply to the court and the court is satisfied
that:
- the directors of the corporation or its subsidiary will not bring,
diligently prosecute or defend or discontinue the action;
- the complainant is acting in good faith; and
- it appears to be in the interests of the corporation or its subsidiary
that the action be brought, prosecuted, defended or discontinued.
Under the Canada Business Corporations Act, the court in a derivative action
may make any order it thinks fit including, without limitation an order:
- authorizing the complainant or any other person to control the conduct of
the action;
- giving directions for the conduct of the action;
- directing that any amount adjudged payable by a defendant in the action
shall be paid, in whole or in part, directly to former and present
stockholders of the corporation or its subsidiary instead of to the
corporation or its subsidiary; and
- requiring the corporation or its subsidiary to pay reasonable legal fees
and any other costs reasonably incurred by the complainant in connection
with the action.
A court may also order a corporation or its subsidiary to pay the
complainant's interim costs, including reasonable legal fees and disbursements.
Although the complainant may be held accountable for the interim costs on final
disposition of the complaint, it is not required to give security for costs in a
derivative action.
DISSENTERS' RIGHTS
Under the Delaware General Corporation Law, dissenters' rights of appraisal
are limited. Rights of appraisal are available to a stockholder of a corporation
only in connection with some mergers or consolidations involving the
corporation, or if its certificate of incorporation provides that these rights
are available as a result of:
- an amendment to its certificate of incorporation,
- any merger or consolidation in which the corporation is a "constituent
corporation," or
- the sale of all or substantially all of the assets of the corporation.
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Unless provided in a corporation's certificate of incorporation, appraisal
rights are not available under the Delaware General Corporation Law in
connection with a merger or consolidation of a corporation if the corporation's
stock is, on the applicable record date, listed on a national securities
exchange or designated on the Nasdaq National Market or held of record by more
than 2,000 stockholders. Nevertheless, appraisal rights will be available if the
merger or consolidation requires stockholders to exchange their stock for
anything other than shares of the surviving corporation; shares of another
corporation that will be listed on a national securities exchange, designated on
the Nasdaq National Market or held of record by more than 2,000 stockholders;
cash in lieu of fractional shares of any corporation; or a combination of that
kind of shares and cash.
The Canada Business Corporations Act provides that stockholders entitled to
vote on a matter are entitled to exercise rights of dissent and to be paid the
fair value of their shares in connection therewith. The Canada Business
Corporations Act does not distinguish for this purpose between listed and
unlisted shares. These matters include:
- any amalgamation with a corporation, other than with particular subsidiary
corporations;
- an amendment to the corporation's articles to add, change or remove any
provisions restricting the issue, transfer or ownership of shares;
- an amendment to the corporation's articles to add, change or remove any
restriction upon the business or businesses that the corporation may carry
on;
- a continuance under the laws of another jurisdiction;
- a sale, lease or exchange of all or substantially all of the property of
the corporation other than in the ordinary course of business; and
- amendments to the articles of a corporation which require a separate class
or series vote, except that a stockholder is not entitled to dissent if an
amendment is effected by a court order made in connection with an action
for an oppression remedy.
Under the Canada Business Corporations Act, a stockholder may, in addition
to exercising rights of dissent, seek an oppression remedy for any act or
omission of a corporation which is oppressive, unfairly prejudicial to or that
unfairly disregards a stockholder's interest, as described below under
"--Oppression Remedy."
DIVIDENDS
Under the Delaware General Corporation Law, a corporation may declare and
pay dividends out of "surplus" which is defined as the excess of net assets over
capital. If there is no surplus, dividends can be paid out of net profits for
the fiscal year in which the dividend is declared and/or for the preceding
fiscal year as long as the amount of capital of the corporation following the
dividend is not less than the aggregate amount of the capital represented by the
issued and outstanding stock of all classes having a preference upon the
distribution of assets. In addition, the Delaware General Corporation Law
generally provides that a corporation may redeem or repurchase its shares only
if the capital of the corporation is both not impaired would not be impaired by
the redemption or repurchase.
Under the Canada Business Corporations Act, a corporation may pay a dividend
by issuing fully paid shares of the corporation. A corporation may also pay a
dividend in money or property unless there are reasonable grounds for believing
that the corporation is, or would after the payment be, unable to pay its
liabilities as they become due; or the realizable value of the corporation's
assets would thereby be less than the aggregate of its liabilities and stated
capital of all classes of stock. For additional information with respect to
dividends to holders of Quebecor Printing preferred shares and redemption of
preferred shares, see "DESCRIPTION OF SHARE CAPITAL."
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AMENDMENTS TO CHARTER AND BY-LAWS
Under the Delaware General Corporation Law, unless a higher vote is required
in the certificate of incorporation, an amendment to the certificate of
incorporation generally requires:
- the recommendation of the board of directors;
- the approval of the holders of a majority of all shares entitled to vote
for that type of proposal, voting together as a single class; and
- approval of the holders of a majority of the outstanding stock of each
class entitled to vote for that type of proposal.
Pursuant to the Delaware General Corporation Law, the power to amend the
by-laws of a corporation is vested in the stockholders, but a corporation may
also confer this authority on the board of directors if the certificate of
incorporation so provides. The World Color certificate of incorporation has
conferred the power to make, alter or repeal the World Color by-laws upon the
directors. The World Color by-laws may be amended either by the vote of a
majority of the board of directors or by the holders of a majority of the
outstanding stock entitled to vote on this type of proposal.
Under the Canada Business Corporations Act, an amendment to a corporation's
articles generally requires stockholder approval by special resolution, which is
a resolution passed by a majority of not less than two-thirds of the votes cast
by stockholders entitled to vote on the resolution. In addition, if an amendment
to the articles of incorporation adversely affects the rights of a particular
class or series of stock, that class or series is entitled to vote separately on
the amendment as a class, whether or not that class or series is designated as
voting stock. Under the Canada Business Corporations Act, unless the articles or
by-laws otherwise provide, the directors may, by resolution, make, amend or
repeal any by-law that regulates the business or affairs of a corporation. Where
the directors make, amend or repeal a by-law, they are required to submit the
by-law, amendment or repeal to the stockholders at the next meeting of
stockholders. The stockholders may confirm, reject or amend the by-law amendment
or repeal by an ordinary resolution, which is a resolution passed by a majority
of the votes cast by stockholders entitled to vote on the resolution.
DIRECTOR LIABILITY
The Delaware General Corporation Law permits Delaware corporations, in their
certificates of incorporation, to eliminate or limit the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty, except for liability:
- for any breach of the director's duty of loyalty to the corporation or its
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- arising from the payment of a dividend or approval of a stock repurchase
in violation of the Delaware General Corporation Law; or
- for any transaction from which the director derived an improper personal
benefit.
The World Color certificate of incorporation eliminates director liability
for breaches of fiduciary duty to the full extent permitted under the Delaware
General Corporation Law.
The Canada Business Corporations Act does not permit any limitation of a
director's liability.
FIDUCIARY DUTIES OF DIRECTORS
Under the Delaware General Corporate Law, the duty of care requires that the
directors act in an informed and deliberative manner and inform themselves,
prior to making a business decision, of all material information reasonably
available to them. The duty of care also requires that directors exercise
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care in overseeing and investigating the conduct of corporate employees. The
duty of loyalty may be summarized as the duty to act in good faith, not out of
self-interest, and in a manner which the directors reasonably believe to be in
the best interests of the stockholders.
Pursuant to the Canada Business Corporations Act, the duty of care requires
that the directors exercise the care, diligence and skill that a reasonably
prudent person would exercise in comparable circumstances. The duty of loyalty
requires directors of a Canadian corporation to act honestly and in good faith
with a view to the best interests of the corporation.
RIGHTS OF INSPECTION
The Delaware General Corporation Law allows any stockholder of a Delaware
corporation, upon written demand under oath stating the purpose of the demand
to, during usual business hours, inspect for any proper purpose the
corporation's stock ledger, list of stockholders, and other books and records,
and to make copies or extracts of these documents and materials. A proper
purpose means a purpose reasonably related to the person's interest as a
stockholder.
Under the Canada Business Corporations Act, a corporation is required to
make available to its stockholders and creditors, their agents and legal
representatives, prescribed books and records during usual business hours of the
corporation. Such persons may, free of charge, take extracts from these
prescribed books and records and, in the case of a corporation having
outstanding securities which were issued as part of a distribution to the
public, any other person, may take extracts from these books and records upon
payment of a reasonable fee. Stockholders and creditors, their agents and legal
representatives, and, in the case of a corporation having outstanding securities
which were issued as part of a distribution to the public, any other person,
upon payment of a reasonable fee and sending to the corporation of an affidavit,
may also require a corporation to furnish a list of stockholders. In addition,
directors of a corporation are entitled to examine specified additional records,
documents and instruments of the corporation.
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
The Delaware General Corporation Law permits indemnification of officers,
directors, employees and agents against expenses, judgments, fines and amounts
paid in settlement actually and reasonably incurred in proceedings, other than
an action by or in the right of the corporation. The indemnified person,
however, must have acted in good faith and in a manner that he reasonably
believed to be in or not opposed to the best interest of the corporation and,
with respect to any criminal actions, had no reasonable cause to believe that
the conduct was unlawful.
In the case of actions, by or in the right of the corporation,
indemnification is limited to expenses actually and reasonably incurred, and no
indemnification may be made for any claim, issue or matter as to which the
person has been adjudged to be liable to the corporation, unless indemnification
is otherwise authorized by a court.
Under the Canada Business Corporations Act, and pursuant to Quebecor
Printing's by-laws, Quebecor Printing may indemnify a person who is a present or
former director or officer or a person who acts or acted at Quebecor Printing's
request as a director or officer of another corporation of which Quebecor
Printing is or was a stockholder or creditor, and that person's heirs and legal
representatives, against all costs, charges and expenses, including an amount
paid to settle an action or satisfy a judgment, reasonably incurred by him in
respect of any civil, criminal or administrative action or proceeding to which
he is made a party by reason of that person's position if:
- that person acted honestly and in good faith with a view to the best
interests of Quebecor Printing; and
- in the case of a criminal or administrative action or proceeding that is
enforced by a monetary penalty, that person had reasonable grounds for
believing that his conduct was lawful.
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A person is entitled to indemnity from Quebecor Printing as a matter of
right if that person was substantially successful on the merits in his defense
of the action or proceeding and fulfilled the conditions set out in the
immediately preceding bullet points. Quebecor Printing may, with the approval of
a court, also indemnify a person in a derivative action to which that person is
made a party by reason of being or having been a director or officer of Quebecor
Printing, if that person fulfills the conditions set out in the immediately
preceding bullet points.
ADDITIONAL PROVISIONS RELATING TO BOARD ACTION
Delaware law generally permits a board of directors to consider
constituencies in addition to stockholders, even though the Delaware General
Corporation Law does not contain specific provisions to that effect.
When interpreting a director's duty of loyalty under the Canada Business
Corporation Act, Canadian courts have generally interpreted the best interests
of the corporation to mean the best interests of the shareholders as a whole.
There is no settled law dealing with the extent to which a board of directors
may consider constituencies in addition to shareholders.
OPPRESSION REMEDY
The Delaware General Corporate Law does not provide for an oppression
remedy.
The Canada Business Corporations Act provides an oppression remedy that
enables the court to make any order, both interim and final, to rectify any act
or omission of the corporation or an affiliate that is oppressive or unfairly
prejudicial to, or that unfairly disregards the interests of any security
holder, creditor, director or officer of the corporation. Complainants eligible
for this remedy include:
- a present or former registered holder or beneficial owner of securities of
a corporation or any of its affiliates;
- a present or former officer or director of the corporation or any of its
affiliates; and
- any other person who in the discretion of the court is a proper person to
make that type of a complaint.
Because of the breadth of the conduct which can be complained of and the
scope of the court's remedial powers, the oppression remedy is very flexible and
is frequently relied upon to safeguard the interests of stockholders and other
complainants which have a substantial interest in the corporation. Under the
Canada Business Corporations Act, it is not necessary to prove that the
directors of a corporation acted in bad faith in order to seek an oppression
remedy. Additionally, a court may order a corporation or its subsidiary to pay
the complainant's interim costs, including reasonable legal fees and
disbursements. Although the complainant may be held accountable for the interim
costs on final disposition of the complainant, it is not required to give
security for costs in an oppression action.
QUORUM OF STOCKHOLDERS
Under the Delaware General Corporation Law, and unless the certificate of
incorporation or by-laws provide otherwise, a quorum at a meeting of
stockholders consists of a majority of shares entitled to vote present in person
or represented by proxy. In no event may a quorum consist of less than one-third
of shares entitled to vote at the meeting. World Colors by-laws provide that a
quorum shall be a majority of the issued and outstanding stock of World Color
entitled to vote at the meeting, present in person or by proxy.
Under the Canada Business Corporations Act, unless Quebecor Printing's
by-laws otherwise provide, a quorum of stockholders is present at a meeting,
irrespective of the number of persons actually present at the meeting, if the
holders of a majority of the shares entitled to vote at the meeting are present
in person or represented by proxy. Quebecor Printing's by-laws provide that a
quorum is present at an annual or special meeting of stockholders, if the
holders of shares representing at least 10% of the voting rights at the meeting
are present in person or represented by proxy. For information on voting rights
of Quebecor Printing's preferred shares see "DESCRIPTION OF SHARE CAPITAL."
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THE COMPANIES
QUEBECOR PRINTING
GENERAL
Quebecor Printing, a diversified global commercial printing company, is the
largest commercial printer in Canada and Europe, and one of the largest in the
United States and South America. Its 1998 revenues reached $3.8 billion.
Quebecor Printing offers its customers state-of-the-art web offset, gravure and
sheetfed printing capabilities, plus related value-added printing services in
product categories including magazines, inserts and circulars, books, catalogs,
directories, specialty printing and direct mail, and CD-ROM mastering and
replicating. Quebecor Printing is a market leader in most of its product
categories. Quebecor Printing believes that the diversity of its customer base,
geographic coverage and product segments reduces its reliance on any single
product line or market. Quebecor Printing's strategy for growth focuses on
increasing its geographic coverage and expanding its product segments and
services across its network of facilities. As of March 1, 1999, Quebecor
Printing employed approximately 27,535 people.
Quebecor Printing services these markets and offers its products through a
network of 115 printing and related services facilities capable of servicing
economically virtually all major markets in the United States, Canada, France,
Germany, the United Kingdom, Spain, Sweden, Finland, Mexico, India, Chile,
Argentina, Peru and Colombia.
DESCRIPTION OF PRODUCTS
MAGAZINES
Quebecor Printing prints more than 500 magazine titles, including: TIME,
GEORGE, TRAVEL, HOLIDAY, SPORTS ILLUSTRATED, PEOPLE, FORTUNE, MONEY, TV GUIDE,
SOUTHERN LIVING, CAR AND DRIVER, LE FIGARO MAGAZINE, FIRST FOR WOMEN, READER'S
DIGEST, MACLEAN'S, L'ACTUALITE, CHATELAINE, FLARE, 7 JOURS, TV WEEK, B.C.
BUSINESS, GROCER TODAY, AWARD, SUPER CAMPING GUIDE, STAY WELL, BEAUTIFUL BC,
WESTERN LIVING, VANCOUVER MAGAZINE, FORBES GLOBAL, YOU, OK WEEKLY, AFTONBLADET,
EXPRESSEN, ICA, LRF MEDIA, ANTTILA, KVICKLY and BILKA among other magazines, as
well as all the magazines published by Quebecor Inc., the parent of Quebecor
Printing.
Management believes Quebecor Printing is the industry leader in producing
Sunday newspaper magazines. These are four-color magazines inserted in
major-market Sunday newspapers. Quebecor Printing prints two syndicated Sunday
magazines, PARADE and USA WEEKEND, as well as locally edited and distributed
Sunday newspaper magazines, and GLOBE, THE SUN and EXAMINER, three weekly
tabloids. In the United Kingdom Quebecor Printing is the largest supplier of
weekend supplements for Associated Newspapers, Mirror Group Newspapers and
Guardian Newspapers.
Quebecor Printing has invested in prepress (desktop-publishing) and press
technology to enhance its ability to service this market. For the production of
medium- to long-run magazines, Quebecor Printing is at an advantage because its
plants have selective-binding and ink-jet-imaging capabilities and can utilize
Quebecor Printing's mail analysis system.
Quebecor Printing also prints comic books for leading companies such as D.C.
Comics. In the comic-book market, Quebecor Printing operates an on-line computer
management system that provides publishers with information regarding the
production and distribution status of each of their titles. In 1993, Quebecor
Printing established Quebecor Printing Comic Book Group to consolidate its
activities in this segment.
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INSERTS AND CIRCULARS
Quebecor Printing's major inserts and circulars customers include large
retailers, such as Sears, Walgreens, K-Mart, Montgomery Ward, Target, Mervyn's,
Ames, CVS, Bradlee's, Sports Authority, JC Penney, Shoppers Drug Mart, Canadian
Tire, Radio Shack, Provigo, Carrefour, RONA, the Brick Warehouse Corporation,
CFA-Carrefour, Continent, But, Conforama, Leclerc and Auchan. In the United
States, Quebecor Printing's eleven rotogravure process printing plants offer
both the coast-to-coast manufacturing network and the long-run efficiencies
required to serve the larger retail customers. Quebecor Printing has four
rotogravure process printing plants in France. In Canada and South America,
Quebecor Printing prints inserts and circulars using heatset and coldset web
offset and rotogravure processes in accordance with customer requirements.
The Canadian segment of Quebecor Printing recently expanded a printing
contract to create and distribute the first customized electronic retail flyer
published on the Internet. Quebecor Printing collaborated with Intellia to
develop the "e-flyer" and an underlying web site for Canadian Tire, a major
automotive and hardware retailer.
CATALOGS
Quebecor Printing prints several hundred different catalogs on an annual
basis for many of North America's direct mail retailers such as L.L. Bean,
Sharper Image, Hanover Direct, Fingerhut, Bloomingdale's, Lillian Vernon, Office
Depot, Executive Greetings, Scholastic, Chadwick's, Sears, Avon, Zellers, Neiman
Marcus, Frederick's of Hollywood and Viking Office Products. Quebecor Printing
offers special catalog services such as list services to help customers compile
effective lists for distribution, selective-binding capacity to allow customers
to vary catalog content to meet their customers' demographic and purchase
patterns, and ink-jet addressing and messaging to personalize messages for each
recipient. This technology partially offsets postage-cost increases by
eliminating pages of products that do not fit a buyer's demographic or
purchasing profile.
In order to deliver a full portfolio of publishing, printing, information
management and electronic commerce services, Quebecor Printing has recently
equipped itself, due to the creation of a strategic partnership between Quebecor
Printing Canada, Quebecor Multimedia and IBM Canada Ltd., with a web-based
electronic catalogues service secured on-line.
BOOKS
Quebecor Printing is the second-largest book manufacturer in North America.
Quebecor Printing acquired Arcata Corporation in July 1994, and combined its
five book manufacturing plants with Quebecor Printing's existing book facilities
to form the Quebecor Printing Book Group. The Quebecor Printing Book Group is an
industry leader in the application of new technologies for book production
including electronic prepress, information networking, digital printing,
computer-to-plate and electronic data interchange. With plants in the United
States and Mexico, Quebecor Printing serves more than 1,000 publisher customers
including Random House, Simon & Schuster, Thomas Nelson, Time Warner,
McGraw-Hill, Pearson, Houghton-Mifflin and Harlequin.
Following its full-service approach, Quebecor Printing has expanded its
presence in the market for on-demand printing through both capital investment
and through the acquisition of William C. Brown. This service allows for small
quantities of books, brochures, technical documents and similar products to be
produced quickly and at a relatively low cost. With the acquisition of Print
Northwest/Six Sigma, Quebecor Printing can now offer technical documentation
printing.
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SPECIALTY PRINTING AND DIRECT MAIL, RELATED SERVICES AND CD-ROMS
Products in these categories include annual reports, corporate prospectuses,
promotional literature, calendars, posters, direct-mail products, CD-ROMs and
other custom items. Quebecor Printing's web and sheetfed printing presses of a
smaller size permit Quebecor Printing to offer custom colors, coatings, finishes
and specialized binding required to produce a wide variety of print products.
Quebecor Printing provides numerous print-related services to customers,
including typesetting, prepress, circulation fulfillment, list management,
mailing and distribution, in particular through desktop-publishing and
electronic prepress technology. The installation of new presses in 1997 allowed
the Specialty Group to increase both its competitive edge and its manufacturing
capacity during 1998.
Quebecor Merrill Canada Inc. offers services of manufacturing operations to
serve the market for financial documents, prospectuses, annual reports and
related printing.
The creation of Quebecor Direct and the purchases in 1996 and 1997 of Les
Jeux de cartes Graphica Inc. (Sherbrooke, Quebec), Petty Co., Inc. (Effingham,
Illinois), Eagle Lithographing Company (Kansas City, Missouri) and Sayers
Communications Group Inc. (St. Louis, Missouri) have raised Quebecor Printing's
position in the high-growth specialty and direct mail market. Quebecor Direct
established an international presence which allows it to be a leader in the
application of versioning, ink jet addressing, print-on-demand technology and
computer-to-plate techniques which are critical to the customized production and
compressed cycle times that customers demand today.
On November 14, 1997, Quebecor Printing launched Quebecor Direct Fragrance &
Cosmetics Division to provide specialized products and related marketing
services to the fragrance and cosmetics industries.
DIRECTORIES
Quebecor Printing specializes in telephone directories and is the largest
directory printer in Canada and among the largest directory printers in North
America. Its presence in this North American market dates back to the late 19th
century with the printing of Bell Canada's first directories. In 1998, the
Directory Group increased productivity and upgraded its service to customers by
investing in new equipment and processes.
Quebecor Printing prints telephone directories and other directories for a
large number of companies in North America, including Bell Atlantic, RH
Donnelley, Southern New England Telephone, Cincinnati Bell, Midwest Litho/Yellow
Page One, US West, Bell ActiMedia (formerly TeleDirect) and Western Printing
Alliance, TransWestern, Bell South, Yellow Book, National, Directory McLeod*USA,
Telephonica Del Peru and Chilenet. In 1994, Quebecor Printing began production
of directories for the Indian domestic market at its directory facility near New
Delhi, India. In 1993, Quebecor Printing established its Directory Group to
consolidate its directory printing operations.
DESCRIPTION OF PROCESSES AND EQUIPMENT
Quebecor Printing uses two types of printing processes: rotogravure and
offset. These two processes represent the most commonly used commercial printing
processes. Both processes have undergone substantial technological advances over
the past decade, resulting in significant improvements in speed and print
quality. Quebecor Printing estimates that in 1998 approximately two-thirds of
its revenues volume were printed using offset and the remainder using the
rotogravure process.
ROTOGRAVURE
With 66 rotogravure presses, Quebecor Printing is one of the largest
world-wide printers using the rotogravure process. The process uses a
copper-coated printing cylinder that is engraved mechanically
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using high-precision, computer-controlled diamond cutting heads. Although the
engraving of the printing cylinder is relatively expensive, the printing
cylinder itself is extremely durable and cost effective for long runs. The
rotogravure process has an excellent reputation for the quality of its
four-color reproductions on various grades of paper and on a very high speed.
The rotogravure process is well suited to long-run printing of advertising
inserts and circulars, Sunday newspaper magazines, and other high-circulation
magazines and catalogs. Quebecor Printing believes that its coast-to-coast
network of rotogravure facilities in the United States offers both the capacity
and locations required by large merchandisers and publishers. The acquisition in
1995 of Groupe Jean Didier with its rotogravure capacity provides an
advantageous position in Europe. Quebecor Printing's advanced ability in
rotogravure digital prepress also ensures more efficient, accurate production of
the same insert simultaneously in multiple locations, thereby offering the
customer the efficiency and cost savings of manufacturing and distribution
closer to its end-use markets in reduced time frames.
OFFSET
In the offset process, an inked impression from a thin metal plate is first
made on a rubber cylinder, then offset to the paper. There are several types of
offset printing processes: sheetfed and web, heatset and coldset. Sheetfed
presses print on sheets of paper, whereas web presses print on rolls of paper.
Short-run printing is generally best served by sheetfed offset, whereas web
offset is generally the best process for longer runs.
SALES AND MARKETING
The sales and marketing activities of Quebecor Printing are highly
integrated and reflect both a national and localized approach of meeting
customers' needs that is complemented by product-specific sales efforts. Sales
representatives are located in plants or in one of the 45 regional offices
throughout North America, Europe, Mexico and Brazil, generally close to their
customers and prospects. Each sales representative has the ability to sell into
any plant in Quebecor Printing's network. This enables the customer to
coordinate simultaneous printing throughout Quebecor Printing's network through
one sales representative. Certain of the larger customers centralize the
purchase of printing services and in this regard Quebecor Printing's ability to
provide broad geographical services is clearly an advantage that its smaller
regional competitors do not enjoy.
Quebecor Printing's sales representatives also offer a wide variety of
prepress and post-press services to customers. These prepress services include
the color electronic prepress system, which takes art work from idea to final
product, and desktop publishing, which gives the customer greater control over
the finished product. These prepress services are especially helpful for the
smaller customers, who may not have the capital to employ that type of equipment
or may have to rely on third-party vendors, which can result in coordination and
delay problems. Post-press services, including shipping and distribution
expertise, ink-jet personalizing and customer-targeted binding, are rapidly
becoming requirements of numerous customers.
Quebecor Printing has continued to develop Quebecor Imaging Services,
established in 1992, to provide an integrated approach to research, development
and the implementation of new technologies which allow us to create and transmit
the image of the printed page prior to printing. QIS was integrated to Quebecor
Litho Plus in 1995. Quebecor Destination Services has continued to improve to
partially counter rising postal rates and other distribution-related costs. QDS
has inaugurated a new distribution center for pool-shipping products in
Nashville, Tennessee, that is able to service efficiently more than 70% of the
American population. Prepress and post-press services, which provide added value
to customers both before and after printing, are becoming an increasingly
important competitive advantage to Quebecor Printing.
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Quebecor Printing believes that its size and network of locations throughout
North America and in Europe give it advantages over smaller competitors in terms
of shipping and distribution. Because of its volume, Quebecor Printing is able
to set up pool-shipping systems, which enable customers to ship their products
at significant discounts. The discount is achieved through agreements with the
postal services, which provides the mailer/customer with a discount if the
mailer/customer pays the freight costs to transport the mail closer to the
postal services delivery office. Quebecor Printing uses its custom-built mail
analysis system, which automatically combines different customers into
truck-load shipments and analyzes the cost-savings benefit to the customer. The
mail analysis system then generates the necessary forms, bills of lading and
freight invoices for the customer.
Ink-jet personalizing is increasingly being used by many publishers and
cataloguers. Ink-jet addressing eliminates the additional process of printing
paper labels and improves mailing efficiency. Catalogers use ink-jet
personalizing in a number of ways. Ink-jet addressing allows both the cover and
the order form to be labeled and to show customer-coding information.
Furthermore, as cataloguers continue to look for methods to increase the level
of personalization, the ink-jet process is being used more frequently to add
personal messages, specific inserts to frequent buyers, or unique coding
information for order entry. Another advantage to ink-jet printing and selective
binding is Quebecor Printing's ability to merge lists of names for the same
customer or to co-mail different customers to achieve increased postal pre-sort
discounts.
TECHNOLOGY
Quebecor Printing is committed to the effective use of state-of-the-art
technology to provide cost effective customer service. Quebecor Printing is
active in the following areas among others: rotogravure computer-aided prepress
and cylinder processing, which improves time and cost efficiencies and the
quality of prepress page preparation and cylinder engraving; wide-web heatset
web offset presses, where Quebecor Printing collaborated on the engineering and
subsequent installation of nine Sunday Press 54-inch, 48-page presses, which are
twice as productive than standard 36-inch, 32-page presses; ink-jet-addressing
and messaging systems, with Quebecor Printing offering a 72-line messaging
capability for the customization of catalogs and magazines.
Quebecor Printing also cooperates with large suppliers in the area of
research and development of new printing technologies, materials and processes.
Quebecor Printing's capital-improvement programs include replacing and/or
upgrading of existing equipment. Since 1994, Quebecor Printing has continued to
invest in Target Bound-TM- selective binding equipment, which enables publishers
and catalog merchandisers to produce multiple versions of a magazine or catalog
in a single bindery run. It also acquired color electronic prepress and desktop
publishing equipment, invested in its mail analysis system, acquired new
equipment for answer-card printing and insertion, and invested in LazerBook-TM-,
which offers its customers a wider range of printing and binding styles.
In 1995, Quebecor Printing demonstrated its ingenuity, and developed the
Bind Sleeve-TM- process which enables it to bind a CD-ROM in a book at full
production speed. Bill Gate's successful book, "The Road Ahead" utilized this
new technology.
Quebecor Printing has continued to invest in faster, more efficient and
higher-quality presses. Prepress continued to be the stage for dramatic
enhancements in the digital electronic area, with new computer software and
hardware installed to help customers create their pages more quickly and more
efficiently. Quebecor Printing has been an industry leader in bringing on line
new imaging services that streamline the process of preparing pages for print,
as well as data for other vehicles such as CD-ROM. Quebecor Printing has become
one of the first printers to install desk top publishing, direct to film and
computer-to-plate systems for offset printing, which totally eliminate the
costly and time-consuming film step in print production. It has furthermore
established one of the industry's most
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sophisticated data communications networks, capable of transmitting a customer's
publication files quickly and efficiently from the customer location to multiple
plant locations.
The management of Quebecor Printing believes that, in the years to come,
commercial printing will witness a new generation of technological changes that
will make those printers which can afford to acquire these new technologies,
better equipped to continue to expand. One such change is the arrival of the
Sunday press. These new machines compete with existing presses that run at 2,000
feet per minute on a 36 inch-wide cylinder by offering speeds of 3,000 feet per
minute on 54 inch-wide cylinders. Using the same crew, these new presses bring
about a significant improvement at the margin level. Quebecor Printing now owns
nine Sunday presses.
Quebecor Printing became the first commercial printer to install the latest
generation of short cut-off tabloid offset presses. The new presses print more
pages at faster speeds and use less paper than conventional tabloid presses.
Four machines went into production in Atglen, Pennsylvania and Dallas, Texas.
Plans are also being developed to extend the network of short cut-off tabloid
offset presses to the West Coast. Quebecor Printing invested in new and emerging
digital and web-based technologies to improve services, cut costs and expand its
range of products. Planning also began for the construction of an ATM-based
telecommunications network that will link Canadian facilities and major
customers. The new system will extend to the Que-Net network, which already
links U.S. plants and customers. When completed in 1999, Quebecor Printing will
operate a North America-wide telecommunications network, which will enhance
Quebecor Printing's ability to move digital files between its facilities and
customers quickly, share work among plants, and expand distribution and printing
operations.
WORLD COLOR
GENERAL
World Color is an industry leader in the management and distribution of
print and digital information. World Color is the second largest diversified
commercial printer in the United States, providing digital repress, press,
binding, distribution and multi-media services to customers in the commercial,
magazine, catalog, direct mail, book and directory markets. Founded in 1903,
World Color currently operates 58 facilities with a network of sales offices
nationwide. Through selective acquisitions and internal expansion, World Color
has strategically positioned itself as a full-service provider of high
technology solutions for its customers' imaging, print and distribution needs.
World Color operates in one business segment--printing services, which is
comprised of six separate sectors including, Commercial, Magazines, Catalogs,
Direct Mail, Books and Directories. Substantially all of World Color's sales are
made to customers through its employees based upon customer specification. A
significant amount of World Color's sales are made pursuant to term contracts
with its customers, with the remainder being made on an order-by-order basis. As
a result, World Color has a significant backlog of orders and no customer
accounted for more than 5% of World Color's net sales in 1998.
COMMERCIAL
World Color is a premier printer of virtually all of the different kinds of
printed materials used by businesses to promote their goods and services to
other businesses, investors and consumers. World Color prints high quality
specialty products such as annual reports (including World Color's) and
automobile and travel brochures. World Color is also a leading printer of
product brochures, bill stuffers, informational marketing materials and other
advertising supplements.
World Color also prints freestanding inserts and retail inserts for
established national and regional retailers and is the second largest offset
printer of retail advertising inserts in the United States. World
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Color is an industry leader in three highly specialized areas: (1) complex
personalized direct response materials; (2) unique and intricate
consumer-involvement promotional materials such as scratch-off game pieces; and
(3) airline guides and hotel directories.
With a broad range of specialized equipment and focused attention to
customer service, World Color provides its commercial customers with format
flexibility, high-speed production and the ability to print high quality
commercial products from start to finish at one full-service source.
MAGAZINES
World Color believes that it is the second largest printer of consumer
magazines in the United States. There are three other diversified printing
companies in the sector. The publication customer base includes some of the
largest and most established consumer magazine publishers in a diverse range of
market categories. The popularity of these magazines makes them less susceptible
to cyclical downturns in advertising spending, which World Color believes
provides it with a significant advantage over its competitors whose customers
may be more susceptible to these downturns.
A majority of World Color's magazine printing is performed under contracts
with remaining terms of between one and ten years, the largest of which are with
customers with whom World Color has had relationships for, on average, more than
20 years. World Color has extended a majority of these contracts beyond their
initial expiration dates and intends to continue this practice when economically
practicable.
CATALOGS
World Color is a leading printer for the U.S. catalog market. World Color
currently prints many of the most well known catalog titles. In addition, the
business-to-business catalog printing work spans a broad range of industries
including the computer, home and office furniture, office products and
industrial safety products industries. There are four diversified commercial
printers whose facilities enable them to compete nationally and smaller local
and regional printers who compete for business.
DIRECT MAIL
World Color prints direct mail materials such as booklets, inserts, bill
stuffers and other advertisements. In addition, World Color provides direct
marketers with direct imaging, personalization and other lettershop services.
World Color believes that it is the only direct mail printer capable of
providing complex personalization for both short and long-run projects.
BOOKS
World Color prints mass-market racksize books as well as hardcover books for
the consumer, education and reference markets. World Color services many of the
largest U.S. publishers.
DIRECTORIES
World Color has printed directories since 1981, predominately for Pacific
Bell. World Color prints four-color white-page and yellow-page directories for
Pacific Bell under a contract which extends through the year 2002 and which can
be extended by Pacific Bell for up to an additional three years. World Color
prints more than 100 different regional directory titles for Pacific Bell and
certain other customers.
DIGITAL AND PREPRESS SERVICES
World Color is a leader in the transition from conventional prepress to an
all-digital workflow, providing a complete spectrum of film and digital
preparation services, from traditional paste-up and
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color separations to state-of-the-art, all-digital prepress, as well as digital
imaging and digital archiving. World Color's eleven specialized digital and
prepress facilities, which are strategically located close to its customers,
provide high quality, 24-hour preparatory services linked directly to our
various printing facilities. In addition, the computer systems enable World
Color to exchange images and textual material electronically directly between
its facilities and its customers' business locations. The integrated prepress
operations provide World Color with competitive advantages over traditional
prepress shops that are not able to provide the same level of integrated
services. World Color's digital group also provides multi-media services such as
the transformation of customers' existing printed and digital material into
interactive media such as user-friendly information kiosk systems, Internet web
sites, corporate intranets, CD-ROMs and computer laptop sales presentations.
World Color's digital services group has provided a natural opportunity for
cross-selling efforts by offering integrated prepress and multi-media services
to print customers who may have historically used third-party suppliers for
their prepress and multi-media needs.
PRESS AND BINDING SERVICES
World Color believes that it provides its customers with access to
state-of-the-art technology in all phases of the printing and binding process,
including, among others, wide-web presses, computerized quality information
systems, computer-to-plate and digital processing systems, high speed binding
and personalization capabilities and robotic material handling. Wide-web press
technology, which only a small number of well-capitalized printers are able to
justify, generates a significant cost savings on longer press runs. Computerized
quality information systems provide World Color and its customers with instant
analysis of the quality of the printing, thereby enabling World Color to improve
its performance and plan preventive maintenance of our equipment more
effectively. Computer-to-plate and digital processing technologies eliminate the
use of film which significantly reduces costs and production time and enables
customers to extend their production deadlines. World Color's personalization
capabilities allow customers to include different content, whether advertising
or editorial or both, within different copies of their product depending upon
the geographic, demographic and subscriber specifications of their readers.
World Color operates web and sheetfed offset, rotogravure and flexagraphic
presses. World Color believes that the variety and capabilities of its presses
and other production equipment allows it to meet the broad range of its
customers' printing needs and be the full service provider demanded by the
market. This capacity provides World Color with a competitive advantage over
those smaller printers who are unable to meet this demand.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the World Color common stock as of August 20, 1999, including
beneficial ownership by (i) each stockholder of World Color who owns more than
5% of the outstanding shares of World Color common stock, (ii) each director of
World Color, (iii) the Chief Executive Officer of World Color, (iv) World
Color's four highest paid executive officers (exclusive of the Chief Executive
Officer) and (v) all directors and executive officers of World Color as a group.
Except as otherwise noted, the persons named in the table below have sole voting
and investment power with respect to all shares of World Color common stock
shown as beneficially owned by them. The following table does not include
options which were accelerated in connection with the transactions contemplated
by the merger agreement.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
OF THE COMMON OUTSTANDING SHARES
NAME STOCK OWNED(1) OF THE COMMON STOCK
- ------------------------------------------------------------------------- ----------------- -----------------------
<S> <C> <C>
Quebecor Printing, Inc.(2)............................................... 19,179,495 50.4
Robert G. Burton......................................................... 0 0
Marc L. Reisch........................................................... 0 0
Jennifer L. Adams........................................................ 0 0
James E. Lillie.......................................................... 0 0
Robert B. Lewis.......................................................... 0 0
Charles G. Cavell........................................................ 0 0
Pierre-Karl Peladeau..................................................... 0 0
Christian M. Paupe....................................................... 0 0
Francois R. Roy.......................................................... 0 0
All directors and executive officers as a group.......................... 0 0
</TABLE>
- ------------------------
(1) For purposes of this table, "beneficial ownership" includes any shares that
a person has the right to acquire within 60 days of August 20, 1999. For
purposes of computing the percentage of outstanding shares of World Color
common stock held by each person or group of persons named above on a given
date, any security which this person(s) has the right to acquire within 60
days after August 20, 1999 is deemed to be outstanding for purposes of
computing the percentage ownership of this person, but is not deemed to be
outstanding in computing the percentage ownership of any other person.
(2) Quebecor Printing Inc. indirectly owns all of the issued and outstanding
shares of its subsidiary, Printing Acquisition Inc. which accepted for
payment, and paid for, 19,179,495 shares of World Color common stock.
LEGAL MATTERS
Certain legal matters will be passed upon by:
- Arnold & Porter, Quebecor Printing's United States counsel, on matters of
United States tax law;
- Martineau Walker, a general partnership, special Canadian counsel to
Quebecor Printing, on matters of Canadian and Quebec law and the validity
of the Quebecor Printing subordinate voting shares to be issued to World
Color stockholders pursuant to the merger; and
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- Ogilvy Renault, a general partnership, special Canadian counsel to
Quebecor Printing, on matters of Canadian and Quebec law.
EXPERTS
The consolidated financial statements of Quebecor Printing and its
subsidiaries incorporated in this document by reference to the Annual Report on
Form 40-F for the three years ended December 31, 1998, have been so incorporated
in reliance on the report of KPMG LLP, independent auditors, as of and for year
ended December 31, 1998, given on the authority of these firms as experts in
auditing and accounting.
The consolidated financial statements of World Color and subsidiaries
incorporated by reference in the World Color Annual Report on Forms 10-K for the
years ended December 27, 1998, December 28, 1997 and December 29, 1996, have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports incorporated by reference on Forms 10-K that are incorporated in this
document by reference, and have been so incorporated in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
Representatives of Deloitte & Touche LLP, World Color's independent auditors,
are expected to be present at the World Color special meeting and available to
respond to appropriate questions. These representatives will be given the
opportunity to make a statement at the World Color special meeting if they
desire to do so.
FUTURE STOCKHOLDER PROPOSALS
If the merger is completed as expected, World Color will not hold an annual
meeting of stockholders in 2000. If the merger agreement is not approved by
stockholders or is not completed for any other reason, World Color will hold an
annual meeting in 2000.
A stockholder who intends to present a proposal for action at any annual
meeting and who desires that the proposal to be included in the meeting's proxy
materials must submit the proposal to World Color in advance of the meeting.
Proposals for the annual meeting to be held in 2000 must be received by World
Color at its principal office no later than November 26, 1999, to be considered
for inclusion in the proxy statement and proxy form relating to that meeting. In
addition, a stockholder who otherwise intends to present business at any annual
meeting (including nominating persons for election as directors) must comply
with, among other things, the notice requirements set forth in World Color's
by-laws. The by-laws specify that any stockholder notice of that type be
delivered to or mailed and received by World Color at its principal office not
less than 60 days nor more than 90 days prior to the annual meeting. If less
than 70 days' notice or prior public disclosure of the date of the annual
meeting is given to stockholders, then the stockholder notice must be received
by World Color at is principal office no less than the close of business on the
tenth day following the date on which notice of the annual meeting was mailed or
publicly disclosed. A proposal or nomination that does not comply with these
requirements will be disregarded. In addition, if a stockholder making a
proposal does not comply with all of the requirements of Rule 14a-4 of the
Securities Exchange Act, then a proxy solicited by the board of directors may be
voted on at the discretion of the proxy holder. Such proposals or nominations
should be addressed to:
Jennifer L. Adams, Secretary
World Color Press, Inc.
The Mill
340 Pemberwick Road
Greenwich, Connecticut 06831
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WHERE YOU CAN FIND MORE INFORMATION
Quebecor Printing and World Color file annual, quarterly and other reports,
proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any reports, statements or other information
we file at the SEC's public reference rooms at 450 Fifth Street N.W.,
Washington, D.C., and in New York, New York and Chicago, Illinois. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference rooms.
Our SEC filings are also available to the public from commercial document
retrieval services and at the web site maintained by the SEC at
"http://www.sec.gov." The annual reports for Quebecor Printing on Form 40-F are
not, however, available at the web site.
Quebecor Printing filed a registration statement on Form F-4 to register
with the SEC the Quebecor Printing subordinate voting shares to be issued to
World Color stockholders and option holders in the merger and World Color
convertible debenture holders upon conversion. This document is a part of that
registration statement and constitutes a prospectus of Quebecor Printing in
addition to being a proxy statement for the World Color meeting. As allowed by
SEC rules, this document does not contain all the information you can find in
the registration statement or the exhibits to the registration statement.
The SEC allows us to "incorporate by reference" information into this
document, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this document, except for any
information superseded by information in this document. This document
incorporates by reference the documents set forth below that Quebecor Printing
and World Color have previously filed with the SEC. These documents contain
important information about these companies, businesses and their finances.
<TABLE>
<CAPTION>
QUEBECOR PRINTING (File No. 1-3507) PERIOD
- --------------------------------------------- ---------------------------------------------
<S> <C>
Annual Reports on Form 40-F Years ended December 31, 1998, 1997 and 1996
Current Reports on Form 6-K Filed on August 30, 1999, August 20, 1999,
August 19, 1999, July 23, 1999, July 13,
1999, June 4, 1999, May 27, 1999, May 5,
1999, April 28, 1999, March 22, 1999,
February 16, 1999, February 10, 1999 and
January 29, 1999
</TABLE>
<TABLE>
<CAPTION>
WORLD COLOR (File No. 1-11802) PERIOD
- --------------------------------------------- ---------------------------------------------
<S> <C>
Annual Reports on Form 10-K Years ended December 27, 1998, December 28,
1997 and December 29, 1996
Quarterly Reports on Form 10-Q Quarters ended March 28, 1999 and June 27,
1999
Current Report on Form 8-K Filed on July 13, 1999
</TABLE>
We are also incorporating by reference additional documents that we file
with the SEC between the date of this document and the date of the World Color
meeting.
Quebecor Printing has supplied all information contained or incorporated by
reference in this document relating to Quebecor Printing and World Color has
supplied all the information relating to World Color.
If you are a stockholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the SEC
or the SEC's Internet World Wide Web site (except for Quebecor Printing's Form
40-F) described above. Documents incorporated by reference are available from us
without charge, excluding all exhibits unless we have specifically incorporated
by reference an exhibit in this document. Stockholders may obtain documents
incorporated by reference in
88
<PAGE>
this document by requesting them in writing or by telephone from the appropriate
party at the following addresses:
<TABLE>
<S> <C>
QUEBECOR PRINTING INC. WORLD COLOR PRESS, INC.
612 Saint-Jacques Street The Mill
Montreal, Quebec 340 Pemberwick Road
Canada, H3C 4M8 Greenwich, Connecticut 06831
(514) 954-0101 (203) 532-4200
</TABLE>
If you would like to request documents from us, please do so by September
27, 1999 to receive them before the World Color special meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS DOCUMENT TO VOTE ON THE WORLD COLOR MERGER PROPOSAL. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM
WHAT IS CONTAINED IN THIS DOCUMENT. THIS DOCUMENT IS DATED SEPTEMBER 7, 1999.
YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS DOCUMENT IS
ACCURATE AS OF ANY DATE OTHER THAN THE DATE OF THIS DOCUMENT, AND NEITHER THE
MAILING OF THIS DOCUMENT TO STOCKHOLDERS NOR THE ISSUANCE OF QUEBECOR PRINTING
SUBORDINATE VOTING SHARES IN THE MERGER SHALL CREATE ANY IMPLICATION TO THE
CONTRARY.
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<PAGE>
ANNEX A
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
AMONG
QUEBECOR PRINTING INC.
PRINTING ACQUISITION INC.
AND
WORLD COLOR PRESS, INC.
DATED AS OF JULY 12, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE I THE OFFER........................................................................................ 1
1.1. THE OFFER........................................................................................ 1
1.2. COMPANY ACTION................................................................................... 2
1.3. DIRECTORS........................................................................................ 3
ARTICLE II THE MERGER...................................................................................... 4
2.1. THE MERGER....................................................................................... 4
2.2. EFFECT OF THE MERGER............................................................................. 4
2.3. CONSUMMATION OF THE MERGER....................................................................... 4
2.4. CERTIFICATE OF INCORPORATION AND BY-LAWS; DIRECTORS AND OFFICERS................................. 4
2.5. CONVERSION OF SECURITIES......................................................................... 5
2.6. STOCK OPTIONS.................................................................................... 6
2.7. CLOSING OF COMPANY TRANSFER BOOKS................................................................ 7
2.8. EXCHANGE OF CERTIFICATES......................................................................... 7
2.9. FUNDING OF PAYING AGENT.......................................................................... 8
2.10. TAKING OF NECESSARY ACTION; FURTHER ACTION....................................................... 8
2.11. DISSENTING SHARES................................................................................ 8
2.12. FRACTIONAL SHARES................................................................................ 9
2.13. NO FURTHER OWNERSHIP RIGHTS IN COMMON............................................................ 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER......................................... 9
3.1. ORGANIZATION AND QUALIFICATION................................................................... 9
3.2. AUTHORITY RELATIVE TO THIS AGREEMENT............................................................. 10
3.3. FINANCING ARRANGEMENTS........................................................................... 10
3.4. OWNERSHIP OF SHARES.............................................................................. 11
3.5. SUBSIDIARIES..................................................................................... 11
3.6. CAPITALIZATION................................................................................... 11
3.7. COMMISSION FILINGS............................................................................... 11
3.8. LITIGATION....................................................................................... 12
3.9. EMPLOYEES AND LABOR.............................................................................. 12
3.10. TAXES AND TAX RETURNS............................................................................ 12
3.11 EMPLOYEE BENEFIT PLANS........................................................................... 12
3.12. COMPLIANCE WITH LAWS............................................................................. 14
3.13. ENVIRONMENTAL MATTERS............................................................................ 14
3.14. INTELLECTUAL PROPERTY............................................................................ 15
3.15. YEAR 2000........................................................................................ 16
3.16. NO STOCKHOLDER VOTE REQUIRED..................................................................... 16
3.17. PARENT CONSENTS.................................................................................. 16
</TABLE>
A-i
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
3.18. SUBSCRIPTION RIGHTS.............................................................................. 16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................... 16
4.1. ORGANIZATION AND QUALIFICATION................................................................... 16
4.2. SUBSIDIARIES..................................................................................... 17
4.3. CAPITALIZATION................................................................................... 17
4.4. AUTHORITY RELATIVE TO THIS AGREEMENT............................................................. 17
4.5. COMMISSION FILINGS............................................................................... 18
4.6. LITIGATION....................................................................................... 19
4.7. EMPLOYEES AND LABOR.............................................................................. 19
4.8. TAXES AND TAX RETURNS............................................................................ 19
4.9 EMPLOYEE BENEFIT PLANS........................................................................... 20
4.10. STOCKHOLDER VOTE REQUIRED........................................................................ 21
4.11. COMPLIANCE WITH LAWS............................................................................. 21
4.12. PROPERTIES....................................................................................... 21
4.13. ENVIRONMENTAL MATTERS............................................................................ 22
4.14. INTELLECTUAL PROPERTY............................................................................ 22
4.15. INSURANCE........................................................................................ 22
4.16. YEAR 2000........................................................................................ 23
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER........................................................... 23
5.1. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER............................................ 23
5.2. CERTAIN ACTIONS BY PARENT PENDING THE MERGER..................................................... 24
ARTICLE VI ADDITIONAL AGREEMENTS........................................................................... 24
6.1. ACTION OF COMPANY STOCKHOLDERS................................................................... 24
6.2. COMPANY PROXY STATEMENT.......................................................................... 25
6.3. PREPARATION OF THE FORM F-4 AND THE PARENT PROXY STATEMENT; PARENT STOCKHOLDERS MEETING.......... 25
6.4. EXPENSES......................................................................................... 26
6.5. ADDITIONAL AGREEMENTS............................................................................ 26
6.6. LIMITATION ON NEGOTIATIONS....................................................................... 26
6.7. NOTIFICATION OF CERTAIN MATTERS.................................................................. 27
6.8. LISTING.......................................................................................... 27
6.9. ACCESS TO INFORMATION............................................................................ 27
6.10. STOCKHOLDER CLAIMS............................................................................... 28
6.11. TREATMENT OF EMPLOYEE COMPENSATION AND BENEFITS.................................................. 28
6.12. INDEMNIFICATION RIGHTS........................................................................... 29
6.13. PARENT GUARANTEE................................................................................. 30
6.14. AFFILIATES....................................................................................... 30
</TABLE>
A-ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
ARTICLE VII CONDITIONS..................................................................................... 30
7.1. CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER..................................... 30
7.2. ADDITIONAL CONDITIONS TO OBLIGATION OF PARENT AND PURCHASER TO EFFECT THE MERGER................. 31
7.3. ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER.......................... 31
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER............................................................. 31
8.1. TERMINATION...................................................................................... 31
8.2. AMENDMENT........................................................................................ 33
8.3. FEES UPON TERMINATION............................................................................ 33
8.4. EFFECT OF TERMINATION............................................................................ 34
8.5. WAIVER........................................................................................... 34
ARTICLE IX GENERAL PROVISIONS.............................................................................. 34
9.1. BROKERS.......................................................................................... 34
9.2. PUBLIC STATEMENTS................................................................................ 34
9.3. NOTICES.......................................................................................... 34
9.4. INTERPRETATION................................................................................... 35
9.5. REPRESENTATIONS AND WARRANTIES................................................................... 35
9.6. SEVERABILITY..................................................................................... 35
9.7. MISCELLANEOUS.................................................................................... 36
9.8. COUNTERPARTS..................................................................................... 36
9.9. SURVIVAL......................................................................................... 36
9.10. THIRD PARTY BENEFICIARIES........................................................................ 36
</TABLE>
A-iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of July 12, 1999 (the "AGREEMENT") by
and among QUEBECOR PRINTING INC., a corporation amalgamated under the laws of
Canada ("PARENT"), PRINTING ACQUISITION INC., a Delaware corporation and a
subsidiary of Parent ("PURCHASER"), and WORLD COLOR PRESS, INC., a Delaware
corporation (the "COMPANY").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company has determined that it would
be fair to, advisable and in the best interests of the Company's stockholders to
enter into this Agreement and the Board of Directors of Parent and Purchaser
have approved this Agreement providing for the acquisition of the Company by
Purchaser pursuant to a tender offer (the "OFFER") by Purchaser to purchase for
cash up to 23,500,000 (the "MAXIMUM NUMBER") of the outstanding shares of Common
Stock, par value $0.01, of the Company (the "SHARES"), at a price of $35.69 in
cash per Share; followed by a merger (the "MERGER") of Purchaser with and into
the Company, all upon the terms and subject to the conditions set forth herein;
and
WHEREAS, in furtherance thereof, the respective Boards of Directors of
Parent, Purchaser and the Company have approved this Agreement, the Offer and
the Merger; and
WHEREAS, contemporaneously with the execution and delivery of this Agreement
and as a condition to Parent's willingness to enter this Agreement, (i) Parent
and certain stockholders of the Company are entering into the Tender, Voting and
Option Agreement in substantially the form of EXHIBIT C hereto (the "TENDER,
VOTING AND OPTION AGREEMENT"), and (ii) the Company, Parent and Purchaser are
entering in to the Stock Option Agreement in substantially the form of EXHIBIT D
hereto (the "STOCK OPTION AGREEMENT").
NOW THEREFORE, in consideration of the premises and the mutual agreements,
provisions and covenants herein contained, the parties hereby agree as follows:
ARTICLE I
THE OFFER
1.1. THE OFFER.
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 8.1, Purchaser shall, as soon as reasonably practical
after the date hereof, commence within the meaning of Rule 14d-2 under the
Securities Exchange Act of 1934, as amended, including the rules and regulations
promulgated thereunder (the "EXCHANGE ACT"), the Offer but in any event within
five business days (as such term is defined in Rule 14e-1 under the Exchange
Act) from the date of public announcement of the execution hereof. The Offer
will be subject only to the satisfaction or waiver of the conditions set forth
in Annex I hereto (the "OFFER CONDITIONS"), any of which conditions may be
waived in the sole discretion of Purchaser (other than the Minimum Condition (as
such term is defined in Annex I), which may only be waived with the consent of
the Board of Directors of the Company). Assuming all of the conditions to
consummation of the Offer are satisfied, Purchaser shall consummate the Offer as
promptly as possible.
(b) Parent and Purchaser covenant and agree that upon the terms and subject
to the conditions of this Agreement (including the Offer Conditions), Purchaser
shall accept for payment all Shares, up to the Maximum Number of Shares, that
are validly tendered on or prior to the expiration of the Offer and not timely
withdrawn, as soon as it is permitted to do so under applicable law, and shall
pay for such Shares promptly thereafter. Purchaser may, at any time, assign to
one or more corporations, which are direct or indirect wholly owned subsidiaries
of Parent, the right to purchase all or any portion of
A-1
<PAGE>
the Shares tendered pursuant to the Offer, but any such transfer or assignment
shall not relieve Purchaser and Parent of their obligations under the Offer or
prejudice the rights of tendering stockholders to receive payment for Shares
properly tendered and accepted for payment in accordance with the terms of this
Agreement.
(c) The Offer shall initially be scheduled to expire 20 business days
following the commencement thereof; PROVIDED that, unless this Agreement shall
have been terminated pursuant to Section 8.1, Purchaser shall, subject to
Section 1.1(e), extend the Offer from time to time in the event that, at a
then-scheduled expiration date, the Offer Conditions have not been satisfied
(other than incurable breaches of representations, warranties and covenants,
PROVIDED that the determination of whether a breach is incurable is not in the
sole discretion of Purchaser) each such extension not to exceed (unless
otherwise consented to by the Company) the lesser of 10 additional business days
or such fewer number of days that the Company and Parent reasonably believe are
necessary to cause such Offer Condition to be satisfied; PROVIDED that, under no
circumstances shall any such extension be less than the minimum number of days
required by the Exchange Act or the rules and regulations promulgated thereunder
or by applicable law and PROVIDED further that Purchaser shall not be required
to extend the Offer more than 15 business days after making a public
announcement that all of the Offer Conditions other than the Minimum Condition
have been satisfied. Except as provided in Section 1.1(d) and Section 1.1(e),
Purchaser shall not terminate the Offer without purchasing Shares pursuant to
the Offer. As soon as reasonably practical on the date the Offer is commenced,
Purchaser shall file with the Securities and Exchange Commission (the
"COMMISSION") a Tender Offer Statement on Schedule 14D-1 (together with all
amendments and supplements thereto, the "SCHEDULE 14D-1") with respect to the
Offer, that shall comply in all material respects with the provisions of such
Schedule and all applicable Federal securities laws, and shall contain an Offer
to Purchase and forms of the related letter of transmittal and summary
advertisement (which Schedule 14D-1, Offer to Purchase and other documents are
referred to herein collectively as the "TENDER OFFER DOCUMENTS"). Parent and
Purchaser agree that the Company and its counsel shall be given an opportunity
to review the Schedule 14D-1 before it is filed with the Commission. Parent,
Purchaser and the Company each agree promptly to correct any information
provided by it for use in the Offer Documents that shall have become false or
misleading in any material respect, and Parent and Purchaser further agree to
take all steps necessary to cause the Schedule 14D-1 as so corrected to be filed
with the Commission and the other Offer Documents as so corrected to be
disseminated to holders of Shares in each case as and to the extent required by
applicable securities laws. Parent will provide the Company with a copy of any
comments Parent or Purchaser may receive from the Commission or its staff with
respect to the Tender Offer Documents promptly following receipt thereof.
Purchaser shall not, without the prior written consent of the Board of Directors
of the Company, (i) decrease or change the form of the consideration payable in
the Offer, (ii) reduce the number of Shares sought pursuant to the Offer, (iii)
amend the Offer Conditions or impose additional conditions to the Offer, (iv)
amend or change any term of the Offer or (v) waive the Minimum Condition.
(d) In the event that this Agreement has been terminated pursuant to Section
8.1, Purchaser shall, and Parent shall cause Purchaser to, promptly terminate
the Offer without accepting any Shares for payment.
(e) If on September 13, 1999, either or both of the Minimum Condition or
paragraph (b) of the Offer Conditions has not been satisfied, Purchaser shall,
unless Parent and the Company otherwise agree, terminate the Offer, and the
parties shall, subject to the terms and conditions hereof, seek to consummate
the Merger in accordance with Section 2.5(c).
1.2 COMPANY ACTION. The Company hereby consents to the Offer and represents
that its Board of Directors has determined by a unanimous vote that the Offer
and the Merger are fair to, advisable and in the best interests of, the Company
and its stockholders, has approved the Offer and the Merger, has approved and
adopted this Agreement, and has resolved to recommend acceptance of the Offer
to, and
A-2
<PAGE>
adoption of this Agreement by, the Company's stockholders (it being understood
that, notwithstanding anything in this Agreement to the contrary, if the
Company's Board of Directors shall conclude, acting in good faith, after
receiving advice from outside counsel or its financial advisor, that failure to
modify or withdraw its recommendation would constitute a breach of their
fiduciary duties under applicable law, the Board of Directors may so modify or
withdraw its recommendation and such modification or withdrawal shall not
constitute a breach of this Agreement). The Company further represents that
Morgan Stanley & Co. Incorporated has delivered its written opinion to the Board
of Directors of the Company that, as of the date hereof, the consideration to be
received by holders of Shares pursuant to the Offer and the Merger is fair to
such holders from a financial point of view. Contemporaneously with the
commencement of the Offer, but in no event prior to such date as the Purchaser
has filed the Tender Offer Documents with the Commission, the Company shall file
with the Commission and mail to holders of record and beneficial owners of
Shares a Solicitation/ Recommendation Statement on Schedule 14D-9 with respect
to the Offer (such Schedule 14D-9, as amended from time to time, the "SCHEDULE
14D-9"), which shall contain the recommendation of the Company's Board of
Directors set forth in the preceding sentence. Parent, Purchaser and the Company
each agree promptly to correct any information provided by it for use in the
Schedule 14D-9 that shall have become false or misleading in any material
respect, and the Company further agrees to take all steps necessary to cause the
Schedule 14D-9 as so corrected to be filed with the Commission and disseminated
to holders of Shares, in each case as and to the extent required by applicable
securities laws. The Company shall from time to time furnish Purchaser with such
additional information, if any, including updated or additional lists of
stockholders, mailing labels and lists of securities positions, and other
assistance as the Purchaser may reasonably request in order to be able to
communicate the Offer to the stockholders of the Company. Subject to the
requirements of law, and except for such steps as are necessary to disseminate
the Offer Documents, Parent, Purchaser and each of their respective affiliates
and associates shall hold in confidence the information contained in any of such
lists, labels or additional information and, if this Agreement is terminated,
shall promptly redeliver to the Company all copies (of whatever nature) of such
information then in their possession.
1.3. DIRECTORS.
(a) Promptly upon the purchase by Purchaser of Shares pursuant to the Offer,
Purchaser shall be entitled to designate such number of directors, rounded up to
the next whole number, on the Board of Directors of the Company as will give
Purchaser, subject to compliance with Section 14(f) of the Exchange Act,
representation on the Board of Directors of the Company equal to the product of
(a) the number of directors on the Board of Directors of the Company (after
giving effect to the appointment of such directors) and (b) the percentage that
such number of Shares so purchased bears to the number of Shares outstanding,
and the Company shall, upon request by Purchaser, promptly (i) increase the size
of the Board of Directors of the Company to the extent permitted by its Amended
and Restated Certificate of Incorporation and By-Laws (and amend the By-Laws, if
so required, to increase the size of the Board of Directors to allow for such
additional directors); and/or (ii) use reasonable best efforts to secure the
resignations of such number of directors as is necessary to enable Purchaser's
designees to be elected to the Board of Directors of the Company (and shall hold
a Board meeting for such purpose); and (iii) shall cause Purchaser's designees
to be so elected. At any time after the execution hereof, at the request of
Purchaser, the Company shall promptly take, at its expense, all action necessary
to effect any such election, including mailing to its stockholders the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder in form and substance reasonably satisfactory to
Purchaser and its counsel. Purchaser shall supply the Company and be solely
responsible for any information included in the filings with the Commission with
respect to themselves and their nominees, officers, directors and affiliates
required by said Section 14(f) and Rule 14f-1.
A-3
<PAGE>
(b) Following the election or appointment of Purchaser's designees pursuant
to this Section 1.3 and prior to the Effective Time, any amendment or waiver of
any term or condition of this Agreement, any amendment of the provisions of the
Amended and Restated Certificate of Incorporation or By-Laws of the Company
affecting indemnification, any termination of this Agreement by the Company, any
extension by the Company of the time for the performance of any of the
obligations or other acts of Purchaser or Parent or waiver or assertion of any
of the Company's rights hereunder, and any other consent or action by the Board
of Directors with respect to this Agreement, will require the separate
concurrence of a majority of the continuing directors of the Company who hold
office as of the date of this Agreement or if there are no such continuing
directors, then a majority of the directors of the Company then in office who
were not designated by Purchaser (the "DISINTERESTED DIRECTORS") and such
concurrence shall constitute the authorization of the Board of Directors of the
Company. The number of Disinterested Directors shall be not less than two. Any
person who is a director on the date of this Agreement, but who, in order to
carry out the provisions of this Section 1.3, is not a director at the Effective
Time, shall be entitled to receive all payments at the time such director
resigns as if he or she had been a director as of the Effective Time.
ARTICLE II
THE MERGER
2.1 THE MERGER. At the Effective Time (as defined in Section 2.3), in
accordance with this Agreement and the General Corporation Law of the State of
Delaware, as amended (the "DELAWARE LAW"), Purchaser shall be merged with and
into the Company, the separate existence of Purchaser (except as may be
continued by operation of law) shall cease, and the Company shall continue as
the surviving corporation. The Company, in its capacity as the corporation
surviving the Merger, sometimes is referred to herein as the "Surviving
Corporation."
2.2 EFFECT OF THE MERGER. The Surviving Corporation shall possess all the
rights, privileges, powers and franchises, of a public as well as a private
nature, and be subject to all the restrictions, disabilities and duties, of each
of Purchaser and the Company (collectively, the "CONSTITUENT CORPORATIONS"); the
Surviving Corporation shall be vested with the rights, privileges, powers and
franchises, all properties and assets and all debts due on whatever account, and
all other things in action or belonging to, and all and every other interest of,
each of the Constituent Corporations; and all debts, liabilities and duties of
each of the Constituent Corporations shall thenceforth attach to the Surviving
Corporation and may be enforced against it to the same extent as if such debts,
liabilities and duties had been incurred or contracted by it, all with the
effect set forth in Section 259 of the Delaware Law.
2.3 CONSUMMATION OF THE MERGER. As soon as is practicable after the
satisfaction or waiver of the conditions set forth in Article VII, and in no
event later than five business days after such satisfaction or waiver, the
parties to this Agreement will cause a Certificate of Merger to be filed with
the Secretary of State of the State of Delaware, in such form as required by,
and executed in accordance with, the relevant provisions of the Delaware Law.
The Merger shall be effective at such time as the Certificate of Merger is duly
filed with the Secretary of State of the State of Delaware or at such later time
as specified in the Certificate of Merger (the "EFFECTIVE TIME").
2.4 CERTIFICATE OF INCORPORATION AND BY-LAWS; DIRECTORS AND OFFICERS. The
Certificate of Incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be amended and restated at the Effective Time so as to
read in its entirety in the form set forth as EXHIBIT A hereto and, as so
amended, shall be the Certificate of Incorporation of the Surviving Corporation
immediately after the Effective Time. The By-Laws of Purchaser, as in effect
immediately prior to the Effective Time, shall be the By-Laws of the Surviving
Corporation immediately after the Effective Time and the directors of the
Company shall submit their resignations at the Effective Time. The directors of
Purchaser holding office immediately prior to the Effective Time shall be the
directors of the Surviving
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Corporation immediately after the Effective Time. The officers of the Company
holding office immediately prior to the Effective Time shall be the officers
(holding the same offices as they held with the Company) of the Surviving
Corporation immediately after the Effective Time until such time as their
successors shall have been duly appointed.
2.5 CONVERSION OF SECURITIES. At the Effective Time, by virtue of the
Merger and without any action on the part of Purchaser, the Company or the
holder of any of the following securities:
(a) If Purchaser shall have purchased, pursuant to the Offer, the Maximum
Number of Shares, each Share issued and outstanding immediately prior to the
Effective Time (other than Shares to be canceled pursuant to Section 2.5(d))
shall be canceled, extinguished and converted into the right to receive a number
(rounded to the nearest one-millionth of a share) of fully paid and
nonassessable, Subordinate Voting Shares of Parent ("PARENT STOCK"), equal to
the Exchange Ratio (as defined below).
(b) If Purchaser shall have purchased, pursuant to the Offer, less than the
Maximum Number of Shares (the number of Shares so paid for and purchased in the
Offer being referred to herein as the "PURCHASED SHARE NUMBER"), each Share
issued and outstanding immediately prior to the Effective Time (other than any
Shares to be canceled pursuant to Section 2.5(d) and other than Shares with
respect to which the provisions of Section 2.11 are applicable) shall be
cancelled, extinguished and converted into the right to receive, (i) cash, in an
amount equal to the product of the Cash Proration Factor (as defined below)
multiplied by $35.69 and (ii) a number (rounded to the nearest one-millionth of
a share) of fully paid and non-assessable shares of Parent Stock equal to the
product of (x) 1 minus the Cash Proration Factor multiplied by (y) the Exchange
Ratio.
(c) If the Offer is terminated pursuant to Section 1.1(e), each Share issued
and outstanding immediately prior to the Effective Time (other than any Shares
to be canceled pursuant to Section 2.5(d)) shall be canceled, extinguished and
converted into the right to receive, (i) cash, in an amount equal to $22.00 and
(ii) .6311 shares of Parent Stock.
(d) Each Share held in the treasury of the Company and each Share owned by
Purchaser, in each case immediately prior to the Effective Time, shall
automatically be canceled and retired without any conversion thereof and no
payment or distribution shall be made with respect thereto.
(e) Each share of capital stock of Purchaser issued and outstanding
immediately prior to the Effective Time shall be converted and changed into one
validly issued, fully paid and nonassessable share of such capital stock of the
Surviving Corporation.
(f) If prior to the Effective Time, Parent or the Company, as the case may
be, should (in the case of Parent, after obtaining the consent required by
Section 5.2 hereof; in the case of the Company, after obtaining the consent
required by Section 5.1 hereof) split, combine or otherwise reclassify the
Parent Stock or the Shares, or pay (or set a record date that is prior to the
Effective Time with respect to) a stock dividend or other stock distribution in
Parent Stock or the Shares, or otherwise change the Parent Stock or Shares into
any other securities, or make any other such stock dividend or distribution with
respect to the Parent Stock or the Shares in capital stock of Parent or the
Company or of their respective subsidiaries in respect of the Parent Stock or
the Shares, respectively, then the Merger Consideration and the Exchange Ratio
will be appropriately adjusted to reflect such split, combination, dividend or
other distribution or change to provide the holders of Shares the same economic
effect as contemplated by this Agreement prior to such event.
(g) Share certificates surrendered for exchange by any person constituting
an affiliate of the Company for purposes of Rule 145 under the Securities Act
shall not be exchanged for certificates representing Parent Stock until Parent
has received a written agreement from such person as provided in Section 6.14.
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(h) For purposes of this Agreement, "EXCHANGE RATIO" is equal to 1.6455
shares of Parent Stock per Share. The "CASH PRORATION FACTOR" shall be a
fraction, of which (A) the numerator is equal to (x) the Maximum Number minus
(y) the Purchased Share Number, if any, and (B) the denominator is equal to the
number of Shares issued and outstanding immediately prior to the Effective Time
(excluding Shares to be canceled pursuant to Section 2.5(d) and other than
Shares with respect to which the provisions of Section 2.11 are applicable) (the
"FINAL OUTSTANDING NUMBER"). The consideration provided for in Sections 2.5(a),
(b), or (c), as applicable, together with the consideration provided for in
Section 2.12, is referred to herein as the "MERGER CONSIDERATION".
(i) At the Effective Time, all Shares shall no longer be outstanding and
shall be cancelled and retired and shall cease to exist (in the case of the
Shares to be cancelled pursuant to Section 2.5(d), without the payment of any
consideration therefor), and each certificate (a "CERTIFICATE") formerly
representing any of such Shares, other than the Shares to be cancelled pursuant
to Section 2.5(d), shall thereafter represent only the right to receive the
Merger Consideration.
2.6 STOCK OPTIONS. As soon as practicable following the date of this
Agreement, the Board of Directors of the Company (or, if appropriate, any
committee administering the Stock Plans (as defined below)) shall adopt such
resolutions or take such other actions as may be required to effect the
following:
(a) adjust the terms of all outstanding employee or director stock options
to purchase Shares and any related stock appreciation rights ("COMPANY STOCK
OPTIONS") granted under any stock option or stock purchase plan, program or
arrangement of the Company (the "STOCK PLANS"), to provide that, at the
consummation of the Offer, each Company Stock Option outstanding immediately
prior to the consummation of the Offer shall (except to the extent that Parent
and the holder of a Company Stock Option otherwise agree prior to the
consummation of the Offer or unless the holder of such Company Stock Option
shall have elected otherwise by written notice to Parent prior to the date 10
business days prior to the consummation of the Offer) be cancelled in exchange
for (A) a cash payment from the Surviving Corporation to be made promptly
following the consummation of the Offer (subject to any applicable withholding
taxes) equal in value to (1) the product of (x) the total number of shares of
Company Common Stock subject to such Company Stock Option (the "OPTION SHARES"),
multiplied by (y) $22.00, multiplied by (z) the excess of $35.69 over the
exercise price per share of Common Stock subject to such Company Stock Option,
divided by (2) $35.69, and (B) a number of shares of Parent Stock to be issued
promptly following the Effective Time equal to (1) the product of (x) the number
of Option Shares, multiplied by (y) 0.6311, multiplied by (z) the excess of
$35.69 over the exercise price per share of Common Stock subject to such Company
Stock Option, divided by (2) $35.69; PROVIDED, HOWEVER, that if the Offer is
terminated pursuant to Section 1.1(e), references to "consummation of the Offer"
above shall be deemed replaced by the term "Effective Time." The calculation of
the amounts described in (A) and (B) of this Section 2.6(a) may also be
expressed with the following formulas:
(A) = (Option Shares) X ($22.00) X ($35.69-Exercise Price)
$35.69
(B) = (Option Shares) X ($22.00) X ($35.69-Exercise Price)
$35.69
(b) except as provided herein or as otherwise agreed to by the parties, the
Stock Plans and any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any subsidiary shall terminate as of the Effective Time, and the
Company shall ensure that following the Effective Time no holder of a Company
Stock Option nor any participant in any Stock Plan shall have any right
thereunder to acquire equity securities of the Company or the Surviving
Corporation; and
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(c) prior to the expiration date of the Offer (or if the Offer is terminated
pursuant to Section 1.1(e), immediately prior to the Effective Time), any
restrictions imposed pursuant to any Stock Plan on any shares of Common Stock of
the Company (such shares, "COMPANY RESTRICTED STOCK") shall (subject, if the
Offer has not been terminated pursuant to Section 1.1(e), to the consummation of
the Offer) lapse and each share of Company Restricted Stock shall be subject to
the same terms and conditions of this Agreement as the Shares; PROVIDED,
HOWEVER, that in the event the Offer is terminated, such restrictions shall be
deemed to have not lapsed until immediately prior to the Effective Time.
(d) To the extent that Parent is not a "FOREIGN PRIVATE ISSUER" within the
meaning of Rule 3b-4(c) under the Exchange Act, Parent shall take all steps to
cause any acquisitions of Parent equity securities (including derivative
securities) in connection with this Agreement by each individual who (i) is a
director or officer of the Company or (ii) at the Effective Time will become a
director or officer of Parent to become exempt under Rule 16b-3 promulgated
under the Exchange Act.
2.7 CLOSING OF COMPANY TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed with respect to Shares issued and
outstanding immediately prior to the Effective Time and no further transfer of
such Shares shall thereafter be made on such stock transfer books. If, after the
Effective Time, valid certificates previously representing such Shares are
presented to the Surviving Corporation or the Paying Agent (as defined in
Section 2.8), they shall be exchanged as provided in Section 2.8.
2.8 EXCHANGE OF CERTIFICATES. Prior to the Effective Time, Purchaser shall
designate a bank or trust company, reasonably satisfactory to the Company, to
act as agent (the "PAYING AGENT") for the holders of Shares to receive the funds
and certificates necessary to effect the exchange for the Merger Consideration
of certificates which, immediately prior to the Effective Time, represented
Shares entitled to payment pursuant to Section 2.5(a), 2.5(b) or 2.5(c). As soon
as practicable after the Effective Time, the Surviving Corporation shall cause
the Paying Agent to mail a transmittal form (the "LETTER OF TRANSMITTAL") (which
shall specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing such Shares shall pass, only upon proper
delivery to the Paying Agent) to each holder of record of certificates
theretofore representing such Shares advising such holder of the procedure for
surrendering to the Paying Agent such certificates for payment of the Merger
Consideration in respect thereof. If any certificate of Parent Stock is to be
issued in the name of, or if cash is to be remitted to, a person other than the
person in whose name the certificates for Shares surrendered for exchange are
registered on the books of the Company, it shall be a condition of the exchange
that the certificate so surrendered shall be properly endorsed and the person
requesting such exchange shall pay to the Paying Agent all transfer or other
taxes required by reason of the issuance of such check in the name of a person
other than the registered owner of the certificates surrendered, or shall
establish to the satisfaction of the Paying Agent that such taxes have been paid
or are not applicable. Notwithstanding the foregoing, neither the Paying Agent
nor any party hereto shall be liable to a holder of certificates theretofore
representing Shares for any amount paid to a public official pursuant to any
applicable abandoned property, escheat or similar laws. Upon the surrender and
exchange of a certificate theretofore representing Shares, together with such
Letter of Transmittal duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder shall be entitled to receive a certificate for the
number of full shares of Parent Stock and the amount of cash, if any, without
interest thereon, to which he or she is entitled hereunder, less only such
amount required to be withheld under applicable backup withholding federal
income tax regulations, and such certificate shall forthwith be cancelled. Until
so surrendered and exchanged, each such certificate shall represent solely the
right to receive the Merger Consideration into which the Shares it theretofore
represented shall have been converted pursuant to Sections 2.5(a), 2.5(b) or
2.5(c), without interest, and the Surviving Corporation shall not be required to
pay the holder thereof the Merger Consideration to which such holder otherwise
would be entitled; provided that customary and appropriate certifications and
indemnities
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allowing for payment against lost or destroyed certificates shall be permitted.
If any certificates representing any Shares shall not have been surrendered
prior to five years after the Effective Time (or immediately prior to such
earlier date on which any payment in respect thereof would otherwise escheat to
or become the property of any governmental unit or agency), the payment in
respect of such certificates 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.
2.9 FUNDING OF PAYING AGENT. Parent or Purchaser shall transmit by wire, or
other acceptable means, to the Paying Agent prior to the Effective Time funds
required for the cash portion of the exchange of Shares and cancellation of
Company Options in accordance with this Agreement. The Paying Agent shall agree
to hold such funds in trust and deliver such funds (in the form of checks of the
Paying Agent) in accordance with this Section and Section 2.8. Any portion of
such funds which has not been paid to holders of the Shares or Options pursuant
to Section 2.8 within six months after the Effective Time shall promptly be paid
to the party which provided such funds, and thereafter holders of certificates
representing the right to receive the cash into which Shares or Options formerly
represented by such certificates shall have been converted pursuant to Section
2.5(a), 2.5(b), 2.5(c) or 2.6 who have not theretofore complied with Section 2.8
shall look solely to the Surviving Corporation or the Paying Agent for payment
of the amount of cash to which they are entitled pursuant to this Agreement.
2.10 TAKING OF NECESSARY ACTION; FURTHER ACTION. Parent, Purchaser and the
Company shall use all reasonable efforts to take all such actions as may be
necessary or appropriate in order to effectuate the Offer and the Merger as
promptly as possible. If, at any time after the Effective Time, any further
actions are necessary or desirable to carry out the purposes of this Agreement
or to vest the Surviving Corporation with full right, title and possession to
all assets, property, rights, privileges, immunities, powers and franchises of
either or both of the Constituent Corporations, the officers and directors of
the Surviving Corporation are fully authorized in the name of either or both of
the Constituent Corporations or otherwise to take, and shall take, all such
actions.
2.11 DISSENTING SHARES. Notwithstanding anything in this Agreement to the
contrary, if stockholders of the Company are entitled to appraisal rights under
Section 262 of the Delaware Law, Shares that are issued and outstanding
immediately prior to the Effective Time and that are held by stockholders who
(i) have not voted such Shares in favor of the Merger and (ii) have delivered
timely a written demand for appraisal of such Shares in the manner provided in
Section 262 of the Delaware Law shall not be cancelled and converted into the
right to receive the Merger Consideration described in Section 2.5(a), 2.5(b) or
2.5(c), unless and until such holder shall have failed to perfect, or
effectively shall have withdrawn or lost, such holder's right to appraisal and
payment under the Delaware Law. If such holder shall have so failed to perfect,
or effectively shall have withdrawn or lost such right, such holder's Shares
shall thereupon be deemed to have been cancelled and converted as described in
Sections 2.5(a), 2.5(b) and 2.5(c), at the Effective Time, and each Share shall
represent solely the right to receive the appropriate Merger Consideration. From
and after the Effective Time, no stockholder who has demanded appraisal rights
as provided in Section 262(d) of the Delaware Law shall be entitled to vote his
or her Shares for any purpose or to receive payment of dividends or other
distributions with respect to his or her Shares (except dividends and other
distributions payable to stockholders of record at a date which is prior to the
Effective Time). The Company will give Purchaser prompt notice of all written
demands received by the Company for appraisal of Shares.
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2.12. FRACTIONAL SHARES.
(a) No certificates or scrip or shares of Parent Stock representing
fractional shares of Parent Stock shall be issued upon the surrender for
exchange of Certificates and such fractional interests will not entitle the
owner thereof to vote or to have any rights of a stockholder of Parent or a
holder of shares of Parent Stock.
(b) Notwithstanding any other provision of this Agreement, each holder of
Shares exchanged pursuant to the Merger and each holder of Company Stock Options
who would otherwise have been entitled pursuant to this Agreement to receive a
fraction of a share of Parent Stock (after taking into account all certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to the product of (i) such fractional part of a
share of Parent Stock multiplied by (ii) $21.6875.
2.13. NO FURTHER OWNERSHIP RIGHTS IN COMMON. From and after the Effective
Time, the holders of Shares which were outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Shares except
as otherwise provided in this Agreement or by applicable law. All shares of
Parent Stock issued and cash paid upon the surrender of Certificates in
accordance with the terms hereof shall be deemed to have been issued or paid in
full satisfaction of all rights pertaining to the Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER
Parent and Purchaser hereby represent and warrant to the Company as follows:
3.1. ORGANIZATION AND QUALIFICATION. Parent has been duly incorporated and
is validly existing as a corporation and in good standing under the laws of
Canada and has full corporate power and authority to own its properties and
conduct its business as presently owned and conducted, except where such failure
to be so incorporated, existing and in good standing or to have such power and
authority, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect (as defined below). Parent is duly qualified as a
foreign corporation and in good standing in each jurisdiction in which the
character of its properties owned or leased or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. Purchaser has been duly incorporated and is validly
existing as a corporation and in good standing under the laws of the State of
Delaware and has the full corporate power and authority to conduct its business
as presently conducted, except where such failure to be so incorporated,
existing and in good standing or to have such power and authority, individually
or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect (as defined below). Purchaser has been formed solely for the purpose of
engaging in the transactions contemplated hereby, has engaged in no other
business activities and has no liabilities other than liabilities that, upon
merger of Purchaser and the Company, would not result in a breach or violation
by the Surviving Corporation of the covenants contained in (i) the Indenture
dated as of February 22, 1999, between the Company and The Bank of New York, as
Trustee, relating to the 7 3/4% Senior Subordinated Notes Due 2009; (ii) the
Indenture dated as of November 20, 1998, between the Company and The Bank of New
York, as Trustee, relating to the 8 3/8% Senior Subordinated Notes Due 2008;
(iii) the Indenture dated as of October 8, 1997, between the Company and State
Street Bank, as Trustee, relating to the 6% Convertible Senior Subordinated
Notes Due 2007, (iv) Participation Agreement, dated as of December 21, 1993
among World Color Press, Inc., General Electric Capital Corporation, State
Street Bank and Trust Company of Connecticut, National Association and State
Street Bank and Trust Company of California, N.A. and ancillary documents
related thereto; (v) Participation Agreement, dated as of July 1, 1998 among
World Color Press, Inc.,
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General Electric Capital Corporation, State Street Bank and Trust Company of
Connecticut, National Association and State Street Bank and Trust Company of
California, N.A. and ancillary documents related thereto; (vi) Master Lease
Agreement, dated as of May 11, 1998 by and between BancBoston Leasing Inc. and
World Color Press, Inc., and ancillary documents related thereto; or (vii)
Chattel Leasing Loan and Security Agreement, dated as of December 20, 1994, by
and among World Color Press, Inc., the lenders named on the signature pages
thereto and such other lenders that may become parties thereto, and BancBoston
Leasing Inc., and ancillary documents related thereto. The copies of the
Articles of Amalgamation of the Parent, dated January 1, 1990, as amended, the
Certificate of Incorporation of the Purchaser, and the By-Laws of each of Parent
and the Purchaser previously delivered to the Company are true, correct and
complete as of the date hereof. When used in connection with Parent or any of
its subsidiaries, the term "Material Adverse Effect" means any change or effect
that is or would be materially adverse to the business, financial condition or
results of operations of Parent and its subsidiaries, taken as a whole, other
than any such effect attributable to or resulting from (i) the public
announcement or consummation of the transactions contemplated by this Agreement
including, without limitation, the loss of customers or employees resulting
therefrom (ii) any change in general economic conditions, financial market
conditions or in conditions affecting Parent's industry generally, (iii) any act
or omission of Parent or any of its subsidiaries taken with the prior consent of
the Company pursuant to Section 5.2 or (iv) actions taken by Parent or any of
its subsidiaries at the specific request of the Company.
3.2. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and Purchaser has
the requisite corporate power and authority to enter into this Agreement and to
carry out its respective obligations hereunder. The execution and delivery of
this Agreement by Parent and Purchaser and the consummation by Parent and
Purchaser of the transactions contemplated hereby have been duly authorized by
the Boards of Directors of Parent and Purchaser, and no other corporate
proceedings (other than such consents which have already been obtained) on the
part of Parent or Purchaser are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Parent and Purchaser and constitutes a valid and binding obligation
of each such company, enforceable in accordance with its terms, except to the
extent that enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the enforcement of creditors rights generally or by equitable
principles. None of Parent or Purchaser is subject to or obligated under any
provision of (a) its respective Certificate of Incorporation or By-Laws, (b) any
contract, (c) any license, franchise or permit or (d) any law, regulation,
order, judgment or decree, which would be breached or violated or in respect of
which a right of termination or acceleration or any encumbrance on any of its or
any of its subsidiaries assets could be created by its execution, delivery and
performance of this Agreement and the consummation by it of the transactions
contemplated hereby, other than consent requirements that have already been
satisfied and, in the cases of clauses (b), (c) and (d), any such breaches or
violations which will not, individually or in the aggregate, have a Material
Adverse Effect. Other than in connection with or in compliance with the
provisions of the Delaware Law, the Exchange Act, the securities or blue-sky
laws of the various states of the United States and the provinces of Canada and
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (the
"H-S-R ACT"), no authorization, consent or approval of or filing with, any
public body, court or authority is necessary on the part of Parent or Purchaser
for the consummation by Parent and Purchaser of the transactions contemplated by
this Agreement, except for such authorizations, consents, approvals and filings
as to which the failure to obtain or make would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Parent or
Purchaser or on the ability of Parent or Purchaser to perform their respective
obligations hereunder.
3.3. FINANCING ARRANGEMENTS. Purchaser shall have funds available to it on
the Expiration Date sufficient to purchase the Shares and enable the Surviving
Corporation to pay all amounts payable in consideration of the cancellation of
the Company Stock Options in accordance with the terms of this
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Agreement and the refinancing of all indebtedness of the Company and its
subsidiaries required to be refinanced in connection with the transactions
contemplated by this Agreement.
3.4. OWNERSHIP OF SHARES. As of the date hereof, none of Parent, Purchaser
or any of their subsidiaries owns (beneficially or otherwise) any Shares (except
for Shares that may be held in any of their pension or employee benefit plans).
3.5. SUBSIDIARIES. Each material subsidiary of Parent has been duly
incorporated or organized and is validly existing as a corporation or other
legal entity and is in good standing in its respective jurisdiction of
organization and has full corporate or organizational power and authority to own
its properties and conduct its businesses as presently owned and conducted,
except where such failure to be so incorporated or organized, existing and in
good standing or to have such power and authority, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
Each material subsidiary of Parent is duly qualified as a foreign corporation or
other legal entity and in good standing in each jurisdiction in which the
character of its properties owned or leased or the nature of its activities
makes such qualification necessary except where the failure to be so qualified,
would not reasonably be expected to have a Material Adverse Effect.
3.6. CAPITALIZATION.
(a) As of July 8, 1999, the authorized equity capitalization of Parent
consists of an unlimited number of Multiple Voting Shares, no par value, of
which 62,984,552 are outstanding, an unlimited number of Subordinate Voting
Shares, no par value, of which 59,603,587 are outstanding and an unlimited
number of preferred shares, of which 12,000,000 are outstanding. All of the
outstanding shares of Parent's capital stock are validly issued, fully paid and
nonassessable. The aggregate number of outstanding awards of shares of Parent
Stock that have been issued pursuant to Parent's stock option plans as of July
8, 1999 is 2,568,613.
(b) Except as described in paragraph (a) above, there are no options,
warrants, conversion privileges or other rights, agreements, arrangements or
commitments obligating Parent or any of its subsidiaries to issue or sell any
shares of capital stock of Parent or of any of its subsidiaries or securities or
obligations of any kind convertible into or exchangeable for any shares of
capital stock of Parent or any of its subsidiaries. The holders of the
outstanding Subordinate Voting Shares are not entitled to any preemptive or
other similar rights.
3.7. COMMISSION FILINGS. Parent has made available to the Company copies of
Parent's (i) Annual Reports on Form 40-F for the fiscal years ended December 31,
1997 and 1998, (ii) Parent's Current Reports on Form 6-K for 1999, (iii) proxy
statements relating to Parent's meetings of stockholders (whether annual or
special) during the years 1997 through 1999, inclusive, and (iv) filings under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), since January 1,
1997, in each case as filed with the Commission. Since January 1, 1997, Parent
has filed all reports, registration statements and other documents required to
be filed under the Exchange Act and the rules and regulations thereunder, and
all such reports, registration statements and other documents complied (except
to the extent revised or superseded by a subsequent public filing with the
Commission prior to the date hereof), in all material respects, with the
requirements of the Exchange Act, such compliance to be determined, to the
extent applicable, in accordance with the standards applied to Parent Reports in
the following two sentences. As of their respective dates, Parent's Annual
Report for 1998, Parent's Current Reports on Form 6-K with respect to events
which occurred in 1999 and Parent's 1999 Proxy Statement (together, the "PARENT
REPORTS") (except to the extent revised or superseded by a subsequent public
filing with the Commission prior to the date hereof) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited consolidated interim financial
statements of Parent
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(including any related notes and schedules) included in the reports referred to
in clauses (i) and (ii) of the first sentence of this paragraph have been
prepared in accordance with Canadian generally accepted accounting principles
("CANADIAN GAAP") applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and (except to the extent
revised or superseded by financial statements included in a subsequent public
filing with the Commission prior to the date hereof) fairly present the
consolidated financial position of Parent 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 the unaudited
consolidated interim financial statements, to normal year-end adjustments and
any other adjustments described therein, and the fact that the interim financial
statements were prepared in accordance with the rules and regulations of the
Commission and, therefore, certain information required by Canadian GAAP may
have been omitted. Except as set forth in Parent Reports, since March 31, 1999,
(i) there has not been a Material Adverse Effect, and (ii) except as permitted
by this Agreement, there has been (1) no declaration, setting aside or payment
of any dividend or other distribution by Parent in respect of Parent Stock, and
(2) no material change in the accounting principles as reflected in the first
footnote of the audited financial statements of Parent for the fiscal year
ending December 31, 1998.
3.8. LITIGATION. Except as disclosed in the Parent Reports, there are no
claims, actions, proceedings, or investigations pending or, to the knowledge of
Parent, threatened in writing against Parent or any of its subsidiaries or any
of their officers or directors (in their capacity as such) before any court or
governmental or regulatory authority or body which would reasonably be expected
to result in a Material Adverse Effect and neither Parent nor any of its
subsidiaries or any of their officers or directors (in their capacity as such)
are subject to any writs, injunctions or decrees which would reasonably be
expected to result in a Material Adverse Effect.
3.9. EMPLOYEES AND LABOR. Except as disclosed in Parent Reports, there is
no pending or, to the knowledge of Parent or any subsidiary, threatened, dispute
between Parent or any subsidiary and their present or past employees other than
such disputes as do not or would not reasonably be expected to result in a
Material Adverse Effect.
3.10. TAXES AND TAX RETURNS. Except for such failures to file or pay as
would not reasonably be expected to result in a Material Adverse Effect or as
disclosed in Parent Reports, Parent and each of its subsidiaries have timely
filed all tax returns, declarations and information statements that they are
required to file and have timely paid all taxes shown thereon except to the
extent that such taxes are being contested in good faith. Parent's consolidated
liability for taxes is adequately provided for by reserves except for any
failure to provide reserves that would not reasonably be expected to result in a
Material Adverse Effect. As used in this Agreement, the term "TAXES" includes
all taxes of any nature whatsoever and however denominated, including, without
limitation, income, capital, franchise, sales, gross receipts, occupation, use,
severance, real and personal property, employment, excise, goods and services,
stamp, impost, governmental fees, environmental, transfer, duties and all other
charges, as well as penalties and interest thereon, imposed by any government or
instrumentality, whether federal, state, provincial, local, foreign or other.
3.11. EMPLOYEE BENEFIT PLANS.
(a) No liability under Title IV of ERISA or under sections 82-86 of the
Ontario Pension Benefits Act (the "PBA") and related regulation under that Act
has been incurred by Parent or any Parent ERISA Affiliate that has not been
satisfied in full, other than liability that, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect and no
condition exists that presents a material risk to Parent or any Parent ERISA
Affiliate of incurring a liability under such Title or such provisions of the
PBA, other than liability for premium payments to the Pension Benefit Guaranty
Corporation or Pension Benefits Guarantee Fund assessments and contributions in
the ordinary course of business, which premiums, assessments or contributions
have been or will be paid
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when due, and other than liability that, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect.
(b) Neither Parent nor any Parent ERISA Affiliate, nor any of the Parent
Plans, nor any trust created thereunder, nor any trustee or administrator
thereof has engaged in any prohibited transactions (within the meaning of
Section 406 of ERISA and Section 4975 of the Code) or engaged in any
transactions prohibited by any applicable Canadian federal or provincial pension
benefits standards legislation or by the Income Tax Act (Canada) (the "ITA")
with respect to any Parent Plan registered under such legislation in connection
with which Parent or any Parent ERISA Affiliate could, either directly or
indirectly, incur any liability (or liabilities) that either individually or the
aggregate would reasonably be expected to have a Material Adverse Effect. The
term "PARENT PLAN" means each bonus, deferred compensation, incentive
compensation, stock purchase, stock option, severance pay, medical, life or
other insurance, profit-sharing, or pension plan, program, agreement or
arrangement, and each other employee benefit plan, program, agreement or
arrangement, sponsored, maintained or contributed to or required to be
contributed to by Parent or by any trade or business, whether or not
incorporated, that together with Parent would be deemed a "single employer" with
Parent under Section 414 of the Code (a "PARENT ERISA AFFILIATE") for the
benefit of any employee or director or former employee or former director of
Parent or any Parent ERISA Affiliate.
(c) There has been no change in either the financial position or funded
status of the Parent Plans that are subject to Title IV of ERISA or applicable
Canadian federal or provincial pension benefits standards legislation since the
date of the information relating to the financial position and funded status of
such plans contained in the most recent Parent Form 40-F filed with the SEC or
actuarial reports filed with applicable regulatory authorities under Canadian
federal or provincial pension benefits standards legislation, other than such
changes that individually or in the aggregate would not reasonably be expected
to have a Material Adverse Effect.
(d) To the knowledge of the Parent, each of the Parent Plans that is
intended to satisfy the requirements of Section 125, 401(a) or 501(c)(9) of the
Code satisfies such requirements except where the failure to do so would not
either individually or in the aggregate reasonably be expected to have a
Material Adverse Effect. Each of the Parent Plans has been operated and
administered in compliance with its terms and applicable laws, including but not
limited to ERISA, the Code, the ITA and applicable Canadian federal or
provincial pension benefits standards legislation, except where the failure to
do so would not individually or in the aggregate reasonably be expected to have
a Material Adverse Effect.
(e) With respect to any Parent Plan that is a "multiemployer pension plan,"
as such term is defined in Section 3(37) of ERISA, the aggregate withdrawal
liability that Parent and the Parent ERISA Affiliates would incur if Parent and
the Parent ERISA Affiliates incurred a complete withdrawal under each such plan
on the date hereof would not reasonably be expected to have a Material Adverse
Effect.
(f) There are no actions, suits or claims pending, or, to the knowledge of
Parent, threatened or anticipated (other than routine claims for benefits)
against any Parent Plan, the assets of any Parent Plan or against Parent or any
Parent ERISA Affiliate with respect to any Parent Plan that would individually
or in the aggregate reasonably be expected to have a Material Adverse Effect.
(g) The consummation of the transactions contemplated by this Agreement will
not, by the terms of any Parent Plan, result in, and is not, under the terms of
any Parent Plan, a precondition to, (i) any current or former employee or
director of Parent or any Parent ERISA Affiliate becoming entitled to severance
pay, unemployment compensation or any similar payment, or (ii) any acceleration
in the time of payment or vesting, or increase the amount, of any compensation
due to any such current or former employee or director, or (iii) the renewal or
extension of the term of any agreement regarding compensation for any such
current or former employee or director.
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(h) Any payment of surplus out of any Parent Plan and any contribution
holidays taken by the Parent or any of its subsidiaries under any Parent Plan
were authorized under the terms of the Parent Plan and under applicable law,
except any such payments or contribution holidays which in the aggregate would
not reasonably be expected to have a Material Adverse Effect.
3.12. COMPLIANCE WITH LAWS. Except as disclosed in Parent Reports, Parent
and its subsidiaries are in compliance in all material respects with all laws,
regulations, rules, orders, policies, guidelines and other requirements of all
governmental authorities applicable to their businesses in effect as of the date
hereof except where the failure to do so would not individually or in the
aggregate be reasonably be expected to have a Material Adverse Effect. Parent
and its subsidiaries each hold or have filed in a timely manner applications or
renewals for all permits, licenses, certificates, grants or other authorizations
of foreign, federal, state and local governmental agencies (being collectively
referred to herein as "AUTHORIZATIONS") required for the conduct of its business
as now conducted, and are in compliance with all provisions and conditions
thereof, except for those Authorizations or any such noncompliance which
individually or in the aggregate would not reasonably be expected to have a
Material Adverse Effect. Such Authorizations constitute all Authorizations
required to permit Parent and its subsidiaries to conduct their business in all
material respects in the manner so conducted from and after the Effective Time
except for such Authorizations the lack of which would not reasonably be
expected to result in a Material Adverse Effect. To the knowledge of Parent,
there is no reasonable ground to believe that any of the foregoing
Authorizations will not, in the ordinary course be renewable upon their
expiration except for those Authorizations for which the failure to renew would
not reasonably be expected to result in a Material Adverse Effect. Anything in
this Section 3.12 notwithstanding, it is understood and agreed that the
foregoing shall not be deemed inaccurate by reason of the ordinary expiration of
Authorizations, the renewal of which is expected to be obtained in the ordinary
course or for which the failure to renew would not reasonably be expected to
result in a Material Adverse Effect.
3.13. ENVIRONMENTAL MATTERS.
(a) Parent and its subsidiaries are in compliance with all applicable
Environmental Laws, except as otherwise disclosed in Parent Reports and except
for noncompliance, which individually or in the aggregate, would not reasonably
be expected to result in a Material Adverse Effect.
(b) Except as disclosed in Parent Reports, to the knowledge of Parent: (i)
there have been no Releases of Hazardous Material in, on, under or affecting the
properties or any surrounding site that Parent or its subsidiaries have operated
or owned and (ii) neither Parent nor any of its subsidiaries has disposed of any
Hazardous Material or any substance in a manner that has led, or would
reasonably be anticipated to lead, to a Release except in each case under clause
(i) or (ii) for those which individually or in the aggregate would not
reasonably be expected to result in a Material Adverse Effect, and except in
each case for Releases made in compliance in all material respects with
Environmental Laws. Except as disclosed in Parent Reports, neither Parent nor
any of its subsidiaries or, to Parent's knowledge, any predecessors thereof, has
received any notice that it is a "POTENTIALLY RESPONSIBLE PARTY" under any
Environmental Law, except for any notice the basis of which has been determined
and Parent's liability, if any, has been paid or provided for in the financial
statements included as part of Parent Reports and except for any notice
concerning a liability whose amount, individually or in the aggregate, is not
reasonably expected to have a Material Adverse Effect.
(c) For purposes of this Agreement:
(1) "ENVIRONMENTAL LAW" means any applicable law in effect as of the
date hereof regulating or prohibiting Releases of Hazardous Material into
any part of the environment, or pertaining to the protection of natural
resources, the environment and public and employee health and safety
including, without limitation, the Comprehensive Environmental Response,
Compensation and
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Liability Act ("CERCLA") (42 U.S.C. Section 9601 et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the Clean
Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section
7401 et seq.), the Emergency Planning and Community Right-to-Know Act (42
U.S.C. Section 11001 et seq., the Oil Pollution Act (33 U.S.C. Section 2701
et seq.), the Safe Drinking Water Act (42 U.S.C. Section 300 (et seq.), the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et
seq.), the Canadian Environmental Protection Act (R.S.C. 1985, c. 16), the
Transportation of Dangerous Goods Act (Canada) (S.C. 1992, c. 34), the
Dangerous Goods Transportation Act (Ontario) (R.S.O. 1990, c. D.1), the
Environmental Protection Act (Ontario) (R.S.O. 1990, c. E.19), the
Occupational Health and Safety Act (Ontario) (R.S.O. 1990, c. O.1), the
Ontario Water Resources Act (R.S.O. 1990, c. O.40), the Environment Quality
Act (Quebec) (R.S.Q., c. Q-2) and the Transportation of Dangerous Substances
Regulation (Quebec) (R.R.Q. 1981, c. C-24.2, Reg 4.2) and the regulations
promulgated pursuant thereto, and any such applicable federal, provincial,
state or local statutes, and the regulations promulgated pursuant thereto,
as such laws have been amended or supplemented through the Effective Time;
(2) "HAZARDOUS MATERIAL" means any substance, pollutant, material or
waste which is regulated by Environmental Law, including, without
limitation, coal tar, asbestos, polychlorinated biphenyls, petroleum, and
any material or substance which is defined as a "HAZARDOUS WASTE,"
"HAZARDOUS MATERIAL," "HAZARDOUS SUBSTANCE," "HAZARDOUS AIR POLLUTANT,"
"EXTREMELY HAZARDOUS SUBSTANCE" or "RESTRICTED HAZARDOUS WASTE,"
"CONTAMINANT," "POLLUTANT," "TOXIC WASTE" or "TOXIC SUBSTANCE" under any
provision of Environmental Law; and
(3) "RELEASE" means any release, spill, effluent, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching, or
migration in or into the indoor or outdoor environment (whether on site or
off site), or in, into or out of any property owned, operated or leased by
the applicable party or its subsidiaries or predecessors thereof.
3.14. INTELLECTUAL PROPERTY. Except in each case as would not, individually
or in the aggregate, have a Material Adverse Effect and except as disclosed in
Parent Reports filed and publicly available prior to the date of this Agreement:
(a) Parent and each of its subsidiaries owns, is licensed or otherwise has the
right to use, all Intellectual Property (as defined below) used in or necessary
for the conduct of its business as currently conducted; (b) the use of any
Intellectual Property by Parent and its subsidiaries does not infringe on or
otherwise violate the rights of any person and is in accordance with any
applicable license pursuant to which Parent or any subsidiary acquired the right
to use any Intellectual Property; (c) to the knowledge of Parent, no person is
challenging, infringing on or otherwise violating any right of Parent or any of
its subsidiaries with respect to any Intellectual Property owned by and/or
licensed to Parent or its subsidiaries; and (d) neither Parent nor any of its
subsidiaries has received any written notice of any pending claim with respect
to any Intellectual Property used by Parent and its subsidiaries and to its
knowledge no Intellectual Property owned and/or licensed by Parent or its
subsidiaries is being used or enforced in a manner that would result in the
abandonment, cancellation or unenforceability of such Intellectual Property. For
purposes of this Agreement, "Intellectual Property" shall mean trademarks,
service marks, brand names, certification marks, trade dress and other
indications of origin, the goodwill associated with the foregoing and
registrations in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or renewal of any
such registration or application; inventions, discoveries and ideas, whether
patentable or not, in any jurisdiction; patents, applications for patents
(including, without limitation, divisions, continuations, continuations in part
and renewal applications), and any renewals, extensions or reissues thereof, in
any jurisdiction; nonpublic information, trade secrets and confidential
information and rights in any jurisdiction to limit the use or disclosure
thereof by any person; proprietary writings and other works, whether
copyrightable or not, in any jurisdiction; registrations or applications for
registration of copyrights in any jurisdiction, and any renewals or extensions
thereof;
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any similar intellectual property or proprietary rights; and any claims or
causes of action arising out of or relating to any infringement or
misappropriation of any of the foregoing.
3.15. YEAR 2000. To the knowledge of Parent, the software, operations,
systems and processes (including, to the knowledge of Parent, software,
operations, systems and processes obtained from third parties) which, in whole
or in part, are used, operated, relied upon, or integral to, Parent's or any of
its subsidiaries, conduct of their business, are Year 2000 Compliant (as
hereinafter defined), to the extent that and except as disclosed in Parent
Reports filed and publicly available prior to the date of this Agreement or
where the failure to be Year 2000 Compliant would not, individually or in the
aggregate, have a Material Adverse Effect. For purposes of this Agreement, "YEAR
2000 COMPLIANT" means the ability to process (including calculate, compare,
sequence, display or store), transmit or receive data or data/time data from,
into and between the twentieth and twenty-first centuries, and the years 1999
and 2000, and leap year calculations without error or malfunction.
3.16. NO STOCKHOLDER VOTE REQUIRED. Except as may be required by the rules
of the New York Stock Exchange, Inc. (the "NYSE"), the Montreal Exchange ("ME")
or the Toronto Stock Exchange ("TSE"), no vote of the stockholders of Parent is
required to approve this Agreement and the transactions contemplated hereby. To
the extent that any such vote is required, the vote of Quebecor Inc. will be
sufficient to approve the transaction at a properly called meeting of the
stockholders of Parent.
3.17. PARENT CONSENTS. Parent has received all consents required under the
Shareholders Agreement between Quebecor Inc. and Caisse de Depot et placement du
Quebec and Parent's By-laws to Parent's entering into this Agreement and the
consummation of the transactions contemplated hereby.
3.18. SUBSCRIPTION RIGHTS. Parent has received confirmation that none of
the subscription rights attaching to its Multiple Voting Shares would be
exercised by the holders thereof in connection with the transactions
contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Purchaser that:
4.1. ORGANIZATION AND QUALIFICATION. The Company has been duly incorporated
and is validly existing as a corporation and in good standing under the laws of
the State of Delaware and has full corporate power and authority to own its
properties and conduct its business as presently owned and conducted except
where such failure to be so incorporated, existing and in good standing or to
have such power and authority, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect (as defined below). The
Company is duly qualified as a foreign corporation and in good standing in each
jurisdiction in which the character of its properties owned or leased or the
nature of its activities makes such qualification necessary except where the
failure to be so qualified, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. The copies of the
Amended and Restated Certificate of Incorporation and By-Laws of the Company
previously delivered to Purchaser are true, correct and complete as of the date
hereof. When used in connection with the Company or any of its subsidiaries, the
term "Material Adverse Effect" means any change or effect that is or would be
materially adverse to the business, financial condition or results of operations
of the Company and its subsidiaries, taken as a whole, other than any such
effect attributable to or resulting from (i) the public announcement or
consummation of the transactions contemplated by this Agreement including,
without limitation, the loss of customers or employees resulting therefrom, (ii)
any change in general economic conditions, financial market conditions or in
conditions affecting the Company's industry generally, (iii) any act or omission
of the
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Company or any of its subsidiaries taken with the prior consent of Purchaser
pursuant to Section 5.1 or (iv) actions taken by the Company at the specific
request of Purchaser or Parent.
4.2. SUBSIDIARIES. The Company has listed all subsidiaries required to be
so listed on Exhibit 21 ("EXHIBIT 21") to the Company's Annual Report on Form
10-K for the year ended December 31, 1998. The Company has listed all of its
material subsidiaries (the "MATERIAL SUBSIDIARIES"), including the subsidiaries
required to be listed on Exhibit 21, on Section 4.2 of the Company Disclosure
Schedule, and each such subsidiary has been duly incorporated or organized and
is validly existing as a corporation or other legal entity and is in good
standing in its respective jurisdiction of organization and has full corporate
or organizational power and authority to own its properties and conduct its
businesses as presently owned and conducted, except where such failure to be so
incorporated or organized, existing and in good standing or to have such power
and authority, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. Each Material Subsidiary is duly
qualified as a foreign corporation or other legal entity and in good standing in
each jurisdiction in which the character of its properties owned or leased or
the nature of its activities makes such qualification necessary except where the
failure to be so qualified would not reasonably be expected to have a Material
Adverse Effect. The copies of the Certificate of Incorporation and By-Laws or
comparable organizational documents of each Material Subsidiary that is not
wholly owned by the Company has been previously delivered to Purchaser and are
true, correct and complete as of the date hereof.
4.3. CAPITALIZATION.
(a) As of July 8, 1999, the authorized equity capitalization of the Company
consists of 100,000,000 Shares, par value $.01 per share, of which 37,981,422
are outstanding (including 330,285 shares of Company Restricted Stock), and
50,000,000 shares of preferred stock, par value $.01 per share, of which none
are outstanding. All of the outstanding shares of the Company's capital stock
are validly issued, fully paid (except for the unvested portion of Company
Restricted Stock) and nonassessable. The aggregate number of Shares covered by
outstanding Company Stock Options that have been issued pursuant to the
Company's Stock Option Plans as of July 8, 1999 is 4,798,818. As of July 8,
1999, the Company has granted stock awards totaling 337,500 under the Company's
Restricted Stock Plan. The Company has reserved 3,660,477 Shares for issuance
upon conversion of the 6% Convertible Senior Subordinated Notes.
(b) Except as described in paragraph (a) above, there are no options,
warrants, conversion privileges or other rights, agreements, arrangements or
commitments obligating the Company or any of its subsidiaries to issue or sell
any shares of capital stock of the Company or of any of its subsidiaries
or securities or obligations of any kind convertible into or exchangeable for
any shares of capital stock of the Company or any of its subsidiaries. The
holders of the outstanding Shares are not entitled to any preemptive or other
similar rights. Upon consummation of the Merger in accordance with the terms of
this Agreement, Purchaser will own the entire equity interest in the Company,
and there will be no options, warrants, conversion privileges or other rights,
agreements, arrangements or commitments obligating the Company or any of its
subsidiaries to issue or sell any shares of capital stock of the Company or any
of its subsidiaries other than such rights, options, warrants, conversion
privileges or other agreements, arrangements or commitments, that are the result
of actions taken or caused to be taken by or on behalf of Purchaser.
4.4. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has the requisite
corporate power and authority to enter into this Agreement and the Stock Option
Agreement and, subject to adoption of this Agreement by its stockholders as set
forth in Section 6.1, to perform its obligations hereunder and thereunder.
Assuming the accuracy of Purchaser's representation as to the ownership of
Shares and that no pension or employee benefit plan of any of Parent, Purchaser
or any of their subsidiaries owns (beneficially or otherwise) any Shares, the
execution and delivery of this Agreement and the Stock
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Option Agreement by the Company and the consummation by the Company of the
transactions contemplated by this Agreement and the Stock Option Agreement have
been duly authorized by the Board of Directors of the Company prior to Parent or
Purchaser becoming an "INTERESTED STOCKHOLDER" as defined in Section 203 of the
Delaware Law; and, except for adoption of this Agreement by its stockholders as
set forth in Section 6.1, no other corporate proceedings on the part of the
Company are necessary to authorize or consummate this Agreement and the
transactions contemplated hereby. The Board of Directors of the Company has
approved Purchaser and or any other direct or indirect wholly owned subsidiary
of Parent which would be able to make the representations and warranties in
Article III applicable to Purchaser to which Parent may assign its rights
hereunder becoming "INTERESTED STOCKHOLDERS" as defined in Section 203 of the
Delaware Law pursuant to the terms of this Agreement. This Agreement and the
Stock Option Agreement have been duly executed and delivered by the Company and
constitute valid and binding obligations of the Company, enforceable in
accordance with their respective terms except to the extent that enforceability
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the enforcement of
creditors rights' generally or by equitable principles. Except as set forth in
SECTION 4.4 of the Company Disclosure Schedule, neither the Company nor any of
its subsidiaries is subject to or obligated under any provision of (a) its
certificate or articles of incorporation or by-laws, (b) any contract, (c) any
license, franchise or permit, or (d) any law, regulation, order, judgment or
decree, which would be breached or violated or in respect of which a right of
termination or acceleration or any encumbrance on any of its or any of its
subsidiaries' assets could be created by its execution, delivery and performance
of this Agreement and the consummation by it of the transactions contemplated
hereby, other than, in the case of clauses (b), (c) and (d), any such breaches,
violations, rights or encumbrances which will not, and would not reasonably be
expected to individually or in the aggregate, have a Material Adverse Effect.
Other than in connection with or in compliance with the provisions of the
Delaware Law, the Exchange Act, the securities or blue-sky laws of the various
states of the United States and the H-S-R Act, and except as set forth in
SECTION 4.4 of the Company Disclosure Schedule, no authorization (other than
such Authorizations that are the subject of Section 4.11), consent or approval
of, or filing with, any public body, court or authority is necessary for the
consummation by the Company of the transactions contemplated by this Agreement
other than any authorization, consent or approval the failure to obtain, or any
filing the failure to perform, would not reasonably be expected to have a
Material Adverse Effect.
4.5. COMMISSION FILINGS. The Company has made available to Purchaser copies
of the Company's (i) Annual Reports on Form 10-K for the fiscal years ended
December 27, 1997 and 1998, (ii) Quarterly Reports on Form 10-Q for the quarter
ended March 31, 1999, (iii) proxy statements relating to the Company's meetings
of stockholders (whether annual or special) during the years 1997 through 1999,
inclusive, and (iv) filings under the Securities Act, since January 1, 1997, in
each case as filed with the Commission. Except as set forth in SECTION 4.5 of
the Company Disclosure Schedule, since January 1, 1997, the Company has filed
all reports, registration statements and other documents required to be filed
under the Exchange Act and the rules and regulations thereunder, and all such
reports, registration statements and other documents complied (except to the
extent revised or superseded by a subsequent filing with the Commission prior to
the date hereof), in all material respects, with the requirements of the
Exchange Act, such compliance to be determined, to the extent applicable, in
accordance with the standards applied to the Company Reports in the following
two sentences. As of their respective dates, the Company's Annual Report on Form
10-K for 1998, the Company's Quarterly Reports on Form 10-Q in 1999, the
Company's Current Reports on Form 8-K with respect to events which occurred in
1999 and the Company's 1999 Proxy Statement (together, the "COMPANY REPORTS")
(except to the extent revised or superseded by a subsequent filing with the
Commission prior to the date hereof) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated
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financial statements and unaudited consolidated interim financial statements of
the Company (including any related notes and schedules) included in the reports
referred to in clauses (i) and (ii) of the first sentence of this paragraph have
been prepared in accordance with United States generally accepted accounting
principles ("U.S. GAAP") applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and (except to the
extent revised or superseded by financial statements included in a subsequent
filing with the Commission prior to the date hereof) fairly present the
consolidated financial position of the Company 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 the unaudited
consolidated interim financial statements, to normal year-end adjustments and
any other adjustments described therein, and the fact that the interim financial
statements were prepared in accordance with the rules and regulations of the
Commission and, therefore, certain information required by U.S. GAAP may have
been omitted. Except as set forth in SECTION 4.5 of the Company Disclosure
Schedule, or in the Company Reports, since March 31, 1999, (i) there has not
been a Material Adverse Effect, and (ii) except as permitted by this Agreement,
there has been (1) no declaration, setting aside or payment of any dividend or
other distribution by the Company in respect of the Company's Common Stock, and
(2) no material change in the accounting principles as reflected in the first
footnote of the audited financial statements of the Company for the fiscal year
ending December 27, 1998.
4.6. LITIGATION. Except as disclosed in the Company Reports or in Section
4.6 of the Company Disclosure Schedule, there are no claims, actions,
proceedings, or investigations pending or, to the knowledge of the Company,
threatened in writing against the Company or any of its subsidiaries or any of
their officers or directors (in their capacity as such) before any court or
governmental or regulatory authority or body which would reasonably be expected
to result in a Material Adverse Effect and neither the Company nor any of its
subsidiaries or any of their officers or directors (in their capacity as such)
are subject to any writs, injunctions or decrees which would reasonably be
expected to result in a Material Adverse Effect.
4.7. EMPLOYEES AND LABOR.
(a) Except as disclosed in the Company Reports or in Section 4.7 of the
Company Disclosure Schedule, there is no pending or, to the knowledge of the
Company or any subsidiary, threatened, dispute between the Company or any
subsidiary and their present or past employees other than such disputes as do
not or would not reasonably be expected to result in a Material Adverse Effect.
(b) Except as disclosed in the Company Reports or set forth in Section 4.7
of the Company Disclosure Schedule, there are no written employment, consulting
or severance agreements between the Company or any of its subsidiaries on the
one hand, and any director or officer or, to the knowledge of any Group A
Executive (as defined in the Company Disclosure Schedule) after due inquiry,
other employee of the Company, on the other hand, which obligate the Company to
pay to any director, officer or employee more than $200,000 per annum or
$1,000,000 in the aggregate per agreement and which require more than six months
notice for termination.
4.8. TAXES AND TAX RETURNS. Except for such failures to file or pay as
would not reasonably be expected to result in a Material Adverse Effect or as
disclosed in the Company Reports, the Company and each of its subsidiaries have
timely filed all tax returns, declarations and information statements that they
are required to file and have timely paid all taxes shown thereon except to the
extent that such taxes are being contested in good faith. The Company's
consolidated liability for taxes is adequately provided for by reserves except
for any failure to provide reserves that would not reasonably be expected to
result in a Material Adverse Effect. As used in this Agreement, the term "TAXES"
includes all taxes of any nature whatsoever and however denominated, including,
without limitation, income, capital, franchise, sales, gross receipts,
occupation, use, severance, real and personal property, employment, excise,
goods and services, stamp, impost, governmental fees, environmental, transfer,
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duties and all other charges, as well as penalties and interest thereon, imposed
by any government or instrumentality, whether federal, state, provincial, local,
foreign or other.
4.9. EMPLOYEE BENEFIT PLANS. (a) With respect to each of the material
Company Plans (as hereinafter defined), the Company has made available within 10
business days of the date hereof to Parent true and complete copies of each of
the following documents: (i) the Company Plan and related documents (including
all amendments thereto); (ii) the most recent annual report, financial
statement, and actuarial report, if any; (iii) the most recent summary plan
description, together with each summary of material modifications, if any,
required under ERISA with respect to such Company Plan; and (iv) the most recent
determination letter, if any, received from the IRS with respect to each Company
Plan that is intended to be tax-qualified under the Code. The term "Company
Plan" means each bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance pay, medical, life or other insurance,
profit-sharing, or pension plan, program, agreement or arrangement, and each
other employee benefit plan, program, agreement or arrangement, sponsored,
maintained or contributed to or required to be contributed to by the Company or
by any trade or business, whether or not incorporated, that together with the
Company would be deemed a "single employer" with the Company under Section 414
of the Code (a "COMPANY ERISA AFFILIATE") for the benefit of any employee or
director or former employee or former director of the Company or any Company
ERISA Affiliate.
(b) No liability under Title IV of ERISA has been incurred by the Company or
any Company ERISA Affiliate that has not been satisfied in full, other than a
liability that, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect, and no condition exists that
presents a material risk to the Company or any Company ERISA Affiliate of
incurring a liability under such Title, other than liability for premium
payments to the Pension Benefit Guaranty Corporation and contributions in the
ordinary course of business, which premiums have been or will be paid when due,
and other than a liability that, individually or in the aggregate, would not
reasonably be expected have a Material Adverse Effect.
(c) Neither the Company nor any Company ERISA Affiliate, nor any of the
Company Plans, nor any trust created thereunder, nor any trustee or
administrator thereof has engaged in any prohibited transactions (within the
meaning of Section 406 of ERISA and Section 4975 of the Code) in connection with
which the Company or any Company ERISA Affiliate could, either directly or
indirectly, incur any liability (or liabilities) that either individually or in
the aggregate would reasonably be expected to have a Material Adverse Effect.
(d) There has been no change in either the financial position or funded
status of the Company Plans that are subject to Title IV of ERISA since the date
of the information relating to the financial position and funded status of such
plans contained in the most recent Company Form 10-K filed with the SEC, other
than such changes that individually or in the aggregate would not reasonably be
expected to have a Material Adverse Effect.
(e) To the knowledge of the Company, each of the Company Plans that is
intended to satisfy the requirements of Section 125, 401(a) or 501(c)(9) of the
Code satisfies such requirements except where the failure to do so would not
either individually or in the aggregate reasonably be expected to have a
Material Adverse Effect. Each of the Company Plans has been operated and
administered in compliance with its terms and applicable laws, including but not
limited to ERISA and the Code, except where the failure to do so would not
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect.
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(f) With respect to any Company Plan that is a "multiemployer pension plan,"
as such term is defined in Section 3(37) of ERISA, the aggregate withdrawal
liability that the Company ERISA Affiliates would incur if the Company and the
Company ERISA Affiliates incurred a complete withdrawal under each such plan on
the date hereof would not reasonably be expected to have a Material Adverse
Effect.
(g) There are no actions, suits or claims pending, or, to the knowledge of
the Company, threatened or anticipated (other than routine claims for benefits)
against any Company Plan, the assets of any Company Plan or against the Company
or any Company ERISA Affiliate with respect to any Company Plan that would
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect.
(h) Except as set forth in Section 4.9 of the Company Disclosure Schedule,
the consummation of the transactions contemplated by this Agreement will not, by
the terms of any Company Plan, result in, and is not, by the terms of any
Company Plan, a precondition to (i) any current or former employee or director
of the Company or any Company ERISA Affiliate becoming entitled to severance
pay, unemployment compensation or any similar payment, or (ii) any acceleration
in the time of payment or vesting, or increase the amount, of any compensation
due to any such current or former employee or director, or (iii) the renewal or
extension of the term of any agreement regarding compensation for any such
current or former employee or director.
4.10. STOCKHOLDER VOTE REQUIRED. Under the Delaware Law and the Company's
Amended and Restated Certificate of Incorporation and By-Laws, the Company's
stockholders are required to adopt this Agreement in accordance with the terms
of this Agreement by the affirmative vote of the holders of a majority of the
outstanding Shares at a meeting called for such purpose.
4.11. COMPLIANCE WITH LAWS. The Company and its subsidiaries are in
compliance in all material respects with all laws, regulations, rules, orders,
policies, guidelines and other requirements of all governmental authorities
applicable to their businesses in effect as of the date hereof except where the
failure to do so would not individually or in the aggregate be reasonably
expected to have a Material Adverse Effect. The Company and its subsidiaries
each hold or have filed in a timely manner applications or renewals for all
Authorizations) required for the conduct of its business as now conducted, and
are in compliance with all provisions and conditions thereof, except for those
Authorizations or any such noncompliance which individually or in the aggregate
would not reasonably be expected to have a Material Adverse Effect). Such
Authorizations constitute all Authorizations required to permit the Company and
its subsidiaries to operate the businesses of the Principal Properties or
conduct their business in all material respects in the manner so conducted from
and after the Effective Time except for such Authorizations the lack of which
would not reasonably be expected to result in a Material Adverse Effect. To the
knowledge of the Company, there is no reasonable ground to believe that any of
the foregoing Authorizations will not, in the ordinary course, be renewable upon
their expiration except for those Authorizations, for which the failure to renew
would not reasonably be expected to result in a Material Adverse Effect.
Anything in this Section 4.11 notwithstanding, it is understood and agreed that
the foregoing shall not be deemed inaccurate by reason of the ordinary
expiration of Authorizations, the renewal of which is expected to be obtained in
the ordinary course or for which the failure to renew would not reasonably be
expected to result in a Material Adverse Effect.
4.12. PROPERTIES.
(a) For purposes of this Agreement "PRINCIPAL PROPERTIES" means all of the
properties listed in SECTION 4.12 of the Company Disclosure Schedule and each
reference to real property includes the improvements thereon.
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(b) SECTION 4.12 of the Company Disclosure Schedule sets forth the general
location and size of each of the Principal Properties. Except as set forth in
SECTION 4.12 of the Company Disclosure Schedule, the Company and its
subsidiaries, as applicable, hold rights to or interests in each of the
Principal Properties, either in fee simple or under valid, subsisting and
enforceable leases, as the case may be, together with any easements,
rights-of-way or other surface access rights, necessary for the current
operation of each of the Principal Properties, except for any rights or
interests the absence of which would not be reasonably expected to result in a
Material Adverse Effect. Except as set forth in SECTION 4.12 of the Company
Disclosure Schedule, each Principal Property is held free and clear of all liens
and encumbrances which would not reasonably be expected to have a Material
Adverse Effect.
4.13. ENVIRONMENTAL MATTERS.
(a) The Company and its subsidiaries are in compliance with all applicable
Environmental Laws, except as otherwise disclosed in the Company Reports and
except for noncompliance, which individually or in the aggregate, would not
reasonably be expected to result in a Material Adverse Effect.
(b) Except as disclosed in the Company Reports or as set forth in SECTION
4.13 of the Company Disclosure Schedule, to the knowledge of the Company, (i)
there have been no Releases of Hazardous Material in, on, under or affecting the
properties or any surrounding site that the Company or its subsidiaries have
operated or owned and (ii) neither the Company nor any of its subsidiaries has
disposed of any Hazardous Material or any substance in a manner that has led, or
would reasonably be anticipated to lead, to a Release, except in each case under
clause (i) or (ii) for those which individually or in the aggregate would not
reasonably be expected to result in a Material Adverse Effect, and except in
each case for Releases made in compliance in all material respects with
Environmental Laws. Except as disclosed in the Company Reports or in SECTION
4.13 of the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries or, to the Company's knowledge, any predecessors thereof, has
received any notice that it is a "POTENTIALLY RESPONSIBLE PARTY" under any
Environmental Law, except for any notice the basis of which has been determined
and the Company's liability, if any, has been paid or provided for in the
financial statements included as part of the Company Reports and except for a
notice concerning a liability whose amount, individually or in the aggregate, is
not reasonably expected to have a Material Adverse Effect.
4.14. INTELLECTUAL PROPERTY. Except in each case as would not, individually
or in the aggregate, have a Material Adverse Effect and except as disclosed in
the Company Reports filed and publicly available prior to the date of this
Agreement or in Section 4.14 of the Company Disclosure Schedule: (a) the Company
and each of its subsidiaries owns, is licensed or otherwise has the right to
use, all Intellectual Property (as defined below) used in or necessary for the
conduct of its business as currently conducted; (b) the use of any Intellectual
Property by the Company and its subsidiaries does not infringe on or otherwise
violate the rights of any person and is in accordance with any applicable
license pursuant to which the Company or any subsidiary acquired the right to
use any Intellectual Property; (c) to the knowledge of the Company, no person is
challenging, infringing on or otherwise violating any right of the Company or
any of its subsidiaries with respect to any Intellectual Property owned by
and/or licensed to the Company or its subsidiaries; and (d) neither the Company
nor any of its subsidiaries has received any written notice of any pending claim
with respect to any Intellectual Property used by the Company and its
subsidiaries and to its knowledge no Intellectual Property owned and/or licensed
by the Company or its subsidiaries is being used or enforced in a manner that
would result in the abandonment, cancellation or unenforceability of such
Intellectual Property.
4.15. INSURANCE. Except as set forth in Section 4.15 of the Company
Disclosure Schedule, all material insurance policies maintained by the Company
or its subsidiaries are in full force and effect and, to the Company's
knowledge, are not currently terminable, and the consummation of the
transactions contemplated by this Agreement would not be expected to give rise
to a right of
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termination, on the part of the insurance carriers, other than those policies
the absence or termination of which would not reasonably be expected to have a
Material Adverse Effect. In the judgment of the Company, such policies, with
respect to their amounts and types of coverage, are adequate to insure against
risks to which the Company and its subsidiaries are normally exposed, or to
which they reasonably could be expected to be exposed, in the operation of their
business.
4.16. YEAR 2000. To the knowledge of the Company, the software, operations,
systems and processes (including, to the knowledge of the Company, software,
operations, systems and processes obtained from third parties) which, in whole
or in part, are used, operated, relied upon, or integral to, the Company's or
any of its subsidiaries, conduct of their business, are Year 2000 Compliant (as
hereinafter defined), to the extent that and except as disclosed in the Company
Reports filed and publicly available prior to the date of this Agreement or
where the failure to be Year 2000 Compliant would not, individually or in the
aggregate, have a Material Adverse Effect.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
5.1. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. The Company
covenants and agrees that, prior to the Effective Time, unless Purchaser shall
otherwise agree in writing (which consent shall not be unreasonably withheld) or
as otherwise expressly contemplated or permitted by this Agreement (including
Section 5.1 of the Company Disclosure Schedule and Section 6.11 of the Company
Disclosure Schedule):
(a) The Company shall use reasonable efforts to conduct the businesses and
affairs of the Company and its subsidiaries only in the ordinary course of
business and consistent with past practice;
(b) except as set forth in Section 5.1 of the Company Disclosure Schedule
and except in connection with the adoption by the Company of a shareholder
rights plan that would not be applicable to, or adversely affect the
transactions contemplated hereby among the parties to this Agreement, neither
the Company nor any of its subsidiaries shall: (i) issue (except pursuant to
employee and non-employee director stock options outstanding on the date hereof)
sell, pledge, dispose of or encumber (or permit any of its subsidiaries to
issue, sell, pledge, dispose of or encumber): (A) any additional shares of, or
any options, warrants, conversion privileges or rights of any kind to acquire
any shares of, any capital stock of the Company or any of its subsidiaries, or
(B) any material assets of the Company or any of its subsidiaries except in the
ordinary course of business; (ii) amend or propose to amend the certificate or
articles of incorporation or bylaws or similar governing instruments of the
Company or any of its subsidiaries; (iii) split, combine or reclassify any
outstanding Shares, or declare, set aside or pay any dividend or other
distribution, payable in cash, stock, property or otherwise with respect to the
Shares; (iv) redeem, purchase or acquire, or offer to acquire (or permit any of
its subsidiaries to redeem, purchase or acquire or offer to acquire) any Shares
or other securities of the Company; or (v) enter into or modify any contract,
agreement, commitment or arrangement with respect to any of the matters set
forth in this Section 5.1(b);
(c) neither the Company nor any of its subsidiaries shall (i) acquire (by
merger, consolidation, acquisition of stock or assets or otherwise) any
corporation, partnership or other business organization or division or material
assets thereof for aggregate consideration for all such acquisitions in excess
of $25,000,000; (ii) incur any indebtedness for borrowed money or issue any debt
securities except the borrowing of working capital in the ordinary course of
business and consistent with past practice; or (iii) enter into or materially
modify any contract, agreement, commitment or arrangement with respect to any of
the foregoing;
(d) except as set forth in Section 5.1 of the Company Disclosure Schedule,
or in the ordinary course of business in accordance with past practice, neither
the Company nor any of its subsidiaries
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shall enter into or modify any employment, severance or similar agreements or
arrangements with, or grant any bonuses, salary increases, severance or
termination pay to, any officers, directors or employees;
(e) except as set forth in Section 5.1 of the Company Disclosure Schedule,
or contemplated by this Agreement (including Section 2.6(a)), neither the
Company nor any of its subsidiaries shall adopt or amend any bonus, profit
sharing, compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund or arrangement
for the benefit or welfare of any officer, director or employee, other than (i)
in the ordinary course of business consistent with past practice for the benefit
or welfare of any employee, (ii) for the purpose of accelerating the vesting of
restricted stock and stock options, (iii) to the extent required by law or (iv)
with respect to new hires or promotions in the ordinary course of business;
(f) the Company shall use reasonable efforts (i) to cause its current
insurance (or reinsurance) policies not to be cancelled or terminated; and (ii)
to not permit any of the coverage thereunder to lapse, in any such case unless
prior to or promptly after such termination, cancellation or lapse, replacement
policies underwritten by insurance and reinsurance companies of nationally
recognized standing;
(g) the Company shall use reasonable efforts, and cause each of its
subsidiaries to use reasonable efforts, to keep substantially intact their
respective business organizations and good will, keep available the services of
their officers and employees as a group and maintain their present relationships
with suppliers and customers and others having business relationships with them;
and
(h) the Company shall make no awards of restricted stock or grants of
options.
5.2. CERTAIN ACTIONS BY PARENT PENDING THE MERGER. Parent covenants and
agrees that prior to the Effective Time, unless the Company shall otherwise
agree in writing (which consent shall not be unreasonably withheld prior to the
consummation of the Offer), Parent shall not (i) (A) declare, set aside or pay
any dividends on, or make any other distributions in respect of, any of its
capital stock, except that Parent may continue the declaration and payment of
regular quarterly cash dividends (with usual record and payment dates and in
accordance with its past dividend policy), (B) split, combine or reclassify or
otherwise alter the Parent Stock or any other class of Parent's 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 (C) purchase, redeem
or otherwise acquire any shares of Parent Stock or any other class of Parent's
capital stock or other securities convertible into or exchangeable for such
shares, and (ii) authorize for issuance, issue, deliver or sell for below market
value any shares of Parent Stock or any other class of Parent's capital stock,
other than non-voting preferred stock, or other securities convertible into or
exchangeable for such shares (except upon (x) the conversion of Multiple Voting
Shares, (y) the grant of options issued in the ordinary course of business
pursuant to the existing stock option plans of Parent, or (z) the exercise of
stock options).
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1. ACTION OF COMPANY STOCKHOLDERS. The Company shall take all action
necessary in accordance with and subject to applicable law and its Amended and
Restated Certificate of Incorporation and By-Laws to convene a meeting of its
stockholders promptly after the consummation of the Offer (or if the Offer has
been terminated pursuant to Section 1.1(e), as promptly as practicable) to
consider and vote upon this Agreement. The Company shall use all reasonable
efforts to obtain the necessary adoption of this Agreement by the stockholders
of the Company, subject to the exercise of fiduciary duties by the Board of
Directors under applicable law. At any such meeting, Purchaser and Parent shall
vote or cause to be voted all of the Shares then owned by them and their
subsidiaries in favor of adoption of
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this Agreement and the Company shall vote or cause to be voted all Shares with
respect to which proxies in the form distributed by the Company have been given,
and not voted against the adoption of this Agreement, in favor of adoption of
this Agreement. Between the date of consummation, if any, of the Offer and the
date of the Company stockholders meeting referred to above, Parent and Purchaser
shall not sell, transfer, dispose of or encumber in any manner or otherwise
subject to any voting or other agreement with any party any of the Shares
purchased in the Offer or any voting rights with respect thereto. Between the
date hereof and the Effective Time, neither Parent nor any of its subsidiaries
shall acquire, or agree to acquire, whether in the open market or otherwise, any
rights in any securities of the Company other than pursuant to the Offer or the
Merger.
6.2. COMPANY PROXY STATEMENT. The Company shall file with the Commission
under the Exchange Act within 20 business days from the date hereof, and shall
use all reasonable efforts to have cleared by the Commission, in each case at
the earliest practicable date, a proxy statement (the "COMPANY PROXY
STATEMENT"), with respect to the adoption by the Company's stockholders of this
Agreement in form and substance reasonably satisfactory to Purchaser and its
counsel. The Company shall use its reasonable best efforts to include the
Company Proxy Statement in the Form F-4 (as defined in Section 6.3). Parent,
Purchaser and the Company will cooperate with each other in the preparation of
the Company Proxy Statement; without limiting the generality of the foregoing,
each of Parent and Purchaser will furnish to the Company the information
relating to it required by the Exchange Act and the rules and regulations
promulgated thereunder to be set forth in the Company Proxy Statement. The
Company Proxy Statement shall, subject to the exercise of fiduciary duties by
the Board of Directors under applicable law, contain the determination and
recommendation of the Board of Directors of the Company referred to in SECTION
1.2.
6.3. PREPARATION OF THE FORM F-4 AND THE PARENT PROXY STATEMENT; PARENT
STOCKHOLDERS MEETING.
(a) The Parent Stock to be issued in the Merger shall be registered under
the Securities Act on a Form F-4 registration statement (the "FORM F-4"). As
soon as practicable following the date of this Agreement, but in no event later
than 20 business days from the date hereof, Parent shall prepare and file with
the Commission the Form F-4. Parent shall use its reasonable best efforts to
respond promptly to any comments of the commission and to have the Form F-4
declared effective under the Securities Act as promptly as practicable after
such filing. Parent shall use its reasonable best efforts to include the Company
Proxy Statement in the Submission of the Form F-4 to the Commission. Parent will
advise the Company, promptly after it receives notice thereof, of the time when
the Form F-4 has become effective or any supplement or amendment has been filed,
the issuance of any stop order, the suspension of the qualification of the
Parent Stock issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for amendment of Form F-4 or comments
thereon and responses thereto or requests by the SEC for additional information.
Parent shall obtain, and shall provide evidence reasonably satisfactory to the
Company of, all necessary rulings or orders of Canadian securities regulatory
authorities exempting the distribution by Parent of the shares of Parent Stock
issuable in connection with the Merger and the resale of such shares from the
registration and prospectus delivery requirements and resale restrictions of
applicable Canadian securities laws on terms reasonably satisfactory to the
Company.
(b) Parent shall use its reasonable best efforts to have any approval by the
shareholders of Parent that may be required by the rules and regulations of the
NYSE, ME and TSE waived by such exchanges. If any such waiver is not obtained,
Parent shall, as soon as practicable following the date of this Agreement, take
all action necessary in accordance with Canadian law or the rules of the NYSE,
ME and TSE to convene and hold a meeting of its stockholders (together with any
adjournment or postponement thereof, the "PARENT STOCKHOLDER MEETING") for the
purpose of obtaining the approval (the "PARENT STOCKHOLDER APPROVAL") of a
majority of votes cast by the stockholders of Parent of the issuance of the
Parent Stock in connection with the Merger (the "ISSUANCE"), and shall, through
its Board of
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Directors, recommend to its stockholders the approval of the Issuance, and shall
use reasonable best efforts to cause a proxy statement to be mailed to Parent
shareholders and to solicit from its stockholders proxies in favor the issuance.
6.4. EXPENSES. All costs and expenses incurred in connection with the
Offer, this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expenses, except as set forth in Section 8.3.
6.5. ADDITIONAL AGREEMENTS. (a) Subject to the conditions herein provided,
each of the parties hereto agrees to use all reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by the Offer and this Agreement,
including, without limitation, cooperating with each other, using reasonable
efforts to obtain all necessary waivers, consents and approvals and effecting
all necessary registrations and filings, including, without limitation,
submissions of information requested by governmental authorities.
(b) Notwithstanding the foregoing, Parent and Purchaser (i) shall on or
prior to November 9, 1999 (unless extended in the sole discretion of the
Company) secure the expiration or termination of any applicable waiting period
under the H-S-R Act or the statutes, rules, regulations, administrative and
judicial doctrines and any other antitrust or competition laws of the United
States, any State thereof, any foreign country or the European Union (the
"ANTITRUST LAWS"), (ii) shall take all action necessary or required, including
any litigation or appeals, to permit the consummation no later than November 9,
1999 (unless extended in the sole discretion of the Company) of the Offer, the
Merger and the other transactions contemplated by this Agreement under the
Antitrust Laws, and (iii) shall avoid the imposition of any injunction or other
order under the Antitrust Laws (and to the extent an injunction or other order
has been issued, shall secure its immediate dissolution) that would prevent the
consummation of the Offer, the Merger or the transactions contemplated by this
Agreement on or prior to November 9, 1999 (unless extended in the sole
discretion of the Company). The Company shall cooperate with Parent and
Purchaser in connection with the satisfaction of the covenant of Parent and
Purchaser in this Section 6.5; PROVIDED, HOWEVER, that the steps or actions
referred to in this Section 6.5 that may be required to be taken by the Company
shall be subject to the consummation of the Offer (or if the Offer has been
terminated pursuant to Section. 1.1(e), to the closing of the Merger).
6.6. LIMITATION ON NEGOTIATIONS.
(a) From the date hereof until the termination hereof, except as set forth
in Section 6.6(c) below, the Company and its subsidiaries will not, directly or
indirectly, make, solicit, initiate or encourage submission of proposals or
offers from any persons (including any of its officers or employees) relating to
an Acquisition Proposal. As used herein, the term "ACQUISITION PROPOSAL" means
any proposal or offer involving a liquidation, dissolution, recapitalization,
merger, consolidation or acquisition or purchase of all or substantially all of
the assets of, or equity interest in, the Company or other similar transaction
or business combination involving the Company or its material subsidiaries.
(b) The Company shall:
(i) immediately cease and cause to be terminated all discussions or
negotiations with third parties with respect to any Acquisition
Proposal, if any, existing on the date hereof; and
(ii) promptly notify Purchaser after receipt of any bona fide Acquisition
Proposal or any inquiry from any person relating to an Acquisition
Proposal and promptly provide Purchaser with a reasonable summary of
the financial and other material terms of such Acquisition Proposal.
(c) To the extent that the Board of Directors of the Company shall conclude,
acting in good faith, after receiving advice from outside counsel or its
financial advisor, that the following action is necessary
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or appropriate in order for the Board of Directors to act in a manner which is
consistent with its fiduciary duties under applicable law, the Company may:
(i) furnish or cause to be furnished information concerning the Company
and its businesses, properties or assets to a third party;
(ii) engage in discussions or negotiations with a third party concerning
an Acquisition Proposal initiated by such third party;
(iii) following receipt of an Acquisition Proposal, take and disclose to
its stockholders a position contemplated by Rule 14e-2(a) under the
Exchange Act or otherwise make disclosure to the Company's
stockholders; and
(iv) following receipt of an Acquisition Proposal, (1) through its Board
of Directors, withdraw, modify or amend its recommendation referred
to in Section 1.2, and/or (2) enter into an agreement providing for
the consummation of such Acquisition Proposal; PROVIDED, that no
action shall be taken by the Company pursuant to this subsection (iv)
with respect to any Acquisition Proposal until a time that is after
the third business day following Parent's receipt of written notice
advising Parent that the Board of Directors of the Company has
received such an Acquisition Proposal, and specifying the material
terms and conditions of, and identifying the person making, such
Acquisition Proposal.
(d) The Company will direct its financial and other advisors and
representatives to comply with each of the covenants contained in this Section
6.8.
6.7. NOTIFICATION OF CERTAIN MATTERS. Each party shall give prompt notice
to the others of (to the extent it has knowledge thereof) (i) the occurrence or
failure to occur of any event, which occurrence or failure would cause or may
cause any representation or warranty on its part contained in this Agreement to
be untrue or inaccurate in any respect which would have a Material Adverse
Effect; and (ii) any failure of such party, or any officer, director, employee
or agent thereof, to comply with or satisfy in all material respects any
covenant, condition or agreement to be complied with or satisfied by it
hereunder.
6.8. LISTING. Parent shall use its reasonable best efforts to have the
shares of Parent Stock issued pursuant to this Agreement admitted for listing on
the NYSE, the TSE and the ME (together, the "LISTING"). Any fees in connection
with the Listing payable prior to the Effective Time shall be paid by Parent.
Parent will take no action, for at least three years from the Effective Time, to
cause the Listing to be terminated, except with respect to the NYSE listing, in
accordance with the applicable requirements of the NYSE, including compliance
with Rule 500 of the NYSE, as interpreted in Section 806 of the NYSE Listed
Company Manual as in effect on the date hereof.
6.9. ACCESS TO INFORMATION. Subject to and in accordance with the Antitrust
Laws, from the date hereof to the Effective Time, each party hereto shall, and
shall cause its subsidiaries, officers, directors, employees and agents to,
afford the officers, employees and agents of the other parties hereto reasonable
access at all reasonable times to its officers, employees, agents, premises,
books and records, and properties and shall furnish the other parties hereto all
financial, operating, personal, compensation, tax and other data and
information, that the other party, through its officers, employees or agents,
may reasonably request.
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6.10. STOCKHOLDER CLAIMS. The Company shall not settle or compromise any
claim brought by any present, former or purported holder of any securities of
the Company in connection with the Offer or the Merger prior to the Effective
Time, without the prior written consent of Purchaser, which consent may not be
unreasonably withheld, and shall notify Purchaser promptly upon receipt of all
written demands for appraisal rights.
6.11. TREATMENT OF EMPLOYEE COMPENSATION AND BENEFITS.
(a) Effective no later than the Effective Time, the Company (or Parent, as
applicable) shall enter into agreements and adopt plans or programs, the terms
and conditions of which shall be consistent in all material respects with those
set forth in Section 6.11 of the Company Disclosure (a) Schedule.
(b) For the two-year period immediately following the consummation of the
Offer, Parent shall provide each Group A and Group B executive (as described in
Section 6.11 of the Company Disclosure Schedule) with an annual base salary and
target bonus no less than such executive was eligible to receive immediately
prior to the consummation of the Offer and with employee benefits including
pension, welfare, fringe and other employee benefits that are comparable, on a
benefit by benefit basis, to these benefits as provided by the Company
immediately prior to the consummation of the Offer. Notwithstanding the
foregoing, during the two-year period immediately following the consummation of
the Offer, all employees of Parent who were employees of the Company immediately
prior to the consummation of the Offer shall be entitled to severance benefits
upon termination without Cause (as defined below) that are no less than those
under the severance policies of the Company in effect immediately prior to the
consummation of the Offer.
(c) Bonuses for the fiscal year ended December 31, 1999 ("1999 FISCAL YEAR")
shall be paid to each participant ("PARTICIPANT") under the Company's Management
by Objective bonus plan ("MBO PLAN") as follows: (i) at the consummation of the
Offer, a pro rata bonus, if any, shall be paid based on achievement of the
Participant's performance targets under the MBO Plan, as determined by Marc L.
Reisch, and the portion of the 1999 Fiscal Year completed as of the consummation
of the Offer and (ii) the balance of such 1999 bonus, if any, shall be paid on
January 31, 2000, based on achievement of the Participant's performance targets
under the MBO Plan, as determined by Mr. Reisch and Charles G. Cavell, and the
portion of the 1999 Fiscal Year after the consummation of the Offer; provided,
however, that if such Participant's employment is terminated after the
consummation of the Offer by Parent or the Company for other than Cause (as
defined in Section 6.11(d)) or by the Participant with Good Reason (as defined
in Section 6.11(d)), the balance of such 1999 bonus, if any, shall be paid
promptly following termination based on the achievement of Participant's
performance targets as determined by Mr. Reisch at the consummation of the Offer
(pursuant to (i) above) and the portion of the 1999 Fiscal Year completed after
the consummation of the Offer.
(d) For purposes of this Section 6.11, (1) "Cause" shall mean the Company
Employee's (i) conviction or guilty plea or plea of nolo contendere of a felony
involving fraud or dishonesty, (ii) theft or embezzlement of property from
Parent or (iii) willful and continued refusal by the Company Employee
substantially to perform the duties of his position (other than any such failure
resulting from the Company Employee's incapacity due to physical or mental
illness or any such actual or anticipated failure after the Company Employee's
issuance of a notice of termination for Good Reason) within a reasonable period
of time after receipt of written notice from Parent specifying the manner in
which Parent believes the Company Employee is not substantially performing the
duties of his position. For this definition, no act or failure to act shall be
deemed willful unless done, or omitted to be done, by the Company Employee not
in good faith and without reasonable belief that the Company Employee's act, or
failure to act was in the best interests of Parent and (2) Good Reason shall
mean (i) the Company Employee is not elected, reelected, or otherwise continued
in the office of Parent or any of its subsidiaries which he held immediately
prior to the consummation of the Offer, or he is removed as a member of the
Board of Directors of Parent or any of its subsidiaries if the Company Employee
was
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a Director immediately prior to the consummation of the Offer; (ii) the Company
Employee's duties, responsibilities, status or authority are materially reduced,
diminished or adversely altered from those in effect on the consummation of the
Offer or the Company Employee is assigned duties inconsistent with the Company
Employee's status as a senior officer of Parent; (iii) the Company Employee's
future or current compensation or benefits are reduced; (iv) Parent reduces the
potential earnings of the Company Employee under any performance-based bonus,
equity or other incentive plan of Parent in effect immediately prior to
consummation of the Offer; (v) Parent requires that the Company Employee's
employment be based at a location more than ten miles away from the location at
which it is based at consummation of the Offer; (vi) any purchaser, assign,
surviving corporation, or successor of Parent or its business or assets (whether
by acquisition, merger, liquidation, consolidation, reorganization, sale or
transfer of assets of business or otherwise) fails or refuses to expressly
assume in writing this Agreement and all of the duties and obligations of Parent
thereunder (vii) Parent fails to pay any amounts due to the Company Employee;
(viii) Parent requires the Company Employee to travel substantially more than he
traveled prior to consummation of the Offer; or (ix) Parent breaches any of the
provisions of this Agreement.
(e) If the Offer is terminated pursuant to Section 1.1(e), references to
"consummation of the Offer" in this Section 6.11 shall be deemed replaced by the
term "Effective Time".
6.12. INDEMNIFICATION RIGHTS.
(a) From and after the Effective Time, to the extent not covered by the
insurance set forth in the next succeeding sentence, Parent shall indemnify,
defend and hold harmless the officers, directors and employees of the Company or
any of its subsidiaries against all losses, expenses, claims, damages or
liabilities arising out of claims brought or made by third parties, including,
without limitation, derivative claims, in connection with the transactions
contemplated by this Agreement to the fullest extent permitted or required under
applicable law and shall advance expenses prior to the final disposition of such
claims and liabilities to which this sentence applies. Parent agrees that all
rights to indemnification now existing in favor of the directors, officers or
employees of the Company or any of its subsidiaries (including, without
limitation, any person who was or becomes a director, officer or employee prior
to the Effective Time (the "INDEMNIFIED PARTIES")) under the Delaware Law or as
provided in the Company's Amended and Restated Certificate of Incorporation or
by By-Laws with respect to matters occurring on or prior to the Effective Time
shall survive the Merger and shall continue in full force and effect for a
period of not less than six years after the Effective Time (or, in the case of
claims or other matters occurring on or prior to the expiration of such six year
period which have not been resolved prior to the expiration of such six year
period, until such matters are finally resolved) and Parent shall honor, and
shall cause the Company to honor, all such rights. Parent shall cause to be
maintained in effect for not less than six years from the Effective Time the
current policies of the directors' and officers' liability insurance maintained
by the Company (provided that Parent may substitute therefor policies of at
least the same coverage containing terms and conditions which are no less
advantageous to the Company's directors, officers or employees) with respect to
matters occurring on or prior to the Effective Time; provided that in no event
shall Parent or the Company be required to expend annually more than 200% of the
amount that the Company spent for these purposes in the last fiscal year to
maintain or procure insurance coverage pursuant hereto; and provided further
that if Parent or the Company are unable to obtain the insurance called for by
this section, Parent or the Company will obtain as much comparable insurance as
is available for such amount per year.
(b) Without limiting the foregoing, in the event any claim, action, suit,
proceeding or investigation to which the provisions of this Section 6.12 are
applicable is brought against any Indemnified Party (whether arising before or
after the Effective Time), (i) any counsel retained by the Indemnified Parties
for any period after the Effective Time shall be subject to the approval of the
Surviving Corporation (such approval to not be unreasonably withheld; it being
hereby agreed that the retention of any of
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Simpson Thacher & Bartlett, Richards, Layton & Finger or Osler, Hoskin &
Harcourt by the Indemnified Parties shall not require the approval of the
Surviving Corporation)); (ii) after the Effective Time, the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received; and (iii)
after the Effective Time, the Surviving Corporation will use reasonable efforts
to assist in the vigorous defense of any such matter, provided that the
Surviving Corporation shall not be liable for any settlement of any claim
effected without its written consent, which consent, however, shall not be
unreasonably withheld. Any Indemnified Party wishing to claim indemnification
under this Section 6.12, upon learning of any such claim, action, suit,
proceeding or investigation, shall notify the Surviving Corporation (but the
failure so to notify the Surviving Corporation shall not relieve it from any
liability which it may have under this Section 6.12 except to the extent such
failure materially prejudices the Surviving Corporation). The Surviving
Corporation shall be liable for the fees and expenses hereunder with respect to
only one law firm, in addition to local counsel in each applicable jurisdiction,
to represent the Indemnified Parties as a group with respect to each such matter
unless there is, under applicable standards of professional conduct, a conflict
between the positions of any two or more Indemnified Parties that would preclude
or render inadvisable joint or multiple representation of such parties.
6.13. PARENT GUARANTEE. Parent unconditionally and irrevocably guarantees
to the Company the due, prompt and faithful performance of, and compliance with,
all agreements and obligations of Purchaser in this Agreement. Parent hereby
agrees that the Company shall have the right to enforce the guarantee set forth
in this Section 6.13 to ensure Purchaser's performance of, and compliance with,
all agreements and obligations of Purchaser in this Agreement without being
required to first proceed against Purchaser.
6.14. AFFILIATES. Prior to the Effective Time of the Merger, the Company
shall deliver to Parent a letter identifying all persons who are, at the time
this Agreement is submitted for adoption by the shareholders of the Company,
"AFFILIATES" of the Company for purposes of Rule 145 under the Securities Act.
The Company shall use its reasonable efforts to cause each such person to
deliver to Parent as of the Closing Date, a written agreement substantially in
the form attached as EXHIBIT B hereto.
ARTICLE VII
CONDITIONS
7.1. CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) Unless the Offer has been terminated pursuant to Section 1.1(e), the
Offer shall have been consummated in accordance with its terms; PROVIDED,
HOWEVER, that this condition shall be deemed to be satisfied if Purchaser fails
to accept for payment and pay for Shares pursuant to the Offer other than as a
result of a failure of a condition thereof;
(b) If the Offer has been terminated pursuant to Section 1.1(e), the waiting
period applicable to the consummation of the Merger under the H-S-R Act shall
have expired or been terminated;
(c) the requisite approval of the respective shareholders of Parent (if
required), and of the Company shall have been obtained;
(d) the Form F-4 shall have become effective under the Securities Act and
shall not be the subject of any stop order or proceedings seeking a stop order
and no stop order or similar restraining order shall be threatened or entered by
the SEC or any state securities administration preventing the Merger, and all
necessary rulings or orders of Canadian securities authorities exempting the
distribution by
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Parent of the shares of Parent Stock issuable in connection with the Merger and
the resale of such shares from the registration and prospectus delivery
requirements and resale restrictions of applicable Canadian securities laws
shall have been received;
(e) the shares of Parent Stock issuable to the Company's stockholders and
holders of Company Stock Options as contemplated by this Agreement shall have
been approved for listing on the NYSE, TSE and ME subject to official notice of
issuance;
(f) there shall have been no law, statute, rule or regulation in the United
States, Canada, the European Union or member state of the European Union enacted
or promulgated which is in effect and, in the judgment of a majority of the
Continuing Directors (or if the Offer has been terminated pursuant to Section
1.1(e), in the reasonable judgement of the Company), has the effect of making
the acquisition of Shares illegal or otherwise prohibits consummation of the
Merger; and
(g) there shall not be in effect any preliminary or final injunction or
temporary restraining order or other order or decree issued by any federal,
provincial or state court or administrative agency or authority in the United
States, Canada, the European Union or any member state of the European Union
enjoining, restraining or otherwise prohibiting the Offer, the Merger or the
acquisition by Purchaser of Shares.
7.2. ADDITIONAL CONDITIONS TO OBLIGATION OF PARENT AND PURCHASER TO EFFECT
THE MERGER. If the Offer is terminated pursuant to Section 1.1(e), then the
obligations of Parent and Purchaser to consummate the Merger shall also be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) The representations and warranties of the Company set forth in this
Agreement shall be true and correct immediately prior to the Effective Time,
except for failures to be true and correct that would not be reasonably likely
to have a Material Adverse Effect, PROVIDED, HOWEVER, that representations or
warranties which by their terms are given as of a specified date shall be true
and correct as of such date (except for failures to be true and correct that
would not be reasonably likely to have a Material Adverse Effect).
(b) The Company shall have performed and complied in all material respects
with all agreements and covenants required to be performed or complied with by
it on or before the Effective Time.
7.3. ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER. If the Offer is terminated pursuant to Section 1.1(e), then the
obligations of the Company to consummate the Merger shall also be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) The representations and warranties of Parent and Purchaser set forth in
this Agreement shall be true and correct immediately prior to the Effective
Time, except for failures to be true and correct that would not be reasonably
likely to have a Material Adverse Effect, PROVIDED, HOWEVER, that
representations or warranties which by their terms are given as of a specified
date shall be true and correct as of such date (except for failures to be true
and correct that would not be reasonably likely to have a Material Adverse
Effect).
(b) Parent and Purchaser shall have performed and complied in all material
respects with all agreements and covenants required to be performed or complied
with by them on or before the Effective Time.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1. TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, whether prior to or after approval by the stockholders of the
Company:
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(a) by written mutual consent of Purchaser and the Company prior to the
consummation of the Offer (or, if the Offer has been terminated pursuant to
Section 1.1(e), prior to the Effective Time);
(b) by either Purchaser or the Company:
(i) Unless the Offer has been terminated pursuant to Section 1.1(e), if
the Offer shall not have been consummated by November 10, 1999, or,
if all of the Offer Conditions other than the Minimum Condition shall
have been satisfied by November 10, 1999, such later date as provides
at least 15 business days from the date the Purchaser shall have
publicly announced that all of the Offer Conditions other than the
Minimum Condition have been satisfied; or
(ii) a permanent injunction or other final, non-appealable order by any
federal or state court in the United States or federal or provincial
court in Canada which prohibits the consummation of the Merger shall
have been issued and remain in effect; PROVIDED, HOWEVER, that prior
to invoking this right of termination each party agrees to comply
with Section 6.5 hereof; and, PROVIDED FURTHER, that the occurrence
of an event described in this Section 8.1(b)(ii) related to the
Antitrust Laws shall constitute a breach of the covenant of Parent
and Purchaser in Section 6.5(b); or
(iii) if the Offer has been terminated pursuant to Section 1.1(e) and if
the Merger has not been consummated on or prior to November 19, 1999;
(c) by Purchaser prior to the consummation of the Offer (or, if the Offer
has been terminated pursuant to Section 1.1(e), prior to the Effective Time):
(i) if (1) the Board of Directors of the Company shall have failed to
recommend, or shall have withdrawn, its approval or recommendation of
the Offer (unless the Offer has been terminated pursuant to Section
1.1.(e)) or the Merger or shall have resolved to do any of the
foregoing; or (2) if the Company shall have entered into a definitive
agreement to accept an Acquisition Proposal;
(ii) if the Board of Directors of the Company shall have modified its
approval of the Offer (unless the Offer has been terminated pursuant
to Section 1.1.(e)) or the Merger in a manner adverse to Purchaser
and the Minimum Condition shall not have been met on the then
scheduled expiration date of the Offer immediately following such
modification;
(iii) if the Offer shall have terminated or expired in accordance with
the terms of this Agreement (unless the Offer has been terminated
pursuant to Section 1.1.(e)) without Purchaser or a subsidiary of
Parent having purchased any Shares thereunder, PROVIDED, HOWEVER,
that prior to invoking this right of termination Purchaser agrees to
comply with Section 1.1(c) hereof; or
(d) by the Company prior to the consummation of the Offer (or if the Offer
has been terminated pursuant to Section 1.1(e), prior to the Effective Time):
(i) if the Company withdraws its recommendation of the Offer (unless the
Offer has been terminated pursuant to Section 1.1(e)) or the Merger
pursuant to Section 6.6(c)(iv)(1), or takes the actions described in
Section 6.6(c)(iv)(2), and such action is taken pursuant to, and in
compliance with, such provision; or
(ii) Unless the Offer has been terminated pursuant to Section 1.1(e), if
the Offer shall not have been consummated by October 11, 1999 (and if
the Offer has been terminated pursuant to Section 1.1(e), if the
Merger shall not have been consummated by October 11, 1999) by reason
of not having obtained all required approvals under Antitrust Laws,
PROVIDED, HOWEVER, that such date shall be extended by each day that
the Company is not
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in substantial compliance with any second request issued on the
transactions contemplated by this Agreement but only if and to the
extent that Parent and Purchaser are in substantial compliance when
the Company is not.
Notwithstanding the above, neither the Company nor Purchaser shall be
permitted to terminate this Agreement if the event which gave rise to such
termination right is a result of or arose in connection with any action or
inaction of the party seeking to terminate taken or not taken in breach of the
terms hereof.
8.2. AMENDMENT. Subject to applicable law, this Agreement may be amended by
an instrument signed by each of the parties hereto before or after approval of
the Merger by the stockholders of the Company, if required; PROVIDED, HOWEVER,
that after consummation of the Offer (or, if the Offer has been terminated
pursuant to Section 1.1(e), after the approval of the Merger by the stockholders
of the Company), no amendment may be made which decreases the amount of the
Merger Consideration or effects any change which would adversely affect the
stockholders of the Company (other than Purchaser and its affiliates) without
the approval of the stockholders of the Company (other than Purchaser and its
affiliates).
8.3. FEES UPON TERMINATION. The Company agrees that if this Agreement is
terminated pursuant to:
(a) Section 8.1(b)(i) and at the time of such termination any person, entity
or group (as defined in Section 13(d)(3) of the Exchange Act) (other than Parent
or any of its affiliates) shall have become the beneficial owner of more than
30% of the outstanding Shares (with appropriate adjustments for
reclassifications of capital stock, stock dividends, stock splits, reverse stock
splits and similar events) and such person, entity or group (or any subsidiary
of such person, entity or group) thereafter shall enter into a definitive
written agreement with the Company to accept an Acquisition Proposal at any time
on or prior to the date which is six months after the termination of this
Agreement and such transaction is thereafter consummated;
(b) Sections 8.1(c)(i)(2) or Section 8.1(d)(i); or
(c) Sections 8.1(c)(i)(1), 8.1(c)(ii) or 8.1(c)(iii), and in each case,
prior to the time of termination of this Agreement, there shall exist a bona
fide Acquisition Proposal that has been made known to the Company or publicly
announced by a third party that is more favorable from a financial point of view
than the Offer and the Merger, the Company shall enter into a definitive written
agreement to accept an Acquisition Proposal from such party at any time on or
prior to the date which is six months after the termination of this Agreement
and such transaction shall thereafter be consummated;
(d) then the Company shall pay to Purchaser the Termination Amount (as
defined below). Such payment shall be made as promptly as practicable but in no
event later than (i) in the case of paragraph (b) of this Section, two business
days following termination of this Agreement, (ii) in the case of paragraph (a)
of this Section, upon consummation of such Acquisition Proposal, and (iii) in
the case of paragraph (c) of this Section, upon entering into a definitive
agreement to accept such Acquisition Proposal. Each such payment shall be made
by wire transfer of immediately available funds to an account designated by
Purchaser without set-off or deduction. The term "Termination Amount" as used
herein shall mean (i) if (A) any third party has on or prior to July 26, 1999,
and, at such time, the Company was not in violation of Section 6.6 hereof, (x)
made a bona fide Acquisition Proposal or (y) requested that the Company enter
into negotiations or discussions concerning an Acquisition Proposal or possible
Acquisition Proposal and has indicated a potential price or range of prices in
connection therewith, and (B) a payment is required to be made pursuant to this
Section 8.3 by the Company to Purchaser as a result of the Company entering into
a written agreement to accept an Acquisition Proposal with any such third party
or such third party acquiring 50% or more of the outstanding Shares, $10,662,000
and (ii), in each other circumstance, $42,648,000.
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8.4. EFFECT OF TERMINATION.
(a) The provisions of Sections 6.4 (expenses), 6.12 (indemnification) and
8.3 (termination fees) shall survive the termination of this Agreement. The
provisions of the Confidentiality Agreement shall also survive the termination
of this Agreement.
(b) The rights of termination provided for in Section 8.1 shall not be an
exclusive remedy hereunder but shall be in addition to any other legal or
equitable remedies that may be available to any non-defaulting party hereto
arising out of any default hereunder by any other party hereto, and any party
hereto shall continue to have the right following termination hereof to all
legal and equitable remedies against any other party hereto for any breach of
any representation, warranty, covenant or agreement contained herein by such
other party prior to the termination hereof; PROVIDED, HOWEVER, that in the
event that the amount set forth in Section 8.3 shall have been paid to
Purchaser, there shall be no liability on the part of either the Company or its
respective officers or directors, except for a willful and intentional breach of
any representation, warranty, covenant or agreement contained herein.
8.5. WAIVER. At any time prior to the Effective Time and subject to the
provisions of this Agreement, any party hereto may (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto or
(ii) waive compliance with any of the agreements of any other party or with any
conditions to its own obligations, in each case only to the extent such
obligations, agreements and conditions are intended for its benefit.
ARTICLE IX
GENERAL PROVISIONS
9.1. BROKERS. (a) The Company represents and warrants that no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission, or to the reimbursement of any of its expenses, in connection
with the Offer or the Merger or any similar transaction based upon arrangements
made by or on behalf of the Company, except for the arrangements between the
Company and Morgan Stanley & Co. Incorporated and the arrangements between the
Company and Kohlberg Kravis Roberts & Co., L.P.
(b) Parent and Purchaser represent and warrant to the Company that no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission, or to the reimbursement of any of its expenses, in
connection with the Offer or the Merger or any similar transaction based upon
arrangements made by or on behalf of Parent or Purchaser, except for the
arrangements between Parent and RBC Dominion Securities and Credit Suisse First
Boston Corporation.
9.2. PUBLIC STATEMENTS. Except as required by applicable law or stock
exchange regulation, none of Parent or Purchaser, on the one hand, or the
Company, on the other hand, shall make any public announcement or statement with
respect to the Offer, the Merger or this Agreement without the approval of the
Company or Purchaser, respectively, which approval shall not be unreasonably
withheld. Moreover, the parties hereto agree to consult with each other prior to
issuing each public announcement or statement with respect to the Offer, the
Merger or this Agreement.
9.3. NOTICES. All notices and other communications hereunder shall be given
by telephone and immediately confirmed in writing and shall be deemed given if
delivered personally or mailed by
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registered or certified mail (return receipt requested) 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 Purchaser:
QUEBECOR PRINTING INC.
612 St. Jacques Street
Montreal, Quebec H3C 4M8
Attention: Vice President, Legal Affairs & Secretary
with copies to:
Arnold & Porter
399 Park Avenue
New York, New York 10022-4690
Attention: John A. Willett, Esq.
(b) if to the Company:
WORLD COLOR PRESS, INC.
The Mill
340 Pemberwick Road
Greenwich, CT 06831
Attention: General Counsel
with copies to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: David J. Sorkin, Esq.
9.4. INTERPRETATION. When a reference is made in this Agreement to a
subsidiary of Parent or the Company, the word "SUBSIDIARY" means any
"MAJORITY-OWNED SUBSIDIARY" (as defined in Rule 12b-2 promulgated under the
Exchange Act) of Parent or the Company, as the case may be; PROVIDED, HOWEVER,
that the Company shall in no event and at no time be considered a subsidiary of
Purchaser for purposes of this Agreement. "Affiliate" of a person means a person
that, directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first mentioned person. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
References to Sections and Articles refer to sections and articles of this
Agreement unless otherwise stated. Any reference to dollars or "$" shall refer
to U.S. dollars.
9.5. REPRESENTATIONS AND WARRANTIES. Any matters disclosed in any of a
party's representations and warranties or the section of such party's disclosure
schedule with respect to such representations and warranties shall be deemed
disclosed for purposes of the other representations and warranties of such party
as long as the applicability of such matters to such representations and
warranties is reasonably apparent.
9.6. SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated and the parties shall negotiate
in good faith to modify the Agreement to preserve, to the extent legally
permitted, each party's anticipated benefits and obligations under this
Agreement.
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9.7. MISCELLANEOUS. This Agreement (including the agreements that are
exhibits hereto) and the Confidentiality Agreement constitute the entire
agreement, and supersede all other prior agreements and undertakings, both
written and oral, among the parties with respect to the subject matter hereof.
This Agreement (a) is not intended to confer upon any other person any rights or
remedies hereunder, except as set forth in Section 9.10; and (b) shall not be
assigned by operation of law or otherwise, except that Parent and Purchaser may
assign all or any portion of their rights under this Agreement to any of their
subsidiaries (PROVIDED, HOWEVER, that in the event of any such assignment,
Parent shall cause such assignee to execute and become a party to this agreement
and such assignee shall be vested with all the rights and obligations assigned
to it by the assignor as if it were named in this Agreement), but no such
assignment shall relieve Parent or Purchaser, as applicable, of their
obligations hereunder, and except that this Agreement may be assigned by
operation of law to any corporation with or into which Purchaser may be merged
as long as the surviving corporation in such merger complies with the
representations and warranties and covenants of Purchaser set forth herein and
(c) shall be governed in all respects, including validity, interpretation and
effect, by the internal laws of the State of Delaware, without giving effect to
the principles of conflict of laws thereof. The parties hereto expressly consent
to the personal jurisdiction of the courts of the United States of America and
of the courts of the State of Delaware, in each case sitting in the State of
Delaware. Each of the parties hereto irrevocably waives and agrees not to
assert, by way of motion, as a defense, counterclaim or otherwise, in any action
or proceeding with respect to this Agreement, (a) the defense of sovereign
immunity, (b) any claim that it is not personally subject to the jurisdiction in
any federal court located in the State of Delaware or Chancery or other Courts
of the State of Delaware for any reason other than the failure to serve process
in accordance with this Section 9.7, (c) that it or its property is exempt or
immune from jurisdiction of any such court or from any legal process commenced
in such courts (whether through service of notice, attachment prior to
judgement, attachment in aid of execution of judgement, execution of judgement
or otherwise), and (d) to the fullest extent permitted by applicable law, that
(i) the suit, action or proceeding in any such court is brought in an
inconvenient forum (ii) the venue of such suit, action or proceeding is improper
or (iii) this Agreement, or the subject matter hereof, may not be enforced in or
by such courts. Parent further designates Purchaser as its duly appointed agent
for the service of summonses and other legal processes in the State of Delaware
(a "SERVICE AGENT").
9.8. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original, but together shall be
construed as one document.
9.9. SURVIVAL. The representations, warranties, covenants and agreements of
the parties set forth herein shall terminate as of the Effective Time, except as
provided in Sections 6.11 and 6.12.
9.10. THIRD PARTY BENEFICIARIES. The parties entitled to the employee
benefits pursuant to the terms of Section 6.11 and indemnification pursuant to
the terms of Section 6.12 are expressly made third party beneficiaries solely of
Section 6.11 and Section 6.12, respectively, of this Agreement. In addition,
holders of Company Stock Options and Company Restricted Stock are expressly made
third party beneficiaries solely of Section 2.6 of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed on the date first written above by their respective
officers thereunder duly authorized.
<TABLE>
<S> <C> <C>
QUEBECOR PRINTING INC.
By: /s/ CHARLES G. CAVELL
-----------------------------------------
Name: Charles G. Cavell
Title: President & Chief Executive Officer
By: /s/ CHRISTIAN M. PAUPE
-----------------------------------------
Name: Christian M. Paupe
Title: Executive Vice President
PRINTING ACQUISITION INC.
By: /s/ CHARLES G. CAVELL
-----------------------------------------
Name: Charles G. Cavell
Title: President
By: /s/ CHRISTIAN M. PAUPE
-----------------------------------------
Name: Christian M. Paupe
Title: Treasurer
WORLD COLOR PRESS, INC.
By: /s/ ROBERT G. BURTON
-----------------------------------------
Name: Robert G. Burton
Title: Chairman and Chief Executive
Officer
</TABLE>
A-37
<PAGE>
ANNEX I
CONDITIONS TO THE OFFER
The capitalized terms used in this Annex I have the meanings set forth in
the attached Agreement, except that the term "Merger Agreement" shall be deemed
to refer to the attached Agreement.
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to Purchaser's obligation to pay for or return
tendered shares of Common Stock promptly after termination or withdrawal of the
Offer), pay for any Shares tendered pursuant to the Offer, and may postpone the
acceptance for payment, or, subject to the restriction referred to above,
payment for, Shares tendered pursuant to the Offer, and may terminate the Offer
(whether or not any Shares have theretofore been purchased or paid for) to the
extent permitted by the Merger Agreement, if (i) at the expiration of the Offer,
a number of Shares which, together with any Shares owned by Parent or Purchaser,
would constitute more than 50% of the voting power (determined on a
fully-diluted basis), of all the securities of the Company entitled to vote
generally in a merger shall not have been validly tendered and not withdrawn
prior to the expiration of the Offer (the "MINIMUM CONDITION"), or (ii) if, at
any time on or after July 12, 1999 and prior to the acceptance for payment for
any such Shares, any of the following conditions occurs or has occurred and
continues to exist (each of paragraphs (a) through (f) providing a separate and
independent condition to Purchaser's obligations pursuant to the Offer):
(a) there shall be in effect any preliminary or final injunction or
temporary restraining order or other order or decree issued by any Canadian or
United States federal, provincial or state court or United States federal or
administrative agency or authority, enjoining, restraining or otherwise
prohibiting the Offer, the Merger or the acquisition by Purchaser of Shares;
(b) any waiting periods under the H-S-R Act applicable to the purchase of
Shares pursuant to the Offer shall not have expired or been terminated;
(c) there shall have been any law, statute, rule or regulation in the United
States, Canada, the European Union or any member state of the European Union,
enacted, promulgated or proposed that has the effect of making the acquisition
of Shares illegal or otherwise prohibits consummation of the Merger;
(d) any representation or warranty of the Company in the Merger Agreement
shall not be true and correct in any respect that is reasonably likely to have a
Material Adverse Effect, in each case as if such representation or warranty were
made at the time of such determination (except for any representations or
warranties which by their terms are given as of a specified date, PROVIDED that
such representations or warranties shall have been true and correct on such
date, except for failures to be true and correct that would not be reasonably
likely to have a Material Adverse Effect);
(e) the Company shall fail to perform or comply in any material respect with
any covenant or agreement to be performed or complied with by the Company under
the Merger Agreement required to be performed or complied with by it prior to
the consummation of the Offer;
(f) The Merger Agreement shall have been terminated in accordance with its
terms;
which, in the reasonable judgment of Purchaser with respect to each and every
matter referred to above and regardless of the circumstances giving rise to any
such condition (except for any action or inaction by Purchaser, Parent or any of
their respective affiliates constituting a breach of the Merger Agreement),
makes it inadvisable to proceed with the Offer or with such acceptance for
payment of or payment for Shares or to proceed with the Merger.
The foregoing conditions are for the sole benefit of Purchaser and (i) may
be asserted by Purchaser regardless of the circumstances giving rise to such
condition (except for any action or inaction by Purchaser, Parent or any of
their respective affiliates constituting a breach of the Merger Agreement) or
(ii) (other than the Minimum Condition) may be waived by Purchaser in whole at
any time or in part from time to time in its reasonable discretion. The failure
by Purchaser at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an ongoing
right and may be asserted at any time and from time to time.
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<PAGE>
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
QUEBECOR WORLD (USA) INC.
FIRST
The name of the corporation is Quebecor World (USA) Inc. (the
"Corporation"). The Corporation was originally incorporated under the name of
World Color Press, Inc. The original certificate of incorporation of the
Corporation was filed with the Delaware Secretary of State on September 24,
1984.
SECOND
The address of its registered office in the State of Delaware is Corporation
Trust Center, 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
THIRD
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware (the "DGCL").
FOURTH
The total number of shares of common stock which the Corporation shall have
the authority to issue is three thousand (3,000), par value $1.00 per share,
amounting in the aggregate to $3,000.
FIFTH
The Corporation is to have perpetual existence.
SIXTH
In furtherance and not in limitation of the powers conferred by statute, the
Board of Directors is expressly authorized to make, alter or repeal the by-laws
of the Corporation.
SEVENTH
Elections of directors need not be by written ballot unless the by-laws of
the Corporation shall so provide. Meetings of stockholders may be held within or
without the State of Delaware, as the by-laws may provide. The books of the
Corporation may be kept (subject to any provision contained in the statutes)
outside the State of Delaware at such place or places as may be designated from
time to time by the Board of Directors or in the by-laws of the Corporation.
EIGHTH
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
NINTH
No director of the Corporation shall be personally liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as
director, except for liability (i) for any breach of the
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<PAGE>
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the General Corporation Law
of the State of Delaware, or (iv) for any transaction from which the director
derived an improper personal benefit.
The undersigned hereby declare that this Amended and Restated Certificate of
Incorporation has been duly adopted in accordance with the provisions of
Sections 242 and 245 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, under penalties of perjury, the undersigned have
examined this Amended and Restated Certificate of Incorporation, and to the best
of their knowledge it is true, correct and complete, and the undersigned further
declare that the undersigned have authority to sign this Amended and Restated
Certificate of Incorporation on behalf of Quebecor World (USA) Inc., all as of
this (th) day of .
<TABLE>
<S> <C>
QUEBECOR WORLD (USA) INC.
By: /s/
------------------------------------------
Name:
Title:
</TABLE>
ATTEST:
- ---------------------------------
Name:
Its Secretary
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<PAGE>
EXHIBIT B
FORM OF COMPANY AFFILIATE LETTER
QUEBECOR PRINTING INC.
[Address]
Ladies and Gentlemen:
The undersigned, a holder of shares of common stock, par value $0.01 per
share ("Company Common Stock"), of World Color Press, Inc., a Delaware
corporation (the "Company"), is entitled to receive in connection with the
merger (the "Merger") between the Company and a direct wholly owned subsidiary
of Quebecor Printing Inc. ("Parent") subordinate voting shares, no par value
("Parent Stock"), of Parent. The undersigned acknowledges that the undersigned
may be deemed an "affiliate" of the Company within the meaning of Rule 145
("Rule 145") promulgated under the Securities Act of 1933, as amended (the
"Act"), although nothing contained herein should be construed as an admission of
such fact.
If in fact the undersigned is an affiliate under the Act, the undersigned's
ability to sell, assign or transfer the shares received by the undersigned
pursuant to the Merger may be restricted unless such transaction is registered
under the Act or an exemption from such registration is available. The
undersigned understands that such exemptions are limited and the undersigned has
obtained advice of counsel as to the nature and conditions of such exemptions,
including information with respect to the applicability to the sale of such
securities of Rules 144 and 145(d) promulgated under the Act.
The undersigned hereby represents to and covenants with Parent that the
undersigned will not sell, assign or transfer any of the Parent Stock received
by the undersigned pursuant to the Merger except (i) pursuant to an effective
registration statement under the Act; (ii) in conformity with the limitations
specified by Rules 144 and Rule 145(d); or (iii) in a transaction that, in the
opinion of Simpson Thacher & Bartlett or other counsel reasonably satisfactory
to Parent or as described in a "no-action" or interpretive letter from the Staff
of the Securities and Exchange Commission (the "SEC"), is not required to be
registered under the Act.
In the event of a sale or other disposition by the undersigned of Parent
Stock pursuant to Rule 145(d)(1), the undersigned will supply Parent with
evidence of compliance with such Rule, in the form of a letter in the form of
Annex I hereto. The undersigned understands that Parent may instruct its
transfer agent to withhold the transfer of any Parent Stock disposed of by the
undersigned, but that upon receipt of such evidence of compliance including,
without limitation, an opinion of Simpson Thacher & Bartlett or another counsel
reasonably satisfactory to them, the transfer agent shall effectuate the
transfer of the shares sold as indicated in the letter.
The undersigned acknowledges and agrees that the following legend will be
placed on certificates representing the Parent Stock received by the undersigned
pursuant to the Merger or held by a transferee thereof, which legend will be
removed by delivery of substitute certificates upon receipt of an opinion in
form and substance reasonably satisfactory to Parent from Simpson Thacher &
Bartlett or another independent counsel reasonably satisfactory to Parent to the
effect that such legends are no longer required for the purposes of the Act or
the fourth paragraph of this letter:
"The Securities represented by this certificate were issued in a
transaction to which Rule 145 under the United States Securities Act of 1933
(the "Act") applies. The securities represented by this certificate may be
transferred in the United States only in accordance with Rule 145(d) or
pursuant to an effective registration statement or exemption from
registration under the Act."
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<PAGE>
The undersigned acknowledges that (i) the undersigned has carefully read
this letter and understands the requirements hereof and the limitations imposed
upon the distribution, sale, transfer or other disposition of the Parent Stock
and (ii) the receipt by Parent of this letter is an inducement and a condition
to Parent's obligations to consummate the Merger.
Very truly yours,
A-42
<PAGE>
ANNEX I TO EXHIBIT B
[Date]
Quebecor Printing Inc.
On the undersigned sold subordinate voting shares, no par
value, of Quebecor Printing Inc. ("Parent"). The shares were received by the
undersigned in connection with the merger of a direct wholly owned subsidiary of
Parent with and into World Color Press, Inc.
Based upon the most recent report or statement filed by Parent with the
Securities and Exchange Commission, the shares sold by the undersigned were
within the prescribed limitations set forth in paragraph (e) of Rule 144
promulgated under the Securities Act of 1933, as amended (the "Act").
The undersigned hereby represents that the shares were sold in "brokers'
transactions" within the meaning of Section 4(4) of the Act or in transactions
directly with a "market maker" as that term is defined in Section 3(a)(38) of
the Securities Exchange Act of 1934, as amended. The undersigned further
represents that the undersigned has not solicited or arranged for the
solicitation of orders to buy the shares in anticipation or in connection with
such transactions, and that the undersigned has not made any payment in
connection with the offer or sale of the shares to any person other than to the
broker who executed the order in respect of such sale.
Very truly yours,
A-43
<PAGE>
ANNEX B
MORGAN STANLEY OPINION
[MORGAN STANLEY LOGO]
1585 BROADWAY
NEW YORK, NEW YORK 10036
(212) 761-4000
July 12, 1999
Board of Directors
World Color Press, Inc.
The Mill
340 Pemberwick Road
Greenwich, Connecticut 06831
Members of the Board:
We understand that World Color Press, Inc. ("World Color Press" or the
"Company"), Quebecor Printing Inc. ("Quebecor Printing") and Printing
Acquisition Inc., a wholly owned indirect subsidiary of Quebecor Printing
("Merger Subsidiary"), have entered into an Agreement and Plan of Merger, dated
as of July 12, 1999 (the "Merger Agreement"), which provides, among other
things, for (i) the commencement by Merger Subsidiary of a tender offer (the
"Tender Offer") for up to 23,500,000 of the issued and outstanding shares of
Common Stock, par value $0.01 per share, of the Company (the "Common Stock") for
$35.69 per share net to the seller in cash (the "Tender Offer Consideration"),
and (ii) the subsequent merger (the "Merger") of the Company with and into the
Merger Subsidiary pursuant to which each issued and outstanding share of Common
Stock shall be converted into 1.6455 Quebecor Printing Subordinated Voting
shares (the "Merger Consideration"). The "Consideration" shall consist of the
Tender Offer Consideration and Merger Consideration taken together (or, if less
than 23,500,000 shares of Common Stock are purchased in the Offer, the amount of
consideration as set forth in the Merger Agreement); provided that if the Tender
Offer is terminated pursuant to Section 1.1.(e) of the Merger Agreement, the
Consideration for each share of Common Stock shall consist of cash in an amount
equal to $22.00 and .6311 Quebecor Subordinate Voting shares. Pursuant to the
Merger, the Company will become a wholly owned subsidiary of Quebecor Printing
as more fully set forth in the Merger Agreement. We further understand that
certain of the holders of Common Stock and Quebecor Printing have entered into a
Tender, Voting and Option Agreement, dated as of July 12, 1999. The terms and
conditions of the Tender Offer and the Merger are more fully set forth in the
Merger Agreement.
You have asked for our opinion as to whether the Consideration to be
received by the holders of shares of Common Stock pursuant to the Merger
Agreement is fair from a financial point of view to such holders.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of World Color Press and Quebecor Printing;
(ii) reviewed certain internal financial statements and other financial and
operating data concerning World Color Press and Quebecor Printing
prepared by the respective managements of World Color Press and
Quebecor Printing;
(iii) analyzed certain financial projections for World Color Press and
Quebecor Printing prepared by the respective managements of World Color
Press and Quebecor Printing;
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<PAGE>
(iv) discussed the past and current operations and financial condition and
the prospects of World Color Press and Quebecor Printing with senior
executives of World Color Press and Quebecor Printing;
(v) reviewed the reported prices and trading activity for the common stock
of World Color Press and Quebecor Printing;
(vi) compared the financial performance of World Color Press and Quebecor
Printing and the prices and trading activity of World Color Press and
Quebecor Printing with that of certain other comparable publicly-traded
companies and their securities;
(vii) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(viii) participated in discussions and negotiations among representatives of
World Color Press, Quebecor Printing and certain other parties and
their financial and legal advisors;
(ix) reviewed the Merger Agreement, the Tender, Voting and Option Agreement
and certain related documents; and
(x) performed such other analyses and considered such other factors as we
have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of World
Color Press and Quebecor Printing. We have not made any independent valuation or
appraisal of the assets or liabilities of World Color Press and Quebecor
Printing, nor have we been furnished with any such appraisals. We have assumed
that the Tender Offer and the Merger will be consummated in accordance with the
terms set forth in the Merger Agreement. Our opinion is necessarily based on
economic, market and other conditions as in effect on, and the information made
available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of the Company
in connection with this transaction and will receive a fee for our services. In
the past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for World Color Press and Quebecor
Printing and have received fees for the rendering of these services. In
particular, we acted as lead manager in connection with a high yield offering
for World Color Press in February of 1999.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its entirety
in any filing made by the Company in respect of the Tender Offer and the Merger
with the Securities and Exchange Commission. In addition, Morgan Stanley
expresses no opinion or recommendation as to whether or not the stockholders of
the Company should tender their shares in connection with the Tender Offer or
how such stockholders should vote at the shareholders' meeting held in
connection with the Merger.
Based on and subject to the foregoing, we are of the opinion on the date
hereof that the Consideration to be received by the holders of shares of Common
Stock pursuant to the Merger Agreement is fair from a financial point of view to
such holders.
<TABLE>
<S> <C> <C>
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ STUART J. EPSTEIN
-----------------------------------------
Stuart J. Epstein
MANAGING DIRECTOR
</TABLE>
B-2
<PAGE>
ANNEX C
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
Section 262 Appraisal rights.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to section 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to section 251 (other than a merger effected pursuant to
section 251(g) of this title), section 252, section 254, section 257, section
258, section 263 or section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to sections
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
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<PAGE>
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a meeting
of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal rights are
available pursuant to subsection (b) or (c) hereof that appraisal rights are
available for any or all of the shares of the constituent corporations, and
shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholder's shares shall deliver
to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholder's shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such stockholder's shares. A proxy or vote against
the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall notify
each stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to section 228
or section 253 of this title, each consituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval
of the merger or consolidation and that appraisal rights are available for
any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section;
provided that, if the notice is given on or after the effective date of the
merger or consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of stock of
a constituent corporation that are entitled to appraisal rights. Such notice
may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to appraisal rights
may, within 20 days after the date of mailing of such notice, demand in
writing from the surviving or resulting corporation the appraisal of such
holder's shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a
second notice before the
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effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send such
a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either notice
that such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation
may fix, in advance, a record date that shall be not more than 10 days prior
to the date the notice is given, provided, that if the notice is given on or
after the effective date of the merger or consolidation, the record date
shall be such effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the close of
business on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
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(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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