<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------------
WAVERLY, INC.
(Name of Subject Company)
WAVERLY, INC.
(Name of Person(s) Filing Statement)
Common Stock, par value $2.00 per share
(Title of Class of Securities)
943614107
(CUSIP Number of Class of Securities)
------------------------
EDWARD B. HUTTON, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
351 WEST CAMDEN STREET
BALTIMORE, MARYLAND 21201
(410) 528-4000
(Name, Address and Telephone Number of Person
Authorized to Receive Notice and Communications on Behalf of the Person(s)
Filing Statement)
------------------------
WITH A COPY TO:
MICHAEL P. ROGAN, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
1440 NEW YORK AVENUE, N.W.
WASHINGTON, D.C. 20005-2111
(202) 371-7000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Waverly, Inc., a Maryland corporation
(the "Company"), and the address of the principal executive offices of the
Company is 351 West Camden Street, Baltimore, Maryland 21201. The title of the
class of equity securities to which this statement relates is the common stock,
par value $2.00 per share (the "Company Common Stock" or the "Shares"), of the
Company.
ITEM 2. TENDER OFFER OF NEWCO.
This statement relates to the tender offer by MP Acquisition Corp., a
Maryland corporation ("Newco"), an indirect wholly owned subsidiary of Wolters
Kluwer U.S. Corporation, a Delaware corporation ("Parent"), disclosed in a
Tender Offer Statement on Schedule 14D-1, dated February 18, 1998 (the "Schedule
14D-1"), to purchase all of the issued and outstanding Shares, at a price of
$39.00 per Share, net to the seller in cash (the "Offer Price"), upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated February
18, 1998 (the "Offer to Purchase"), and the related Letter of Transmittal
(which, together with the Offer to Purchase and all amendments and supplements
thereto, constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of February 10, 1998 (the "Merger Agreement"), by and among Parent, Newco and
the Company. The Merger Agreement provides, among other things, that as soon as
practicable after the satisfaction or waiver of the conditions set forth in the
Merger Agreement, Newco will be merged with and into the Company (the "Merger"),
and the Company will continue as the surviving corporation (the "Surviving
Corporation"). A copy of the Merger Agreement is filed herewith as Exhibit 1 and
is incorporated herein by reference.
As set forth in the Schedule 14D-1, the principal executive offices of
Parent and Newco are c/o Wolters Kluwer United States Inc., 161 North Clark
Street, 48th Floor, Chicago, Illinois 60601.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Except as described in this Item 3(b) or under the captions "Certain
Transactions," "Executive Compensation," "Option Grants in the Last Fiscal
Year," "Aggregated Option Exercises in Last Fiscal Year and FY-End Option
Values," and "Defined Pension Benefit Plan" in pages 9 through 14 of the
Company's Proxy Statement, dated March 25, 1997, which pages are filed as
Exhibit 2 to this Schedule 14D-9 and incorporated herein by reference, as of the
date hereof, there are no material contracts, agreements, arrangements or
understandings, or any actual or potential conflicts of interest between the
Company or its affiliates and (i) its executive officers, directors or
affiliates or (ii) Parent, Newco or their respective officers, directors or
affiliates. SEE Item 5 for a description of a letter agreement dated November 4,
1997, between the Company and David J. Callard, a director of the Company (the
"Callard Letter Agreement").
ARRANGEMENTS WITH PARENT, NEWCO OR THEIR AFFILIATES
CONFIDENTIALITY AGREEMENT
The following is a summary of certain material provisions of the
Confidentiality Agreement, dated December 5, 1997, between the Company and
Parent (the "Confidentiality Agreement"). This summary does not purport to be
complete and is qualified in its entirety by reference to the complete text of
the Confidentiality Agreement, a copy of which is filed as Exhibit 3 hereto and
is incorporated herein by reference. Capitalized terms not otherwise defined
below shall have the meanings set forth in the Confidentiality Agreement.
1
<PAGE>
The Confidentiality Agreement contains customary provisions pursuant to
which, among other matters, Parent agreed to keep confidential all nonpublic,
confidential or proprietary information furnished to it by the Company relating
to the Company, subject to certain exceptions (the "Confidential Information"),
and to use the Confidential Information solely for the purpose of evaluating a
possible transaction involving the Company and Parent. Parent has agreed in the
Confidentiality Agreement that for a period of three years from the date
thereof, without the prior written consent of the Company, neither it nor any of
its affiliates will, among other things, acquire or offer or agree to acquire,
directly or indirectly, any securities or assets of the Company or any successor
or affiliate of the Company or propose any tender or exchange offer, merger or
other business combination involving the Company, "solicit" any "proxies" (as
those terms are used in the rules of the Securities and Exchange Commission (the
"Commission")) or seek to influence the management, policy or conduct of the
business affairs of the Company. Parent further agreed that, for a period of two
years from the date of the Confidentiality Agreement, neither Parent nor any of
its affiliates will, without the written consent of the Company, solicit the
employment of any employee of the Company or any of its affiliates with whom
Parent or its representatives had contact during the negotiations and
investigations in connection with a possible transaction between Parent and the
Company.
THE MERGER AGREEMENT
The following is a summary of certain material provisions of the Merger
Agreement. This summary does not purport to be complete and is qualified in its
entirety by reference to the complete text of the Merger Agreement, a copy of
which is filed as Exhibit 1 hereto and is incorporated herein by reference.
Capitalized terms not otherwise defined below shall have the meanings set forth
in the Merger Agreement.
THE OFFER. The Merger Agreement provides for the commencement of the Offer
not later than the fifth business day from the public announcement of the
execution of the Merger Agreement. The Merger Agreement also provides that Newco
cannot amend or waive the Minimum Condition (as defined below) or decrease the
Offer Price or the number of Shares sought, change the form of consideration to
be paid pursuant to the Offer, amend any other term or condition of the Offer in
any manner adverse to the holders of Shares or extend the expiration date of the
Offer without the prior written consent of the Company. Notwithstanding the
foregoing provisions, Parent has agreed to cause Newco to extend the Offer at
any time up to six (6) months from the date of the Merger Agreement in periods
of ten business days for each such extension, if, and to the extent that, at the
initial expiration date of the Offer, or any extension thereof, all conditions
to the Offer have not been satisfied or waived.
The obligation of Newco to accept for payment and pay for Shares tendered
pursuant to the Offer is subject to the condition that there will be validly
tendered and not withdrawn a number of Shares which, together with any Shares
beneficially owned by Parent or Newco, represent at least two-thirds of the
Shares outstanding on a fully diluted basis (the "Minimum Condition"). In
addition, Newco is not required to accept for payment or pay for any Shares
tendered pursuant to the Offer, and may terminate the Offer and not accept for
payment any tendered Shares, if (a) any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
or the antitrust laws of applicable jurisdictions outside the United States, has
not expired or been terminated prior to the expiration of the Offer; (b) at any
time on or after February 10, 1998, and before the expiration of the Offer any
of the following occur: (i) there shall be any statute, rule, regulation,
judgment, order or injunction promulgated, entered, enforced, enacted, issued or
applicable to the Offer or the Merger by any governmental entity of competent
jurisdiction in the United States or other country in which the Company or
Parent directly or indirectly has material assets or operations which (A) seeks
to prohibit the consummation of the Offer or the Merger, (B) as a result of the
Offer or the Merger seeks to restrain or prohibit or impose any material
limitations on Parent's or Newco's ownership or operation of all or a material
portion of the businesses or assets of the Company and its Subsidiaries (as
defined below), taken as a whole, or of Parent and its Subsidiaries, taken as a
whole, or compel Parent or any of its Subsidiaries or affiliates to dispose of
or hold separate all or any material portion of the business or assets of the
2
<PAGE>
Company and its Subsidiaries, taken as a whole, or of Parent and its
Subsidiaries, taken as a whole or requires the Company, Parent or Newco to pay
damages that are material in relation to the Company and its Subsidiaries, taken
as a whole, (C) seeks to challenge, prohibit, or make illegal the acceptance for
payment, payment for or purchase of Shares pursuant to, or consummation of, the
Offer or the Merger, (D) seeks to impose material limitations on the ability of
Newco or Parent effectively to exercise full rights of ownership of the Shares
accepted for payment pursuant to the Offer, including, without limitation, the
right to vote the Shares purchased by it on all matters properly presented to
the Company's stockholders, or (E) seeks to require divestiture by Parent or any
of its Subsidiaries or affiliates of any Shares, provided that Parent shall have
used all reasonable efforts to cause any such judgment, order or injunction to
be vacated or lifted; (ii) there shall be threatened, instituted or pending any
action, suit or proceeding by any governmental entity of competent jurisdiction
in the United States or any other country in which the Company or Parent
directly or indirectly has material assets or operations, that is reasonably
likely, directly or indirectly, to result in any of the consequences referred to
in clauses (A) through (E) above; (iii) there has been since February 10, 1998,
any event, occurrence or development or state of circumstances or facts which
has had a Company Material Adverse Effect (as defined below); (iv) the
representations and warranties of the Company set forth in the Merger Agreement
shall not be true and accurate in any material respect as of the date of
consummation of the Offer as though made on or as of such date or the Company
shall have breached or failed in any material respect to perform or comply with
any material obligation, agreement or covenant required by the Merger Agreement
to be performed or complied with by it except, in each case where the failure of
such representations and warranties to be true and accurate or the breach,
non-performance or non-compliance with such obligations, agreements or
covenants, do not, individually or in the aggregate, have a Company Material
Adverse Effect; (v) the Merger Agreement shall have been terminated in
accordance with its terms; (vi) the Company shall have entered into a definitive
agreement or agreement in principle with any person with respect to an
Alternative Proposal (as defined below); or (vii) the Board of Directors of the
Company (the "Company Board") shall have withdrawn, modified or changed in a
manner adverse to Parent or Newco (including by amendment of the Schedule 14D-9)
its recommendation of the Offer, the Merger Agreement or the Merger or shall
have recommended an Alternative Proposal (as defined below) or the Company Board
shall have adopted a resolution to do any of the foregoing, which in the sole
judgment of Parent or Newco makes it inadvisable to proceed with the Offer
and/or with such acceptance for payment.
For purposes of the Merger Agreement, "Subsidiaries" means, when used with
reference to any entity, any corporation a majority of the outstanding voting
securities of which are owned directly or indirectly by such entity. "Company
Material Adverse Effect" means any adverse change in the assets, liabilities,
financial condition, or results of operations of the Company or any of its
Subsidiaries which is material to the Company and its Subsidiaries taken as a
whole other than any change or effect arising out of general economic
conditions. "Alternative Proposal" means any proposal or offer for a merger,
asset acquisition or other business combination involving the Company or any
proposal or offer to acquire a significant equity interest in, or a significant
portion of the assets of, the Company other than the transactions contemplated
by the Merger Agreement. "Superior Proposal" means any bona fide proposal to
acquire, directly or indirectly, for consideration consisting of cash and/or
securities, all of the Shares then outstanding or all or substantially all the
assets of the Company, and otherwise on terms which the Company Board determines
in good faith to be more favorable to the Company and its stockholders than the
Offer and the Merger (after consultation with the Company's financial advisor).
THE MERGER. The Merger Agreement provides that, subject to the terms and
conditions thereof, Newco will be merged with and into the Company, with the
Company continuing as the Surviving Corporation and a wholly owned subsidiary of
Parent, and each issued and outstanding Share (other than Shares owned by
Parent, Newco or any other wholly owned subsidiary of Parent and Shares owned by
the Company as treasury stock) shall be converted into the right to receive the
Offer Price, without interest. Each issued and outstanding Share of Newco common
stock shall be converted into and become one fully paid and nonassesable share
of Common Stock of the Surviving Corporation. The Merger Agreement also
3
<PAGE>
provides that (i) the directors and officers of Newco immediately prior to the
effective time of the Merger (the "Effective Time") will be the initial
directors and officers, respectively of the Surviving Corporation; (ii) the
Articles of Incorporation of the Company will be the initial Articles of
Incorporation of the Surviving Corporation; and (iii) the By-laws of Newco will
be the initial By-laws of the Surviving Corporation.
TREATMENT OF OPTIONS. The Merger Agreement provides that Parent and the
Company will take all actions necessary so that immediately prior to the
Effective Time, the Company shall pay to the holder of each option to purchase
Shares which has been granted under the Company's stock option plans an amount
equal to the product of (A) the excess, if any, of the Offer Price over the per
share exercise price and (B) the number of Shares subject to such option. Each
outstanding option will be cancelled as of the Effective Time.
DIRECTORS. The Merger Agreement provides that, promptly upon the purchase
of and payment for Shares by Parent or any of its Subsidiaries which represent
at least two-thirds of the outstanding Shares (on a fully diluted basis), Parent
will be entitled to designate such number of directors, rounded up to the next
whole number, on the Company Board as shall give Parent, subject to compliance
with Section 14(f) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Rule 14f-1 promulgated thereunder, representation on the
Company Board equal to the product of the total number of directors on the
Company Board (giving effect to the directors elected pursuant to this sentence)
multiplied by the percentage that the aggregate number of Shares beneficially
owned by Parent, Newco and any of their affiliates bears to the total number of
Shares then outstanding. The Company will take all action necessary to cause
Parent's designees to be elected or appointed to the Company Board and to secure
the resignations of such number of its incumbent directors as is necessary. The
Company will take all action necessary to cause individuals designated by Parent
to constitute the same percentage as such individuals represent on the Company
Board of each committee of the Company Board and each board of directors (and
committee thereof) of each of the Company's Subsidiaries. Notwithstanding the
foregoing, until the Effective Time, the Company will have on the Company Board
at least two directors who were directors of the Company on the date of the
Merger Agreement; provided, that, subsequent to the purchase of and payment for
Shares pursuant to the Offer, Parent will always have its designees represent at
least a majority of the entire Company Board.
The Merger Agreement also provides that from and after the time, if any,
that Parent's designees constitute a majority of the Company Board, any
amendment of the Merger Agreement, any termination of the Merger Agreement by
the Company, any extension of time for performance of any of the obligations of
Parent or Newco, or any waiver of any condition or any of the Company's rights
thereunder may be effected only by the action of a majority of the directors of
the Company then in office who were directors on the date of the Merger
Agreement, which action shall be deemed to constitute the action of the full
Company Board; provided, that, if there are no such directors, such actions may
be effected by the unanimous vote of the entire Company Board.
STOCKHOLDERS' MEETING. Pursuant to the Merger Agreement, the Company shall,
if required by applicable law in order to consummate the Merger, duly call, give
notice of, convene and hold a special meeting of its stockholders as soon as
practicable following the acceptance for payment and purchase of Shares by Newco
pursuant to the Offer for the purpose of considering and taking action upon the
Merger Agreement.
The Merger Agreement also provides that the Company shall, if required by
applicable law in order to consummate the Merger, prepare and file with the
Commission a preliminary proxy or information statement relating to the Merger
and the Merger Agreement and shall (i) obtain and furnish the information
required to be included by the Commission in the Proxy Statement (as hereinafter
defined) and, after consultation with Parent, respond promptly to any comments
made by the Commission with respect to the preliminary proxy or information
statement and cause a definitive proxy or information
4
<PAGE>
statement (the "Proxy Statement") to be mailed to its stockholders and (ii)
obtain the necessary approvals of the Merger and the Merger Agreement by its
stockholders. The Merger Agreement also provides that, subject to the fiduciary
obligations of the Company Board, the Company shall include in the Proxy
Statement the recommendation of the Company Board that stockholders of the
Company vote in favor of the approval of the Merger and the adoption of the
Merger Agreement. The Merger Agreement also provides that, in the event that
Parent, Newco or any other Subsidiary of Parent shall acquire at least 90% of
the outstanding shares of each class of capital stock of the Company, pursuant
to the Offer or otherwise, the parties shall take all necessary and appropriate
action to cause the Merger to become effective as soon as practicable after such
acquisition, without a meeting of the Company's stockholders in accordance with
Maryland General Corporation Law (the "MGCL").
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains
representations and warranties of one or both of the parties with respect to,
among other things, (i) organization, good standing, corporate power and
enforceability, (ii) capitalization, (iii) required consents or approvals, (iv)
no material misstatements in filings made with the Commission or financial
statements, (v) absence of material adverse changes, (vi) no litigation, (vii)
tax returns filed and taxes paid, (viii) no liabilities under ERISA, (ix)
compliance with environmental laws and regulations, (x) no infringement upon the
copyrights or intellectual property of third parties and no infringement by
others upon the copyrights or intellectual property held by the parties, (xi)
compliance with law, (xii) insurance, (xiii) approvals under the MGCL and the
inapplicability of Maryland antitakeover provisions, (xiv) voting requirements,
(xv) employment of investment bankers and financial advisors, (xvi) receipt of
fairness opinion from financial advisor, (xvii) confidentiality agreements
signed with other parties, (xviii) interim operations of Newco and (xix)
sufficiency of funds to consummate the Merger.
In the Merger Agreement, each of Parent and Newco also (i) acknowledges that
none of the Company, its Subsidiaries or any of their respective directors,
officers, employees, affiliates, agents, advisors or representatives makes any
representation or warranty, either express or implied, as to the accuracy or
completeness of any of the information provided or made available to Parent,
Newco or their agents or representatives, and (ii) agrees, to the fullest extent
permitted by law, that none of the Company, its Subsidiaries or any of their
respective directors, officers, employees, affiliates, agents or representatives
shall have any liability or responsibility whatsoever to Parent and Newco on any
basis based upon any information provided or made available, or statements made,
to Parent or Newco, except that the foregoing limitations shall not apply with
respect to representations or warranties of the Company in any reports under the
Exchange Act filed by the Company with the Commission or in Article III of the
Merger Agreement or in the disclosure schedule delivered by the Company to
Parent but always subject to the limitations and restrictions contained in such
representations and warranties.
INTERIM OPERATIONS. In the Merger Agreement, the Company has covenanted and
agreed that, among other things, between the date of the Merger Agreement and
prior to the time Newco's designees have been elected to, and constitute a
majority of, the Company Board, unless Parent otherwise agrees in writing and
except as otherwise contemplated by the Merger Agreement, (a) the Company will
conduct its operations according to its ordinary and usual course of business
consistent with past practice and seek to preserve intact its current business
organization, keep available the services of its current officers and employees
and preserve its relationships with customers, suppliers and others having
business dealings with it and (b) neither the Company nor any of its
Subsidiaries will (i) issue, sell, grant, dispose of, pledge or otherwise
encumber, or authorize or propose the issuance, sale, disposition or pledge or
other encumbrance of (A) any additional shares of capital stock of any class
(including the Shares), or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for any shares of capital
stock, or any rights, warrants, options, calls, commitments or any other
agreements of any character to purchase or acquire any shares of capital stock
or any securities or rights convertible into, exchangeable for, or evidencing
the right to subscribe for, any shares of capital stock or (B) any other
securities in respect of, in lieu of, or in substitution for, Shares outstanding
on the date of the Merger Agreement;
5
<PAGE>
(ii) redeem, purchase or otherwise acquire or propose to redeem, purchase or
otherwise acquire, directly or indirectly, any of its outstanding Shares; (iii)
split combine, subdivide or reclassify any Shares or declare, set aside for
payment or pay any dividend or make any other actual, constructive or deemed
distribution in respect of any Shares or otherwise make any payments to
stockholders in their capacity as such, other than the declaration and payment
of regular quarterly cash dividends in accordance with past dividend policy and
except for dividends by a direct or indirect wholly owned Subsidiary of the
Company; (iv) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its direct or indirect Subsidiaries (other than the
Merger); (v) adopt any amendments to its Articles of Incorporation or By-Laws or
alter through merger, liquidation, reorganization, restructuring or in any other
fashion the corporate structure or ownership of any direct or indirect
Subsidiary of the Company; (vi) make any material acquisition, by means of
merger, consolidation or otherwise, or material disposition, of assets or
securities (other than the Merger); (vii) other than in the ordinary course of
business consistent with past practice, incur any indebtedness for borrowed
money or guarantee any such indebtedness or issue any debt securities or make
any loans, advances or capital contributions to, or investments in, any other
person other than the Company or any direct or indirect wholly owned Subsidiary
of the Company; (viii) grant any material increases in the compensation of any
of its directors, officers or key employees, except in the ordinary course of
business and in accordance with past practice, provided, however, that the
Company will be entitled to pay, prior to the Effective Time, bonuses with
respect to 1997 pursuant to the Company's Incentive Plan; (ix) enter into any
new or amend any existing employment or severance or termination agreement with
any director or officer of the Company; (x) except as may be required to comply
with applicable law, become obligated under any new pension plan, welfare plan,
multiemployer plan, employee benefit plan, severance plan, benefit arrangement,
or similar plan or arrangement, which was not in existence on the date of the
Merger Agreement, or amend any such plan or arrangement in existence on the date
of the Merger Agreement if such amendment would have the effect of materially
enhancing any benefits thereunder; (xi) take, or agree to take, any action that
would make any representation or warranty of the Company in the Merger Agreement
inaccurate at the Effective Time (except for representations and warranties
which speak as of a particular date, which need be accurate only as of such
date) or omit, or agree to commit to omit, to take any action necessary to
prevent any such representation or warranty from being inaccurate in any
material respect at the Effective Time, provided however that the Company will
be permitted to take or omit to take such action which can be cured, and in fact
is cured, at or prior to the Effective Time or take, any action that would
result in, or is reasonably likely to result in, any of the conditions of the
Merger set forth in Article VI of the Merger Agreement not being satisfied;
(xii) authorize, recommend, propose or announce an intention to do any of the
foregoing, or enter into any contract, agreement, commitment or arrangement to
do any of the foregoing.
ALTERNATIVE PROPOSALS. Pursuant to the Merger Agreement, the Company has
agreed that it (a) will not, and will cause its officers, directors, employees,
representatives and agents not to, initiate, solicit or encourage, directly or
indirectly, any Alternative Proposal or engage in any negotiations or enter into
any agreement or provide any confidential information or data to any person in
connection with or relating to any Alternative Proposal; (b) will immediately
cease any existing discussions or negotiations, if any, with any parties
conducted heretofore with respect to any Alternative Proposal; and (c) will
notify Parent as soon as practicable if any such inquiries or proposals are
received by, any such information is requested from, or any such negotiations
and/or discussions are sought to be initiated or continued with, the Company.
Notwithstanding the foregoing, nothing in such provision shall require the
Company Board on behalf of the Company to act, or refrain from acting, in any
manner which, in the opinion of the Company Board after consultation with its
counsel, could reasonably be deemed inconsistent with its fiduciary duties to
the Company's stockholders under applicable law.
DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION. The Merger
Agreement provides that (a) from and after the consummation of the Offer, Parent
will, and will cause the Company (or the Surviving Corporation if after the
Effective Time) to, indemnify, defend and hold harmless any current or
6
<PAGE>
former officer or director of the Company (the "Company Indemnified Party") and
its Subsidiaries against all losses, claims, damages, liabilities, costs and
expenses (including attorney's fees and expenses), judgments, fines, losses, and
amounts paid in settlement in connection with any actual or threatened action,
suit, claim, proceeding or investigation (each a "Claim") to the extent that any
such Claim is based on, or arises out of the fact that such person is or was a
director or officer of the Company or any of its Subsidiaries, and to the extent
that any such Claim pertains to any matter or fact arising out of any act or
omission prior to or at the Effective Time, regardless of whether such Claim is
asserted or claimed prior to, at or after the Effective Time, to the full extent
permitted under applicable law or the Company's Articles of Incorporation,
By-laws or indemnification agreements in effect on the date of the Merger
Agreement or otherwise as permitted by contract, including provisions relating
to advancement of expenses incurred in the defense of any action or suit.
Without limiting the foregoing, in the event any Company Indemnified Party
becomes involved in any capacity in any Claim, then from and after consummation
of the Offer, Parent shall, or shall cause the Company (or the Surviving
Corporation if after the Effective Time) to, periodically advance to such
Company Indemnified Party its legal and other expenses (including the cost of
any investigation and preparation incurred in connection therewith), subject to
the provision by such Company Indemnified Party of an undertaking to reimburse
the amounts so advanced in the event of a final non-appealable determination by
a court of competent jurisdiction that such Company Indemnified Party is not
entitled thereto; (b) Parent and the Company agree that all rights to
indemnification and all limitations on liability existing in favor of the
Company Indemnified Party as provided in the Company's Articles of Incorporation
and By-laws as in effect as of the date of the Merger Agreement shall survive
the Merger and shall continue in full force and effect, without any amendment
thereto, for a period of six years from the Effective Time to the extent such
rights are consistent with the MGCL; provided, that, in the event any claim or
claims are asserted or made within such six year period, all rights to
indemnification in respect of any such claim or claims shall continue until
disposition of any and all such claims; (c) Parent shall cause to be maintained
in effect for the Indemnified Parties (as defined below) for not less than six
years after the Effective Time policies of directors' and officers' liability
insurance and fiduciary liability insurance with respect to matters occurring at
or prior to the Effective Time (including, without limitation, the transactions
contemplated by the Merger Agreement) providing substantially the same coverage
and containing terms and conditions which are no less advantageous, in any
material respect, to those currently maintained by the Company for the benefit
of the Company's present or former directors, officers, employees or agents
covered by such insurance policies prior to the Effective Time (the "Indemnified
Parties"); and (d) in the event Parent or Newco or any of their successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its properties
and assets to any person, then, and in each such case, proper provision shall be
made so that the successors and assigns of Parent and Newco assume the
obligations set forth above and none of the actions described in clauses (i) or
(ii) shall be taken until such provision is made.
EMPLOYEES. The Merger Agreement provides that, (a) Parent agrees that
individuals who are employed by the Company and its Subsidiaries immediately
prior to the Effective Time shall be employees of the Company and its
Subsidiaries as of the Effective Time (each such employee, an "Affected
Employee" and together with all former employees of the Company and its
Subsidiaries "Company Employees"); (b) Parent will, or will cause the Surviving
Corporation to, give Affected Employees full credit for purposes of eligibility
and vesting, and determination of the level of benefits under any employee
benefit plans or arrangements maintained by Parent, the Surviving Corporation or
any Subsidiary of Parent for such Affected Employees' service with the Company
or any Subsidiary of the Company to the same extent recognized by the Company
immediately prior to the Effective Time; (c) Parent will, or will cause the
Surviving Corporation to, (i) waive all limitations as to preexisting conditions
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Company Employees under any welfare benefit plans
that such employees may be eligible to participate in after the Effective Time,
other than limitations or waiting periods that are already in effect with
respect to such employees
7
<PAGE>
and that have not been satisfied as of the Effective Time under any welfare plan
maintained for the Company Employees immediately prior to the Effective Time,
and (ii) provide each Company Employee with credit for any co-payments and
deductibles paid prior to the Effective Time in satisfying any applicable
deductible or out-of-pocket requirements under any welfare plans that such
employees are eligible to participate in after the Effective Time; (d) Parent
agrees that until December 31, 2000, the coverage and benefits provided to
Affected Employees pursuant to employee benefit plans or arrangements maintained
by Parent, the Surviving Corporation, or any Subsidiaries of Parent shall be, in
the aggregate, not less favorable than those provided to such employees
immediately prior to the Effective Time determined in accordance with benefits
set forth in the Merger Agreement, and after December 31, 2000, Parent agrees to
provide such coverage and benefits, in the aggregate, at least as favorable to
the Affected Employees as the coverage and benefits provided to Parent's
employees and, without limiting the generality of the foregoing, Parent agrees
to honor, or to cause the Surviving Corporation to honor, until December 31,
2000, the severance policy of the Company as in effect as of the Effective Time;
(e) through December 31, 2000, Parent agrees to provide, or to cause the
Surviving Corporation to provide to each currently retired Company Employee and
each Company Employee who has retired prior to December 31, 2000 (the "Retired
Employees") certain employee benefits (other than stock options). The Merger
Agreement further provides that from December 31, 2000 until December 31, 2002,
Parent agrees to continue to provide or to cause the Surviving Corporation to
provide to the Retired Employees the post-retirement medical insurance premium
percentage subsidy which each such Retired Employee is receiving as of December
31, 2000 and that in all other respects, the post-retirement medical benefits
available to Retired Employees will be no less favorable than those available to
Parent's employees who are eligible for post-retirement medical benefits under
its retiree medical benefit plan and that from and after December 31, 2002,
Parent will provide the Retired Employees the post-retirement medical coverage
provided to employees or former employees of Parent who are eligible for
post-retirement medical benefits, treating for all purposes of such coverage the
Retired Employee's service with the Company as service with Parent; (f) Parent
and the Surviving Corporation agree to honor without modification and assume the
employment agreements, executive termination agreements and individual benefit
arrangements of the Company, all as in effect at the Effective Time; (g) Parent
agrees to advise the employees of the Company, in a written communication issued
to the Company Employees as soon as practicable following the date of the Merger
Agreement, of Parent's undertakings set forth in this provision; and (h) until
December 31, 2000, Parent agrees that there shall be no termination or merger or
consolidation of the Waverly, Inc. Pension Plan (the "Pension Plan") and the
Pension Plan shall not be amended except as required by applicable law.
CORPORATE PRESENCE. In the Merger Agreement, Parent and Newco have agreed
that the Surviving Corporation shall maintain a substantial operating presence
in the City of Baltimore, Maryland, including maintaining a substantial work
force and operations in Baltimore for a period of five (5) years following the
Effective Time.
FURTHER ASSURANCES. In the Merger Agreement, each of the parties agrees to
use its reasonable best efforts to take, or cause to be taken, all action, and
to do, or cause to be done, all things necessary under applicable laws and
regulations to consummate and make effective the transactions contemplated by
the Merger Agreement. The Merger Agreement provides that the provision of the
Merger Agreement governing Directors' and Officers' Insurance and
Indemnification is intended to benefit the Company Indemnified Parties, and the
provision of the Merger Agreement providing for the maintenance of directors'
and officers' liability insurance is intended to benefit the Indemnified Parties
and that such provisions shall be binding on all successors and assigns of
Parent, Newco, the Company and the Surviving Corporation and shall be
enforceable by the Company Indemnified Parties and the Indemnified Parties, as
the case may be, after the Effective Time. Parent guarantees the performance by
the Surviving Corporation of the obligations pursuant to the above-listed
provisions and the performance of the obligations described in the provisions
"Employees" and "Corporate Presence" herein.
8
<PAGE>
CONDITIONS TO THE MERGER. The Merger Agreement provides that the respective
obligations of each party to effect the Merger shall be subject to the
satisfaction, at or prior to the Effective Time, of the following conditions:
(a) the Merger Agreement shall have been approved and adopted by the requisite
vote of the Company's stockholders; (b) there shall not be in effect any
statute, rule, regulation, executive order, decree, ruling or injunction or
other order of a court or governmental or regulatory agency of competent
jurisdiction directing that the transactions contemplated in the Merger
Agreement not be consummated or otherwise materially limiting or restricting
ownership or the operation of the business of the Surviving Corporation;
provided, however, that, prior to invoking such condition each party shall use
its reasonable efforts to have any such decree, ruling, injunction or order
vacated; (c) subject to the terms and provisions set forth in the Merger
Agreement, all governmental consents, orders and approvals legally required for
the consummation of the Merger and the transactions contemplated thereby shall
have been obtained and be in effect at the Effective Time, other than
non-material consents, orders or approvals and the waiting periods under the HSR
Act and under antitrust laws of applicable jurisdictions outside the United
States shall have expired or been terminated. The Merger Agreement further
provides that the respective obligations of Parent, Newco and the Company to
effect the Merger are subject to the satisfaction at or prior to the Effective
Time of the following conditions, any or all of which may be waived in whole or
in part by the obligated party, to the extent permitted by applicable law: (a)
the representations and warranties of each party set forth in the Merger
Agreement shall be true and correct as of the Effective Time as though made on
and as of the Effective Time (except for changes permitted by the Merger
Agreement and that those representations and warranties which address matters
only as of a particular date shall remain true and correct as of such date),
except in any case where such failures to be true and correct in the aggregate
would not have a Company Material Adverse Effect or a Parent Material Adverse
Effect (as defined below), as the case may be; (b) each party shall have
performed in all material respects all of its respective covenants and
agreements under the Merger Agreement theretofore to be performed; and (c)
Parent and the Company shall each have received from the other at the Effective
Time a certificate dated the Effective Time and executed by the President or a
Vice President of either Parent or the Company, as the case may be, certifying
to the fulfillment of the conditions set forth in (a) and (b) of this sentence.
For purposes of the Merger Agreement, "Parent Material Adverse Effect" means any
adverse change in the assets, liabilities, financial condition, or results of
operations of Parent or any of its Subsidiaries which is material to Parent or
any of its respective Subsidiaries, taken as a whole, other than any change or
effect arising out of general economic conditions.
TERMINATION. The Merger Agreement provides that it may be terminated at any
time prior to the Effective Time: (a) by the mutual consent of Parent, Newco and
the Company; (b) by either the Company or Parent (i) if the Shares shall not
have been purchased pursuant to the Offer on or prior to six (6) months from the
execution of the Merger Agreement; provided, however, that a party may not
terminate the Merger Agreement pursuant to this clause if such party's failure
to fulfill any obligation under the Merger Agreement was the cause of, or
resulted in, the failure of Parent or Newco to purchase the Shares on or prior
to such date or (ii) if any governmental entity of competent jurisdiction in the
United States or other country in which the Company or Parent directly or
indirectly has material assets or operations shall have issued an order, decree
or ruling or taken any other action (which order, decree, ruling or other action
the parties hereto shall use their respective reasonable best efforts to lift),
in each case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by the Merger Agreement and such order, decree, ruling
or other action shall have become final and non-appealable; (c) by the Company
(i) if prior to the purchase of Shares pursuant to the Offer, (A) the Company
Board shall have entered into or shall have publicly announced its intention to
enter into an agreement or an agreement in principle with respect to any
Alternative Proposal that the Company Board determines, in good faith after
consultation with its financial advisors, is a Superior Proposal; (B) the
Company Board shall have withdrawn, or modified or changed in a manner adverse
to Parent or Newco its approval or recommendation of the Offer, the Merger
Agreement or the Merger or shall have recommended a Superior Proposal or shall
have executed, or shall have announced its intention to enter into, an agreement
in principle or
9
<PAGE>
definitive agreement relating to a Superior Proposal with a person or entity
other than Parent, Newco or their affiliates (or the Company Board resolves to
do any of the foregoing); (C) any person or group (as defined in Section
13(d)(3) of the Exchange Act) (other than Parent, Newco or any affiliate
thereof) shall have become the beneficial owner (as defined in Rule 13d-3
promulgated under the Exchange Act) of a majority of the outstanding Shares, or
(D) any representation or warranty made by Parent or Newco in the Merger
Agreement shall not have been true and correct in all material respects when
made, or Parent or Newco shall have failed to observe or perform in any material
respect any of its material obligations under the Merger Agreement; provided
that prior to exercising such right of termination, the Company shall give
prompt written notice to Parent of such misrepresentation or breach of warranty
or failure to observe or perform; provided, further, that the Company shall not
have such right of termination if the condition resulting in such
misrepresentation or breach of warranty or failure to observe or perform is
cured; (ii) if Parent or Newco shall have terminated the Offer, or the Offer
shall have expired, without Parent or Newco, as the case may be, purchasing any
Shares pursuant thereto; provided that the Company may not terminate the Merger
Agreement pursuant to such provision if the Company is in material breach of the
Merger Agreement; or (iii) if Parent, Newco or any of their affiliates shall
have failed to commence the Offer on or prior to five business days following
the date of the initial public announcement of the Offer; provided, that the
Company may not terminate the Merger Agreement pursuant to such provision if the
Company is in material breach of the Merger Agreement; or (d) by Parent or Newco
(i) if, due to an occurrence that if occurring after the commencement of the
Offer would result in a failure to satisfy any of the conditions to the Offer,
Parent, Newco, or any of their affiliates shall have failed to commence the
Offer on or prior to five business days following the date of the initial public
announcement of the Offer; provided that Parent may not terminate the Merger
Agreement pursuant to such provision if Parent or Newco is in material breach of
the Merger Agreement; (ii) prior to the purchase of shares of Company Common
Stock pursuant to the Offer, if (A) the Company shall have received any
Alternative Proposal which the Company Board has determined is a Superior
Proposal; (B) the Company Board shall have withdrawn, or modified or changed in
a manner adverse to Parent or Newco its approval or recommendation of the Offer,
the Merger Agreement or the Merger or shall have recommended an Alternative
Proposal or shall have executed, or shall have announced its intention to enter
into, an agreement in principle or definitive agreement relating to an
Alternative Proposal with a person or entity other than Parent, Newco or their
affiliates (or the Company Board resolves to do any of the foregoing); (C) any
person or group (as defined in Section 13(d)(3) of the Exchange Act) (other than
Parent, Newco or any affiliate thereof) shall have become the beneficial owner
(as defined in Rule 13d-3 promulgated under the Exchange Act) of more than
one-third of the outstanding Shares, or (D) any representation or warranty made
by the Company in the Merger Agreement shall not have been true and correct in
all material respects when made, or the Company shall have failed to observe or
perform in any material respect any of its material obligations under the Merger
Agreement; provided that prior to exercising such right of termination, Parent
and Newco shall give prompt written notice to the Company of such
misrepresentation or breach of warranty or failure to observe or perform;
provided, further, that Parent and Newco shall not have such right of
termination if the condition resulting in such misrepresentation or breach of
warranty or failure to observe or perform is cured.
EFFECT OF TERMINATION; TERMINATION FEE. The Merger Agreement provides that
if Parent or Newco terminates the Merger Agreement pursuant to the provisions
described in clauses (d)(ii) (A), (B) and (C) under "Termination" above, then
immediately following such termination, the Company shall pay to Parent
$10,000,000 in full satisfaction of the obligations of the Company under the
Merger Agreement. Nothing contained in such provision shall relieve any party
from liability for fraud or for willful breach of the Merger Agreement.
Except as set forth above, whether or not the Merger is consummated, all
costs and expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby shall be paid by the party incurring such
expenses.
10
<PAGE>
AMENDMENT. The Merger Agreement provides that after approval of the Merger
Agreement by the stockholders of the Company, no amendment shall be made which
reduces or changes the consideration payable in the Merger or adversely affects
the rights of the Company's stockholders without the approval of such
stockholders.
STOCK OPTION AND TENDER AGREEMENT
Concurrently with the execution of the Merger Agreement, Parent and Newco
entered into a Stock Option and Tender Agreement (the "Stock Option Agreement")
with certain stockholders of the Company listed on Schedule I thereof (the
"Stockholders") with respect to Shares owned by such Stockholders. The following
summary of the Stock Option Agreement does not purport to be complete and is
qualified in its entirety by reference to the complete text of the Stock Option
Agreement which is attached as Exhibit 4 hereto and is incorporated by
reference.
Pursuant to the Stock Option Agreement the Stockholders have agreed to
tender their Shares in the Offer and have granted Parent an option (the "Stock
Option") to purchase 5,338,680 Shares (representing an aggregate of
approximately 53.3% of the Shares outstanding as of February 10, 1998 on a fully
diluted basis) owned by such holders at a purchase price equal to the Offer
Price. The Stock Option may be exercised by Parent or Newco if (i) the Offer is
terminated by Parent or Newco because (A) the Company shall have entered into a
definitive agreement or an agreement in principle for an Alternative Proposal or
(B) the Company's Board of Directors shall have withdrawn, modified or changed
in a manner adverse to Parent or Newco its recommendation of the Offer, the
Merger Agreement or the Merger or recommended an Alternative Proposal or
resolved to do any of the foregoing, or (ii) if the Offer expires without the
purchase of Shares thereunder when either (x) the Minimum Condition was not
satisfied or (y) the occurrence of circumstances in subclauses (i)(A) and (B) of
this sentence, in each case without any violation of the Offer or the Merger
Agreement by Parent or Newco. Parent may also exercise the Stock Option if the
Company terminates the Merger Agreement for the reasons described in clauses
(c)(i)(A) and (c)(i)(B) under "The Merger Agreement -- Termination" above. The
Stock Option may be exercised during the period (the "Exercise Period")
commencing on the date the Offer is terminated or expires, as described above,
and ending the on the date six months and one day thereafter.
The delivery of the Shares subject to the Stock Option is conditioned upon
(i) the waiting periods under the HSR Act expiring or terminating and (ii) there
being no order of a court of competent jurisdiction restricting or prohibiting
the exercise of the Stock Option or the delivery of the Shares thereunder.
Pursuant to the Stock Option Agreement, the Stockholders have agreed to vote
all Shares held by such Stockholders (i) in favor of the Merger, the Merger
Agreement and the transactions contemplated thereby and (ii) against any action
or agreement that would result in a material breach of a covenant,
representation or warranty or other obligation of the Company under the Merger
Agreement and (iii) against any action or agreement that would materially
impede, interfere with or attempt to discourage the Offer or the Merger.
Pursuant to the Stock Option Agreement, each Stockholder has also agreed
that if the Merger Agreement is terminated by the Company prior to the purchase
of Shares in the Offer because the Company Board has (i) entered into an
Alternative Proposal that it determines is a Superior Proposal or (ii)
withdrawn, modified or changed in a manner adverse to Parent or Newco its
approval of the Offer, the Merger Agreement or the Merger, then such Stockholder
shall, (A) participate in all meetings of stockholders, (B) vote the Shares
legally or beneficially owned by such Stockholder to enlarge the Company Board
to provide Parent with a majority of the Company Board, (C) not vote any such
Shares in favor of actions requiring stockholder approval described in Section 5
of the Merger Agreement and (D) use its reasonable efforts as a stockholder to
prevent actions prohibited by Section 5 of the Merger Agreement.
11
<PAGE>
Each of certain Stockholders listed on Schedule II of the Stock Option
Agreement have agreed that during the Exercise Period in the event that such
Stockholder has breached the voting agreements described above, such Stockholder
shall be deemed to have granted Parent proxies to vote his or her Shares, except
that Parent shall not have the right to vote to reduce the Offer Price or the
Merger Consideration or to amend or modify the Merger Agreement or reduce the
rights or benefits of the Company or any stockholders of the Company under the
Offer or the Merger Agreement or reduce the obligations of Parent or Newco
thereunder. The Stock Option Agreement provides that such proxies terminate if
(x) the Offer expires or terminates without any Shares being purchased
thereunder in violation of the Offer or the Merger Agreement or (y) Parent or
Newco is in violation of the Stock Option Agreement.
The Stock Option Agreement provides that except for the Stock Option, the
Stock Option Agreement terminates on the date the Merger Agreement terminates.
WOLTERS KLUWER GUARANTEE
In connection with and pursuant to the Merger Agreement, Wolters Kluwer nv,
a corporation organized under the laws of The Netherlands ("Wolters Kluwer") and
the ultimate parent of Parent and Newco, has agreed to unconditionally guarantee
the payment obligations of Parent and Newco under the Merger Agreement pursuant
to a letter agreement between Wolters Kluwer and the Company dated February 11,
1998, a copy of which is filed herewith as Exhibit 5.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE COMPANY BOARD
The Company Board has unanimously approved the Merger Agreement, the Offer
and the Merger, and has determined that the Offer and the Merger are fair to and
in the best interests of the Company's stockholders, and unanimously recommends
that the Company's stockholders accept the Offer and tender their Shares in the
Offer.
A letter to the Company's stockholders communicating the Company Board's
recommendation and a press release announcing the execution of the Merger
Agreement are filed herewith as Exhibits 6 and 7, respectively, and are
incorporated herein by reference.
(b) BACKGROUND; REASONS FOR THE COMPANY BOARD'S RECOMMENDATION
Over the past decade, a number of larger publishing companies have
approached the Company to explore a possible business collaboration, joint
venture or acquisition of the Company. The Company's management regularly
reported such expressions of interest to the Company Board and the Company Board
agreed with management and the preference of the Passano family, the original
founding family of the Company (who together with its associates beneficially
own in the aggregate approximately 57.3% of the outstanding Shares), for
remaining independent. As a result of both (1) developments relating to the
medical publishing industry as well as (2) the desire of members of the Passano
family to achieve the value inherent in their investment in the Company, the
Company's management reviewed a range of strategic alternatives to enhance
stockholder value at several meetings with investment bankers in August and
September 1997. The strategic alternatives considered included, among others,
possible acquisitions, a potential venture involving one major business unit and
the potential sale of the Company. On September 30, 1997, the Company retained
Morgan Stanley & Co. Incorporated ("Morgan Stanley") to assist in this strategic
review. The result of this review was the decision by management to recommend
that the Company initiate a process to explore the sale of the entire equity
interest in the Company through an auction process (the "Auction Process").
12
<PAGE>
On October 24, 1997, Morgan Stanley made a presentation to the Company
Board. Morgan Stanley identified and reviewed a list of leading candidates that
might be expected to have an interest in potentially purchasing the Company,
outlined a description of the Auction Process and presented a preliminary
timetable for a potential transaction. At the October 24, 1997 meeting of the
Company Board, the Company Board approved the Auction Process.
On November 5, 1997, the Company issued a press release to announce that the
Company Board had initiated the Auction Process. The press release stated the
Company Board believed that the Auction Process would greatly benefit
stockholders. The press release also noted that the Company would seek a buyer
who would demonstrate commitment to the Company's employees and maintain a
substantial operating presence in Baltimore.
Throughout November and early December 1997, the Company, through Morgan
Stanley and its legal counsel, negotiated and executed confidentiality
agreements with parties that expressed an interest in participating in the
Auction Process. The Company entered into confidentiality agreements with 14
parties.
After a party executed a confidentiality agreement, such party was provided
with a "Confidential Offering Memorandum" prepared by Morgan Stanley for use in
evaluating a possible transaction with the Company. The Confidential Offering
Memorandum included information concerning the history of the Company, a
business overview and financial information. Parties receiving the Confidential
Offering Memorandum were instructed to submit a preliminary indication of
interest to Morgan Stanley by December 17, 1997. The preliminary indication of
interest was to include, among other things, a non-binding indication of the
amount and form of consideration the submitting party would be prepared to pay
for the common equity of the Company, the source of financing of the potential
transaction and any contingencies thereto, and plans for the Company's employees
and corporate presence in Baltimore.
On December 17, 1997, Morgan Stanley received six preliminary indications of
interest. After consulting with Morgan Stanley, the Company's management
selected four of those parties submitting preliminary acquisition proposals to
continue in the Auction Process.
At various times throughout January, 1998, each of the four parties invited
to participate in the second stage of the Auction Process made trips to
Baltimore to conduct a due diligence review of the Company, which included
presentations by the management of the Company and a detailed review of Company
documents. In addition, on separate occasions, the Company and Morgan Stanley
met with each of the four parties to discuss the sale of the Company pursuant to
the Auction Process.
On January 19, 1998, Morgan Stanley sent to the four parties selected to
continue in the Auction Process a letter (the "Bid Procedures Letter") governing
further procedures for the Auction Process and a form of the Agreement and Plan
of Merger. The parties were invited to submit a firm written offer to acquire
the Company (a "Proposal") and were instructed to submit Proposals by February
4, 1998. The Bid Procedures Letter identified which factors the Company would
use in evaluating Proposals and instructed the parties to include in the
Proposal the specific amount of consideration offered per share. Each party was
asked to mark changes in a form of the Agreement and Plan of Merger which had
been prepared by the Company and include in the Proposal a statement that such
party would be prepared to execute the Agreement and Plan of Merger (with any
proposed modifications) in the form submitted. Pursuant to the Bid Procedures
Letter, submission of a Proposal constituted an agreement to be bound by the
terms set forth therein.
On February 4, 1998, the Company, Morgan Stanley and the Company's legal
counsel had several discussions to evaluate the responses received from the
potential purchasers. After lengthy discussions on the evening of February 4th
and the morning of February 5th, the Company concluded that the Proposal
submitted by Parent which included a proposed form of Stock Option Agreement
(the "Parent Proposal") appeared to be the most favorable to the Company and its
stockholders, both as to price and other terms, and authorized Morgan Stanley to
begin tentative negotiations with Parent and its financial advisors.
13
<PAGE>
On the afternoon of February 5, 1998, Morgan Stanley discussed the Parent
Proposal with Parent's financial advisor. On the evening of February 5th, the
Company, Morgan Stanley and the Company's legal counsel discussed the merits of
the Parent Proposal and the results of Morgan Stanley's negotiations with Parent
and its financial advisors. At the conclusion of this discussion, the Company
determined to enter into exclusive negotiations with Parent through their
respective financial and legal advisors. On the morning of February 6, 1998,
representatives of the Company spoke with representatives of Parent regarding
certain matters related to the transaction.
From February 6th through the morning of February 10th, 1998, the Company's
legal counsel and legal counsel for Parent had lengthy negotiations concerning
the Merger Agreement and the Stock Option Agreement.
On February 10, 1998, the Company Board met to consider the Merger Agreement
and transact other business. Morgan Stanley made a presentation to the Company
Board outlining the results of the Auction Process and reviewing the details of
the Parent Proposal. Thereafter, the Company Board unanimously approved the
Merger Agreement. One director was absent from the meeting and he subsequently
advised the Company Board that he approves the Merger Agreement.
On the evening of February 10, 1998, the Company, Parent and Newco entered
into the Merger Agreement and Parent, Newco and the Stockholders entered into
the Stock Option Agreement.
On February 11, 1998, the Company and Parent issued a joint press release
announcing the execution of the Merger Agreement and Wolters Kluwer executed the
Guarantee. A copy of the press release is filed herewith as Exhibit 7.
On February 18, 1998, Parent commenced the Offer.
In approving the Offer, the Merger, the Merger Agreement and the other
transactions contemplated thereby and recommending that all holders of Shares
accept the Offer and tender their Shares pursuant to the Offer, the Company
Board considered a number of factors including:
1. The presentations and views expressed by management of the Company
(at the meeting of the Company Board held on February 10, 1998, and at
previous meetings of the Company Board) regarding, among other things: (a)
the financial condition, results of operations, cash flows, business and
prospects of the Company, including the prospects of the Company if it
remained independent; (b) the strategic alternatives available to the
Company; (c) the fact that in view of the discussions held with various
parties, as well as the Auction Process conducted, the management of the
Company believed it was unlikely that any other party would propose an
acquisition or strategic business combination that would be more favorable
to the Company and its stockholders than the Offer and the Merger; and (d)
the recommendation of the Merger by the management of the Company.
2. The presentation of Morgan Stanley at the meeting of the Company
Board held on February 10, 1998, and the opinion of Morgan Stanley,
expressed orally at the February 10, 1998 meeting (and subsequently
confirmed in writing), to the effect that, as of February 10, 1998, the
consideration to be received by the Company's stockholders pursuant to the
Merger Agreement is fair, from a financial point of view, to the Company's
stockholders. The full text of the opinion of Morgan Stanley, dated February
10, 1998, which sets forth the assumptions made, matters considered and
limitations on the review undertaken by Morgan Stanley, is attached hereto
as Exhibit 8 and is incorporated herein by reference. Stockholders are urged
to read the opinion of Morgan Stanley carefully in its entirety for
assumptions made, matters considered and the limits of the review undertaken
by Morgan Stanley.
3. The historical market prices and the recent limited trading activity
of the Shares, including the fact that the Offer Price represents a premium
of approximately 42.5% over the reported closing price of the Shares on the
National Association of Securities Dealers Automatic Quotation system on
14
<PAGE>
the last full trading day preceding the public announcement of the
commencement of the Auction Process.
4. The arms-length negotiations between the Company and Parent leading
to the belief of the Company Board that $39.00 per Share represented the
highest price per Share that could be negotiated with Parent.
5. The results of the inquiries made by the Company's management and
financial advisor in the Auction Process regarding a possible sale of the
Company and the public nature of the Auction Process itself.
6. That the Offer and the Merger provide for a prompt cash tender offer
for all Shares to be followed by a merger for the same consideration,
thereby enabling the Company's stockholders to obtain the benefits of the
transaction in exchange for their Shares at the earliest possible time.
7. That, in the Merger Agreement, Parent and Newco have agreed to honor
all employee benefits and arrangements with respect to employees and former
employees of the Company until December 31, 2000 and that, thereafter, the
Company's employees will be provided with employee benefits that are no less
favorable in the aggregate than those provided to Parent's employees.
8. That, in the Merger Agreement, Parent and Newco have agreed to
maintain a substantial operating presence in the City of Baltimore,
including maintaining a substantial work force and operations in Baltimore
for five years following the Effective Time.
9. Other provisions of the Offer and the Merger Agreement, including
the parties' representations, warranties and covenants, the conditions to
their respective obligations, and the limited ability of Parent and the
Purchaser to terminate the Offer or the Merger Agreement.
10. The business reputation and capabilities of Parent and its
management, and Parent's financial strength, including its ability to fund
the Offer.
11. The belief that the combined company would be better able to respond
to the needs of customers and markets, the increased competitiveness of the
medical publishing industry, and the opportunities that changes in the
medical publishing industry, including electronic publishing, might bring to
the combined entity.
The foregoing discussion of information and factors considered and given
weight by the Company Board is not intended to be exhaustive. In view of the
variety of factors considered in connection with its evaluation of the Offer and
the Merger, the Company Board did not find it practicable to, and did not,
quantify or otherwise assign relative weights to the specific factors considered
in reaching its determinations and recommendations. In addition, individual
members of the Company Board may have given different weights to different
factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to the terms of a letter agreement dated September 30, 1997 (the
"Engagement Letter"), the Company retained Morgan Stanley to assist the Company
as its financial advisor in considering the desirability and feasibility of
effecting various strategies for maximizing the Company's value to its
stockholders, including, among other things, a merger or sale of the Company.
The Company has agreed to pay Morgan Stanley a "transaction fee" of 1.0% of the
aggregate value of a transaction that results in 55% or more of the Company's
common stock changing hands, less $400,000, as well as reimbursement for
expenses incurred. Pursuant to the Engagement Letter, the Company has agreed to
indemnify Morgan Stanley and its directors, officers, agents, employees and
controlling persons for certain costs, expenses and liabilities, including
liabilities under federal securities laws, to which it might be subjected
arising out of its engagement as financial advisor.
15
<PAGE>
Pursuant to the Callard Letter Agreement, the Company retained Mr. Callard,
a director of the Company, to advise and assist in the possible sale of the
Company. The Company has agreed to pay Mr. Callard a contingent fee of $400,000
if (a) control of more than 55% of the Company's common stock is sold or
transferred or (b) the Company sells a substantial amount of its assets. The
Company has also agreed to indemnify Mr. Callard for certain costs, expenses and
liabilities related to his services in connection with the Callard Letter
Agreement.
Except as disclosed herein, neither the Company nor any person acting on its
behalf has employed, retained or compensated any person to make solicitations or
recommendations to the Company's stockholders with respect to the Offer or the
Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except as set forth on Schedule I hereto, no transactions in the Shares
have been effected during the past 60 days by the Company or, to the best of the
Company's knowledge, by any executive officer, director, affiliate or subsidiary
of the Company.
(b) To the best knowledge of the Company, all of its executive officers,
directors, affiliates and subsidiaries currently intend to tender pursuant to
the Offer all Shares held of record or beneficially owned by them (other than
Shares issuable upon exercise of stock options and Shares, if any, which if
tendered could cause such persons to incur liability under the provisions of
Section 16(b) of the Exchange Act).
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, the Company is not engaged
in any negotiation in response to the Offer which relates to or would result in
(i) an extraordinary transaction, such as a merger or reorganization, involving
the Company or any subsidiary of the Company; (ii) a purchase, sale or transfer
of a material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or dividend
policy of the Company.
(b) Except as described in Item 3(b) and Item 4 above (the provisions of
which are hereby incorporated by reference), there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer which relate to or would result in one or more of the matters referred to
in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The Company intends to file with the Commission and furnish to stockholders
an Information Statement pursuant to Section 14(f) of the Exchange Act and Rule
14f-1 promulgated hereunder in connection with the possible designation by
Parent, pursuant to the Merger Agreement, of certain persons to be appointed to
the Company Board other than at a meeting of the Company's stockholders.
16
<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
Exhibit 1. Agreement and Plan of Merger dated as February 10, 1998, by and among the
Company, Parent and Newco.
Exhibit 2. Pages 9 through 14 of the Company's Proxy Statement dated March 25, 1997,
relating to its annual meeting of stockholders.
Exhibit 3. Confidentiality Agreement dated December 5, 1997 between the Company and Parent.
Exhibit 4. Stock Option and Tender Agreement, dated as of February 10, 1998, by and among
Parent and the Stockholders identified therein.
Exhibit 5. Letter Agreement between Wolters Kluwer and the Company dated February 11, 1998.
Exhibit 6. Letter to Stockholders of the Company, dated February 18, 1998.*
Exhibit 7. Joint Press Release, issued by the Company and Parent on February 11, 1998.
Exhibit 8. Opinion of Morgan Stanley dated February 10, 1998.*
</TABLE>
- ------------------------
* Included in copies of the Schedule 14D-9 mailed to stockholders.
17
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: February 18, 1998
WAVERLY INC.
By: /s/ EDWARD B. HUTTON, JR.
-----------------------------------------
Name: Edward B. Hutton, Jr.
Title: President and Chief Executive
Officer
18
<PAGE>
SCHEDULE I
CERTAIN TRANSACTIONS IN SHARES OF COMMON STOCK
OF THE COMPANY EFFECTED DURING THE PAST 60 DAYS
On January 30, 1998, the directors and officers of the Company listed below
exercised stock options granted under the Company's Incentive Plan. Pursuant to
the Incentive Plan, the options were scheduled to expire on February 1, 1998
unless exercised before such date.
<TABLE>
<CAPTION>
NUMBER OF
SHARES SUBJECT EXERCISE
NAME POSITION TO OPTIONS PRICE
- --------------------------------------------------------------- ----------------------- --------------- -----------
<S> <C> <C> <C>
William M. Passano, Jr......................................... Chairman 26,000 $ 7.875
E. Magruder Passano, Jr........................................ Vice Chairman 4,500 $ 7.875
E. Philip Hanlon............................................... Chief Financial 1,126 $ 7.875
Officer
Alma J. Wills.................................................. President, Williams 5,100 $ 7.875
& Wilkins Periodical
Publishing
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
WOLTERS KLUWER U.S. CORPORATION,
MP ACQUISITION CORP.,
and
WAVERLY, INC.
February 10, 1998
<PAGE>
TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
THE OFFER AND MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Offer . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Company Actions . . . . . . . . . . . . . . . . . . . . . . . 4
1.3 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.4 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.5 Effective Time. . . . . . . . . . . . . . . . . . . . . . . . 8
1.6 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.7 Articles of Incorporation of
the Surviving Corporation . . . . . . . . . . . . . . . . . . 8
1.8 By-Laws of the Surviving
Corporation . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.9 Directors and Officers of the
Surviving Corporation . . . . . . . . . . . . . . . . . . . . 9
1.10 Shareholders' Meeting . . . . . . . . . . . . . . . . . . . . 9
1.11 Merger Without Meeting of
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE II
CONVERSION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1 Conversion of Capital Stock . . . . . . . . . . . . . . . . 11
2.2 Exchange of Certificates . . . . . . . . . . . . . . . . . . 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . 14
3.1 Corporate Organization and
Qualification . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . 14
3.3 Authority Relative to This
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .15
3.4 Consents and Approvals; No
Violation . . . . . . . . . . . . . . . . . . . . . . . . . .16
3.5 SEC Reports; Financial
ii
<PAGE>
Statements. . . . . . . . . . . . . . . . . . . . . . . . . . .17
3.6 Absence of Certain Changes
Or Events . . . . . . . . . . . . . . . . . . . . . . . . . . .18
3.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . .18
3.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
3.9 Employee Benefit Plans; Labor
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
3.10 Environmental Laws and
Regulations . . . . . . . . . . . . . . . . . . . . . . . . . .21
3.11 Intangible Property; Copyrights . . . . . . . . . . . . . . . .22
3.12 Compliance with Applicable Laws . . . . . . . . . . . . . . . .22
3.13 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . ..23
3.14 Approvals; Antitakeover
Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . .23
3.15 Voting Requirements . . . . . . . . . . . . . . . . . . . . . .24
3.16 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . .24
3.17 Opinion of Financial Advisors . . . . . . . . . . . . . . . . .24
3.18 Information Supplied. . . . . . . . . . . . . . . . . . . . . .24
3.19 Confidentiality Agreements. . . . . . . . . . . . . . . . . . .25
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
AND NEWCO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
4.1 Corporate Organization and
Qualification . . . . . . . . . . . . . . . . . . . . . . . . .25
4.2 Authority Relative to This
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . .26
4.3 Consents and Approvals; No
Violation . . . . . . . . . . . . . . . . . . . . . . . . . . .26
4.4 Interim Operations of Newco . . . . . . . . . . . . . . . . . .27
4.5 Sufficient Funds. . . . . . . . . . . . . . . . . . . . . . . .27
4.6 Share Ownership . . . . . . . . . . . . . . . . . . . . . . . .27
4.7 Information in Proxy Statement
and Schedule 14D-9. . . . . . . . . . . . . . . . . . . . . . .27
4.8 Investigation by Parent . . . . . . . . . . . . . . . . . . . .28
4.9 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . .29
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS. . . . . . . . . . . . . . . . . . . . . .29
5.1 Interim Operations of the
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
5.2 Alternative Proposals . . . . . . . . . . . . . . . . . . . . .32
5.3 Certain Filings . . . . . . . . . . . . . . . . . . . . . . . .33
5.4 Satisfaction of Conditions;
Receipt of Necessary Approvals. . . . . . . . . . . . . . . . .33
iii
<PAGE>
5.5 Access to Information . . . . . . . . . . . . . . . . . . . . .34
5.6 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . .34
5.7 Directors' and Officers' Insurance
and Indemnification . . . . . . . . . . . . . . . . . . . . . .35
5.8 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . .37
5.9 Corporate Presence. . . . . . . . . . . . . . . . . . . . . . .39
5.10 Conduct of Business of Newco. . . . . . . . . . . . . . . . . .39
5.11 Certain Filings . . . . . . . . . . . . . . . . . . . . . . . .39
5.12 Further Assurances. . . . . . . . . . . . . . . . . . . . . . .39
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER . . . . . . . . . . . . . . . . . . .40
6.1 Conditions to Each Party's
Obligations to Effect the Merger. . . . . . . . . . . . . . . .40
6.2 Additional Conditions to the
Obligations of Parent and Newco . . . . . . . . . . . . . . . .41
6.3 Additional Conditions to the
Obligations of the Company. . . . . . . . . . . . . . . . . . .41
ARTICLE VII
TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . .42
7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . .46
ARTICLE VIII
MISCELLANEOUS AND GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . .46
8.1 Payment of Expenses and Other
Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . .46
8.2 Survival of Representations and Warranties; Survival of
Confidentiality Agreement . . . . . . . . . . . . . . . . . . .47
8.3 Modification or Amendment . . . . . . . . . . . . . . . . . . .47
8.4 Waiver of Conditions. . . . . . . . . . . . . . . . . . . . . .47
8.5 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . .47
8.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . .47
8.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
8.8 Entire Agreement; Assignment. . . . . . . . . . . . . . . . . .49
8.9 Parties in Interest . . . . . . . . . . . . . . . . . . . . . .49
8.10 Certain Definitions . . . . . . . . . . . . . . . . . . . . . .49
8.11 Obligation of Parent. . . . . . . . . . . . . . . . . . . . . .50
8.12 Validity. . . . . . . . . . . . . . . . . . . . . . . . . . . .50
8.13 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . .51
8.14 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . .51
8.15 Specific Performance. . . . . . . . . . . . . . . . . . . . . .51
iv
<PAGE>
8.16 Joint and Several Liability . . . . . . . . . . . . . . . . . .52
8.17 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . .52
ANNEX A; CONDITIONS TO THE OFFER . . . . . . . . . . . . . . . . . . . . . . A-1
v
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
February 10, 1998, by and among Wolters Kluwer U.S. Corporation, a Delaware
corporation ("Parent"), MP Acquisition Corp., a Maryland corporation and a
wholly owned subsidiary of Parent ("Newco"), and Waverly, Inc., a Maryland
corporation (the "Company").
RECITALS
WHEREAS, the respective Boards of Directors of Parent, Newco and
the Company have, subject to the conditions of this Agreement, determined
that the Merger (as defined below) is in the best interests of their
respective stockholders and approved this Agreement and the transactions
contemplated hereby; and
WHEREAS, Parent, Newco and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, and
in consideration of the execution and delivery by Parent, Newco and the
Stockholders named therein of a stock option and tender agreement (the "Stock
Option and Tender Agreement") Parent, Newco and the Company hereby agree as
follows:
ARTICLE I
THE OFFER AND MERGER
1.1 The Offer. (a) As promptly as practicable (but in no event
later than five business days after the public announcement of the execution
hereof), Newco shall commence (within the meaning of Rule 14d-2 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) an offer
(the "Offer") to purchase for cash all shares of the issued and outstanding
Common Stock, par value $2.00 per share (referred to herein as either the
"Shares" or "Company Common Stock"), of the Company at a price of $ 39.00 per
Share, net to the
<PAGE>
seller in cash (such price, or such higher price per Share as may be paid in
the Offer, being referred to herein as the "Offer Price"), subject to there
being validly tendered and not withdrawn prior to the expiration of the
Offer, that number of Shares which, together with the Shares beneficially
owned by Parent or Newco, represent at least two-thirds of the Shares
outstanding on a fully diluted basis (the "Minimum Condition") and to the
other conditions set forth in Annex A hereto. Newco shall, on the terms and
subject to the prior satisfaction or waiver (except that the Minimum
Condition may not be waived) of the conditions of the Offer, accept for
payment and pay for Shares tendered as soon as it is legally permitted to do
so under applicable law. The obligations of Newco to commence the Offer and
to accept for payment and to pay for any Shares validly tendered on or prior
to the expiration of the Offer and not withdrawn shall be subject only to the
Minimum Condition and the other conditions set forth in Annex A hereto. The
Offer shall be made by means of an offer to purchase (the "Offer to
Purchase") containing the terms set forth in this Agreement, the Minimum
Condition and the other conditions set forth in Annex A hereto. Newco
expressly reserves the right to amend any of the terms and conditions of the
Offer; provided that Newco shall not amend or waive the Minimum Condition,
decrease the Offer Price or decrease the number of Shares sought, change the
form of consideration to be paid pursuant to the Offer, impose conditions to
the Offer in addition to those set forth in Annex A hereto, or amend any
other term or condition of the Offer in any manner adverse to the holders of
the Shares or extend the expiration date of the Offer without the prior
written consent of the Company (such consent to be authorized by the Board of
Directors of the Company or a duly authorized committee thereof).
Notwithstanding the foregoing, Newco shall, and Parent agrees to cause Newco
to, extend the Offer for a period of ten business days following the initial
expiration date of the Offer, if any conditions to the Offer have not been
satisfied or waived at such date. In addition, following such first
extension of the Offer as provided in the preceding sentence, Newco shall,
and Parent agrees to cause Newco to, extend the Offer at any time up to six
(6) months from the execution of this Agreement, for one or more periods of
not more than ten business days, if at the expiration date of the Offer, as
extended, all conditions to the Offer have not been satisfied or waived. In
addition,
2
<PAGE>
the Offer Price may be increased and the Offer may be extended to the extent
required by law in connection with such increase in each case without the
consent of the Company.
(b) As soon as practicable on the date the Offer is
commenced, Parent and Newco shall file with the United States Securities and
Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1
with respect to the Offer (together with all amendments and supplements
thereto and including the exhibits thereto, the "Schedule 14D-1"). The
Schedule 14D-1 will include, as exhibits, the Offer to Purchase and a form of
letter of transmittal and summary advertisement (collectively, together with
any amendments and supplements thereto, the "Offer Documents"). Parent and
Newco represent that the Offer Documents will comply in all material respects
with the provisions of applicable federal securities laws and, on the date
filed with the SEC and on the date first published, sent or given to the
Company's shareholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by Parent or Newco with respect to information
supplied by the Company in writing for inclusion in the Offer Documents.
Each of Parent and Newco further agrees to take all steps necessary to cause
the Offer Documents to be filed with the SEC and to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. Each of Parent and Newco, on the one hand, and the
Company, on the other hand, agrees promptly to correct any information
provided by it for use in the Offer Documents if and to the extent that it
shall have become false and misleading in any material respect and each of
Parent and Newco further agrees to take all steps necessary to cause the
Offer Documents as so corrected to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required
by applicable federal securities laws. The Company and its counsel shall be
given a reasonable opportunity to review the Schedule 14D-1 and the Offer
Documents before they are filed with the SEC. In addition, Parent and Newco
agree to provide the Company and its counsel in writing with any comments or
other communications that Parent, Newco or their counsel
3
<PAGE>
may receive from time to time from the SEC or its staff with respect to the
Offer Documents promptly after the receipt of such comments or other
communications.
1.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer
and represents that the Board of Directors, at a meeting duly called and
held, has (i) unanimously approved this Agreement and the transactions
contemplated hereby, including the Offer and the Merger (collectively, the
"Transactions"), (ii) adopted a resolution by the unanimous vote of the Board
of Directors approving the acquisition of Shares by Parent and Newco pursuant
to the Offer, which resolution constitutes approval of the acquisition of
Shares pursuant to the Offer under Section 3-603 of the Maryland General
Corporation Law (the "MGCL"); (iii) adopted a resolution by the unanimous
vote of the Board of Directors which declares that the Transactions are
advisable on substantially the terms and conditions set forth or referred to
in the resolution in accordance with Section 3-105 of the MGCL; (iv)
unanimously determined that as of the date hereof the Transactions are fair
to and in the best interest of the Company's shareholders and (v) unanimously
resolved to recommend that the shareholders of the Company accept the Offer,
tender their Shares thereunder to Newco and approve and adopt this Agreement
and the Merger; provided, that such recommendation may be withdrawn, modified
or amended if, in the opinion of the Board of Directors, after consultation
with its legal counsel, such recommendation would be inconsistent with its
fiduciary duties to the Company's shareholders under applicable law. The
Company represents that it has previously approved an amendment to the
Company's By-laws that exempts the acquisition of Shares pursuant to the
Transactions from the provisions of Section 3-702 of the MGCL. The Company
has been advised that all of its directors and executive officers intend
either to tender their Shares pursuant to the Offer or to vote their Shares
in favor of the Merger.
(b) As promptly as practicable following the commencement of
the Offer, the Company shall file with the SEC a Solicitation/Recommendation
Statement on
4
<PAGE>
Schedule 14D-9 (together with all amendments and supplements thereto and
including the exhibits thereto, the "Schedule 14D-9") which shall, subject to
the fiduciary duties of the Company's directors under applicable law and to
the provisions of this Agreement, contain the recommendation referred to in
clause (v) of Section 1.2(a) hereof. The Company represents that the
Schedule 14D-9 will comply in all material respects with the provisions of
applicable federal securities laws and, on the date filed with the SEC and on
the date first published, sent or given to the Company's shareholders, shall
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representation is made by the Company with
respect to information supplied by Parent or Newco for inclusion in the
Schedule 14D-9. The information supplied by Parent or Newco for inclusion in
the Schedule 14D-9 shall not, on the date filed with the SEC and on the date
first published, sent or given to the Company's stockholders, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Company further agrees to take all steps necessary to cause
the Schedule 14D-9 to be filed with the SEC and to be disseminated to holders
of Shares, in each case as and to the extent required by applicable federal
securities laws. Each of the Company, on the one hand, and Parent and Newco,
on the other hand, agrees promptly to correct any information provided by it
for use in the Schedule 14D-9 if and to the extent that it shall have become
false and 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 SEC and to be disseminated to holders of the Shares, in each
case as and to the extent required by applicable federal securities laws.
Parent and its counsel shall be given a reasonable opportunity to review the
initial Schedule 14D-9 before it is filed with the SEC. In addition, the
Company agrees to provide Parent, Newco and their counsel in writing with any
comments or other communications that the Company or its counsel may receive
from time to time from the SEC or its staff with
5
<PAGE>
respect to the Schedule 14D-9 promptly after the receipt of such comments or
other communications.
(c) In connection with the Offer, if requested by Parent, the
Company will promptly furnish or cause to be furnished to Parent mailing
labels, security position listings and any available listing or computer file
containing the names and addresses of the record holders of the Shares as of
a recent date, and shall furnish Parent with such information and assistance
as Parent or its agents may reasonably request in communicating the Offer to
the shareholders of the Company. Except for such steps as are necessary to
disseminate the Offer Documents, Parent and Newco shall hold in confidence
the information contained in any of such labels and lists and the additional
information referred to in the preceding sentence, will use such information
only in connection with the Offer, and, if this Agreement is terminated, will
upon request of the Company deliver or cause to be delivered to the Company
all copies of such information then in its possession or the possession of
its agents or representatives.
1.3 Directors.
(a) Promptly upon the purchase of and payment for Shares by
Parent or any of its Subsidiaries (as defined in Section 8.10) which
represent at least two-thirds of the outstanding shares of Company Common
Stock (on a fully diluted basis), Parent 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 is equal to the product of the total number of
directors on such Board (giving effect to the directors designated by Parent
pursuant to this sentence) multiplied by the percentage that the aggregate
number of Shares beneficially owned by Newco, Parent and any of their
affiliates bears to the total number of shares of Company Common Stock then
outstanding. The Company shall take all action necessary to cause Parent's
designees to be elected or appointed to the Company's Board of Directors and
to secure the resignations of such number of its incumbent directors as is
necessary to enable Parent's designees to be so elected to the Company's
Board, and shall cause Parent's designees to be so elected. At such times,
the Company will take all action necessary to cause individuals designated by
Parent to constitute the
6
<PAGE>
same percentage as such individuals represent on the Company's Board of
Directors of (A) each committee of the Board and (B) each board of directors
(and committee thereof) of each Subsidiary in each case to the extent
permitted by the National Association of Securities Dealers (the "NASD")
Rules. Notwithstanding the foregoing, until the Effective Time (as defined in
Section 1.5 hereof), the Company shall retain as members of its Board of
Directors at least two (2) directors that are directors of the Company on the
date hereof (the "Company Designees"); provided, that subsequent to the
purchase of and payment for Shares pursuant to the Offer, Parent shall always
have its designees represent at least a majority of the entire Board of
Directors. The Company's obligations under this Section 1.3(a) shall be
subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. The Company shall promptly take all actions required pursuant to
such Section 14(f) and Rule 14f-1 in order to fulfill its obligations under
this Section 1.3(a), including mailing to shareholders the information
required by such Section 14(f) and Rule 14f-1 as is necessary to enable
Parent's designees to be elected to the Company's Board of Directors. Parent
or Newco will supply the Company any information with respect to either of
them and their nominees, officers, directors and affiliates required by such
Section 14(f) and Rule 14f-1.
(b) From and after the time, if any, that Parent's
designees constitute a majority of the Company's Board of Directors, any
amendment of this Agreement, any termination of this Agreement by the
Company, any extension of time for performance of any of the obligations of
Parent or Newco hereunder, any waiver of any condition or any of the
Company's rights hereunder or other action by the Company hereunder may be
effected only by the action of a majority of the directors of the Company
then in office who were directors of the Company on the date hereof, which
action shall be deemed to constitute the action of the full Board of
Directors; provided, that if there shall be no such directors, such actions
may be effected by the unanimous vote of the entire Board of Directors of the
Company.
1.4 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.5 hereof), the
Company and Newco
7
<PAGE>
shall consummate a merger (the "Merger") pursuant to which (a) Newco shall be
merged with and into the Company and the separate corporate existence of
Newco shall thereupon cease, (b) the Company shall be the successor or
surviving corporation in the Merger and shall continue to be governed by the
laws of the State of Maryland and (c) the separate corporate existence of the
Company with all its rights, privileges, immunities, powers and franchises
shall continue unaffected by the Merger. The corporation surviving the
Merger is sometimes hereinafter referred to as the "Surviving Corporation."
The Merger shall have the effects set forth in the MGCL.
1.5 Effective Time. Parent, Newco and the Company will cause
appropriate Articles of Merger (the "Articles of Merger") to be executed and
filed on the date of the Closing (as defined in Section 1.6) (or on such
other date as Parent and the Company may agree) with the State Department of
Assessments and Taxation of the State of Maryland as provided in the MGCL.
The Merger shall become effective at the time at which the Articles of Merger
have been duly filed with the State Department of Assessments and Taxation of
the State of Maryland or at such time as is agreed upon by the parties and
specified in the Articles of Merger, and such time is hereinafter referred to
as the "Effective Time."
1.6 Closing. The closing of the Merger (the "Closing") shall take
place (a) at the offices of Skadden, Arps, Slate, Meagher & Flom, 1440 New
York Avenue, Washington, D.C. as soon as practicable following the
satisfaction or waiver of all of the conditions set forth in Article VI
hereof or (b) at such other place, time and date as Parent and the Company
may agree.
1.7 Articles of Incorporation of the Surviving Corporation. The
Articles of Incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended as provided by law and such Articles of
Incorporation.
1.8 By-Laws of the Surviving Corporation. The By-Laws of Newco,
as in effect immediately prior to the Effective Time, shall be the By-Laws of
the Surviving Corporation until thereafter amended as provided by law,
8
<PAGE>
the Articles of Incorporation of the Surviving Corporation and such By-Laws.
1.9 Directors and Officers of the Surviving Corporation. The
directors and officers of Newco at the Effective Time shall, from and after
the Effective Time, be the initial directors and officers, respectively, of
the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal
in accordance with the Surviving Corporation's Articles of Incorporation and
By-Laws.
1.10 Shareholders' Meeting.
(a) If required by applicable law in order to consummate the
Merger, the Company, acting through its Board of Directors, shall, in
accordance with applicable law:
(i) duly call, give notice of, convene and hold a special
meeting of its shareholders (the "Special Meeting") as soon as practicable
following the acceptance for payment and purchase of Shares by Newco
pursuant to the Offer for the purpose of considering and taking action upon
this Agreement;
(ii) prepare and file with the SEC a preliminary proxy or
information statement relating to the Merger and this Agreement and shall
(x) obtain and furnish the information required to be included by the SEC
in the Proxy Statement (as hereinafter defined) and, after consultation
with Parent, to respond promptly to any comments made by the SEC with
respect to the preliminary proxy or information statement and cause a
definitive proxy or information statement (the "Proxy Statement") to be
mailed to its shareholders and (y) obtain the necessary approvals of the
Merger and this Agreement by its shareholders; and
(iii) subject to the fiduciary obligations of the Board
under applicable law as advised by its legal counsel, include in the Proxy
Statement the recommendation of the Board that shareholders of
9
<PAGE>
the Company vote in favor of the approval of the Merger and the adoption of
this Agreement.
(b) Parent agrees that it will provide the Company with the
information concerning Parent and Newco required to be included in the Proxy
Statement and will vote, or cause to be voted, all of the Shares then owned
by it, Newco or any of its other Subsidiaries and affiliates in favor of the
approval of the Merger and the adoption of this Agreement.
(c) The Company represents that the Proxy Statement (or any
amendment thereof or supplement thereto) at the date mailed to Company
stockholders and at the time of the Special Meeting will not contain any
untrue statement of material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading, except
that no representation is made by the Company with respect to statements made
therein based on information supplied by Parent or Newco in writing for
inclusion in the Proxy Statement. If at any time prior to the Effective Time
any event with respect to the Company or any of its Subsidiaries should occur
which is required to be described in a supplement to the Proxy Statement,
such event shall be so described, and such supplement shall be promptly filed
with the SEC and, as required by law, disseminated to the stockholders of the
Company. With respect to the information relating to the Company, the Proxy
Statement will comply as to form and substance in all material respects with
the requirements of the Exchange Act.
1.11 Merger Without Meeting of Shareholders. Notwithstanding
Section 1.10 hereof, in the event that Parent, Newco or any other Subsidiary
of Parent shall acquire at least 90% of the outstanding shares of each class
of capital stock of the Company, pursuant to the Offer or otherwise, the
parties hereto agree to take all necessary and appropriate action to cause
the Merger to become effective as soon as practicable after such acquisition,
without a meeting of shareholders of the Company, in accordance with Section
3-106 of the MGCL.
10
<PAGE>
ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of any
shares of Company Common Stock or common stock, par value $ .01 per share, of
Newco ("Newco Common Stock"):
(a) Newco Common Stock. Each issued and outstanding share
of Newco Common Stock shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation with the
same rights, powers and privileges as the shares so converted and shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock.
All shares of Company Common Stock that are owned by the Company as treasury
stock and any shares of Company Common Stock owned by Parent, Newco or any
other wholly owned Subsidiary of Parent shall be cancelled and retired and
shall cease to exist and no consideration shall be delivered in exchange
therefor.
(c) Exchange of Shares. Each share of Company Common Stock
issued and outstanding (other than Shares to be cancelled in accordance with
Section 2.1(b) hereof), shall be converted into the right to receive the
Offer Price, payable to the holder thereof, without interest (the "Merger
Consideration"), upon surrender of the certificate formerly representing such
share of Company Common Stock in the manner provided in Section 2.2. All
such shares of Company Common Stock, when so converted, shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease
to exist, and each holder of a certificate representing any such shares shall
cease to have any rights with respect thereto, except the right to receive
the Merger Consideration therefor upon the surrender of such certificate in
accordance with Section 2.2.
(d) Stock Options. Parent and the Company shall take all
actions necessary to provide that, immediately prior to the Effective Time,
(i) the Company shall pay to the holder of each then outstanding stock option
11
<PAGE>
to purchase Shares (an "Option") granted under the Company's stock option plans
and agreements (the "Option Plans") with such Options listed on Section 2.1 of
the disclosure schedule delivered to Parent and Newco by the Company
concurrently with the execution hereof (the "Company Disclosure Schedule"),
whether or not then exercisable or vested, an amount in respect thereof equal to
the product of (A) the excess, if any, of the Offer Price over the per share
exercise price of each such Option and (B) the number of Shares subject thereto
(such payment to be net of applicable withholding taxes) and (ii) each such
Option shall be cancelled; provided, however, that the foregoing shall be
subject to the obtaining of any necessary consents of holders of Options, it
being agreed that the Company and Parent will (x) use all reasonable best
efforts to obtain any such consents and (y) make any amendments to the terms of
such stock option or compensation plans or arrangements that are necessary to
give effect to the transactions contemplated by this Section 2.1.
2.2 Exchange of Certificates.
(a) Paying Agent. Parent shall designate a bank or trust
company reasonably acceptable to the Company to act as agent for the holders
of shares of Company Common Stock in connection with the Merger (the "Paying
Agent") to receive the funds to which holders of shares of Company Common
Stock shall become entitled pursuant to Section 2.1(c) hereof. Parent shall
take all steps necessary to deposit or cause to be deposited with the Paying
Agent such funds as needed for timely payment hereunder. Such funds shall be
invested by the Paying Agent as directed by Parent or the Surviving
Corporation.
(b) Exchange Procedures. As soon as reasonably practicable
after the Effective Time but in no event more than three business days
thereafter, the Paying Agent shall mail to each holder of record of a
certificate or certificates, which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "Certificates"),
whose shares were converted pursuant to Section 2.1 hereof into the right to
receive the Merger Consideration (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the
12
<PAGE>
Paying Agent and shall be in such form and have such other provisions as
Parent and the Company may reasonably specify) and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for payment of the
Merger Consideration. Upon surrender of a Certificate for cancellation to
the Paying Agent or to such other agent or agents as may be appointed by
Parent, together with such letter of transmittal, duly executed, the holder
of such Certificate shall be entitled to receive in exchange therefor the
Merger Consideration for each share of Company Common Stock formerly
represented by such Certificate and the Certificate so surrendered shall
forthwith be cancelled. If payment of the Merger Consideration is to be made
to a person other than the person in whose name the surrendered Certificate
is registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or shall be otherwise in proper form
for transfer and that the person requesting such payment shall have paid any
transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such tax either has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration in cash as contemplated by this Section 2.2.
(c) Transfer Books; No Further Ownership Rights in Company
Common Stock. At the Effective Time, the stock transfer books of the Company
shall be closed and thereafter there shall be no further registration of
transfers of shares of Company Common Stock on the records of the Company.
From and after the Effective Time, the holders of Certificates evidencing
ownership of shares of Company Common Stock outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such
Shares, except as otherwise provided for herein or by applicable law. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be cancelled and exchanged as provided
in this Article II.
(d) Termination of Fund; No Liability. At any time
following one (1) year after the Effective
13
<PAGE>
Time, the Surviving Corporation shall be entitled to require the Paying Agent
to deliver to it any funds (including any interest received with respect
thereto) which had been made available to the Paying Agent and which have not
been disbursed to holders of Certificates, and thereafter such holders shall
be entitled to look to the Surviving Corporation (subject to abandoned
property, escheat or other similar laws) only as general creditors thereof
with respect to the Merger Consideration payable upon due surrender of their
Certificates, without any interest thereon. Notwithstanding the foregoing,
neither the Surviving Corporation nor the Paying Agent shall be liable to any
holder of a Certificate for Merger Consideration delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Parent and Newco that:
3.1 Corporate Organization and Qualification. Each of the Company
and its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of incorporation
and is qualified and in good standing as a foreign corporation in each
jurisdiction where the properties owned, leased or operated, or the business
conducted, by it require such qualification, except where the failure to so
qualify or be in good standing would not have a Company Material Adverse
Effect (as defined in Section 8.10). Each of the Company and its
Subsidiaries has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted, except where the failure to have such power and authority would
not have a Company Material Adverse Effect. The Company has heretofore made
available to Parent complete and correct copies of its Articles of
Incorporation and By-Laws as in effect as of the date hereof.
3.2 Capitalization. The authorized capital stock of the Company
consists of: (i) 12,000,000 Shares,
14
<PAGE>
of which, as of the date hereof 9,039,576 Shares were issued and outstanding,
and (ii) 500,000 shares of preferred stock, no par value per share, none of
which, as of the date hereof, were issued and outstanding. All of the
outstanding Shares have been duly authorized and validly issued and are fully
paid and nonassessable. Except as set forth in Section 3.2 of the Company
Disclosure Schedule, as of the date hereof all outstanding shares of capital
stock of the Company's Subsidiaries are owned by the Company or a direct or
indirect wholly owned subsidiary of the Company, free and clear of all liens,
charges, encumbrances, claims and options of any nature. Except as set forth
on Section 3.2 of the Company Disclosure Schedule, there are not as of the
date hereof any outstanding or authorized options, warrants, calls, rights
(including preemptive rights), commitments or any other agreements of any
character which the Company or any of its Subsidiaries is a party to, or may
be bound by, requiring it to issue, transfer, sell, purchase, redeem or
acquire any shares of capital stock or any securities or rights convertible
into, exchangeable for, or evidencing the right to subscribe for, any shares
of capital stock of the Company or any of its Subsidiaries.
3.3 Authority Relative to This Agreement. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and, subject to approval of this Agreement by the holders of two-thirds of
the outstanding Shares in accordance with the MGCL, to consummate the
transactions contemplated hereby. This Agreement and the consummation by the
Company of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby (other than,
with respect to the Merger, the approval of this Agreement by the holders of
two-thirds of the outstanding Shares in accordance with the MGCL). This
Agreement has been duly and validly executed and delivered by the Company
and, assuming this Agreement constitutes the valid and binding agreement of
Parent and Newco, constitutes the valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except that the
enforcement hereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating
15
<PAGE>
to creditors' rights generally and (ii) general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity
or at law).
3.4 Consents and Approvals; No Violation. Neither the execution
and delivery of this Agreement by the Company nor the consummation by the
Company of the transactions contemplated hereby will (a) conflict with or
result in any breach of any provision of the respective Articles of
Incorporation or certificate of incorporation, as the case may be, or
respective By-Laws of the Company or any of its Subsidiaries; (b) except as
set forth on Section 3.4(b) of the Company Disclosure Schedule, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, except (i) in connection with
the applicable requirements of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), (ii) pursuant to the applicable
requirements of the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder (the "Exchange Act"), (iii) the
filing of the Articles of Merger pursuant to the MGCL and appropriate
documents with the relevant authorities of other states in which the Company
or any of its Subsidiaries is authorized to do business all of which states
are set forth on Section 3.4(b)(iii) of the Company Disclosure Schedule, (iv)
as may be required by any applicable state corporation, securities or "blue
sky" laws or state takeover laws, (v) such filings, consents, approvals,
orders, registrations and declarations of the Company as may be required
under the laws of Germany or any other relevant foreign country or (vi) where
the failure to obtain such consents, approvals, authorizations or permits, or
to make such filings or notifications, would not have a Company Material
Adverse Effect; (c) except as set forth on Section 3.4(c) of the Company
Disclosure Schedule, result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration
16
<PAGE>
or lien or other charge or encumbrance) under any of the terms, conditions or
provisions of any note, license, agreement or other instrument or obligation
to which the Company or any of its Subsidiaries is a party or by which any of
them or any of their respective assets may be bound, except for such
violations, breaches and defaults (or rights of termination, cancellation or
acceleration or liens or other charges or encumbrances) as to which requisite
waivers or consents have been obtained or which would not have a Company
Material Adverse Effect; or (d) assuming the consents, approvals,
authorizations or permits and filings or notifications referred to in this
Section 3.4 are duly and timely obtained or made and the approval of this
Agreement by the Company's stockholders has been obtained, violate any order,
writ, injunction, decree, statute, rule or regulation in effect as of the
date of this Agreement and applicable to the Company or any of its
Subsidiaries or any of their respective assets, except for violations which
would not have a Company Material Adverse Effect.
3.5 SEC Reports; Financial Statements.
(a) The Company has filed all reports required to be filed by
it with the Securities and Exchange Commission (the "SEC") since January 1,
1995 pursuant to the federal securities laws and the SEC rules and
regulations thereunder, all of which as of their respective dates, complied
in all material respects with applicable requirements of the Exchange Act
(collectively, the "Company SEC Reports"). None of the Company SEC Reports,
including, without limitation, any financial statements or schedules included
therein, as of their respective dates contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) The consolidated statements of financial position and the
related consolidated statements of operations, stockholders' equity and cash
flows (including the related notes thereto) of the Company included in the
Company SEC Reports complied in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, have been prepared in conformity with generally
accepted accounting principles ("GAAP") applied on a basis consistent with
prior periods (except as otherwise noted therein), and present fairly the
financial position of the Company as of their respective dates, and the
consolidated results of its operations and its cash flows for the periods
presented therein (subject, in the case of
17
<PAGE>
the unaudited interim financial statements, to normal year-end adjustments).
(c) The income statement set forth on Section 3.5(c) of the
Company Disclosure Schedule is an accurate summary of the results of
operations for the period presented therein.
3.6 Absence of Certain Changes or Events. As of the date of this
Agreement, except as set forth on Section 3.6 of the Company Disclosure
Schedule or as a consequence of, or as contemplated by this Agreement, since
December 31, 1996, the business of the Company has been carried on only in
the ordinary and usual course, and other than in the ordinary course of
business, there has not occurred any change (other than a change affecting
the Company's industry generally) which has resulted or is reasonably likely
to result in a Company Material Adverse Effect.
3.7 Litigation. As of the date hereof, except as set forth on
Section 3.7 of the Company Disclosure Schedule there is no action, claim,
suit, proceeding or governmental investigation pending or, to the knowledge
of the Company, threatened against the Company or its Subsidiaries by or
before any court, governmental or regulatory authority or by any third party.
3.8 Taxes.
(a) The Company and its Subsidiaries have filed (or have
obtained extensions to file) all Tax Returns (as defined below) required to
be filed by the Company and its Subsidiaries for taxable periods ending on or
prior to the Closing other than those Tax Returns the failure of which to
file would not have a Company Material Adverse Effect. Such Tax Returns are
true, correct and complete in all material respects.
(b) All Taxes (as defined below) shown on such Tax Returns
have been paid in full or adequate provisions have been made to reflect such
items on the Company's or its Subsidiaries' balance sheet (in accordance with
GAAP).
(c) There are no material liens for Taxes upon the assets of
either the Company or its Subsidiaries
18
<PAGE>
except for statutory liens for current taxes not yet due.
(d) Neither the Company nor any Subsidiary has waived in
writing any statute of limitation with respect to Taxes of the Company or any
Subsidiary.
(e) For the purpose of this Agreement, "Taxes" shall mean all
taxes, charges, fees, levies, penalties or other assessments imposed by any
United States federal, state, local, or foreign taxing authority, including,
but not limited to income, excise, property, sales, transfer, franchise,
payroll, withholding, social security or other taxes, including any interest,
penalties or additions attributable thereto, and "Tax Return" shall mean any
return, report, information return or other document (including any related
or supporting information) with respect to Taxes.
3.9 Employee Benefit Plans; Labor Matters. (a) Section 3.9 of
the Company Disclosure Schedule sets forth a true and complete list of all
collective bargaining agreements, employment, consulting, severance, deferred
compensation and non-competition agreements, executive compensation plans,
stock purchase, stock award and stock option plans and agreements, restricted
stock awards, bonus and incentive plans, directors fee arrangements, both tax
qualified and non-qualified and statutory and non-statutory employee pension
plans, employee profit sharing plans, 401(k) savings plans, multiemployer
plans, employee welfare plans, group life insurance, hospitalization
insurance other similar plans or arrangements (either written or oral but
only to the extent an oral plan provides material benefits) providing for
benefits to any employees, consultants or director of the Company or any
Subsidiaries or affiliates of the Company. With respect to the employee
benefit plans, stock option plans, restricted stock award programs and other
programs and arrangements maintained or contributed to by the Company or any
of its Subsidiaries (the "Company Plans"), except as specifically set forth
on Section 3.9 of the Company Disclosure Schedule: (i) each Company Plan
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service (the "IRS")
that it is so qualified and nothing has occurred since the date of such
letter that could reasonably be expected to affect the
19
<PAGE>
qualified status of such Company Plan; (ii) each Company Plan has been
operated in all material respects in accordance with its terms and the
requirements of applicable law; (iii) neither the Company nor any of its
Subsidiaries has incurred any direct or indirect liability under, arising out
of or by operation of Title IV of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), in connection with the termination of, or
withdrawal from, any Company Plan or other retirement plan or arrangement,
and no fact or event exists that could reasonably be expected to give rise to
any liability. Except as set forth on Section 3.9 of the Company Disclosure
Schedule, the aggregate accumulated benefit obligations of each Company Plan
subject to Title IV of ERISA (as of the date of the most recent actuarial
valuation prepared for such Company Plan) do not exceed the fair market value
of the assets of such Company Plan (as of the date of such valuation).
(b) The Company is not subject to any collective bargaining
or other labor union contracts applicable to persons employed by the Company
or its Subsidiaries as of the date of this Agreement. As of the date of this
Agreement, there is no pending or threatened in writing labor dispute, strike
or work stoppage against the Company or any of its Subsidiaries which may
interfere with the respective business activities of the Company or its
Subsidiaries.
(c) As of the date of this Agreement, there are no more than
973,750 options issued and outstanding under the Company's stock option
plans. No options have been issued to employees or directors of the Company
or its Subsidiaries since January 1, 1998. There are no restricted stock
awards which have been issued by the Company that are currently outstanding.
(d) The consummation of the transactions contemplated by this
Agreement will not give rise to an obligation on behalf of the Company to
make severance payments to any individuals, except such as may arise from
actions of the Company taken at the direction of Parent following the
Effective Time.
(e) No payments made to any individual by the Company or any
Subsidiary as a result of the consummation of the transactions contemplated
by this Agreement
20
<PAGE>
would be non-deductible under either Section 162(m) of the Code or Section
280G of the Code.
(f) Neither the Company nor any Subsidiary has taken any
action or failed to take any action which would result in the imposition of a
material excise tax on the Company pursuant to Sections 4975, 4980B and 4999
of the Code.
3.10 Environmental Laws and Regulations. As of the date of this
Agreement, except as set forth on Section 3.10 of the Company Disclosure
Schedule, (i) the Company and each of its Subsidiaries is in compliance with
all applicable federal, state and local laws and regulations relating to
pollution or protection of human health or the environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata) (collectively, "Environmental Laws"), except for
non-compliance that would not have a Company Material Adverse Effect; (ii)
neither the Company nor any of its Subsidiaries (a) has received written
notice of any action, cause of action, claim, investigation, demand or notice
by any person or entity alleging liability under or non-compliance with any
Environmental Law (an "Environmental Claim") or (b) to the knowledge of the
Company is subject to any Environmental Claim which is reasonably likely to
have a Company Material Adverse Effect; (iii) there has not been a Release of
Hazardous Materials at any property currently or formerly owned or operated
by the Company, any of its Subsidiaries or predecessor in interest except
where such Release would not have a Company Material Adverse Effect; (iv) to
the knowledge of the Company there has not been a Release of Hazardous
Materials at any disposal or treatment facility that received Hazardous
Materials generated by the Company, its Subsidiaries or a predecessor in
interest. For the purpose of this Section, "Hazardous Materials" means (a)
any element, compound, or chemical that is defined, listed or otherwise
classified as a contaminant, pollutant, toxic pollutant, toxic or hazardous
substance, extremely hazardous substance or chemical, hazardous waste,
special waste, or solid waste under Environmental Laws; (b) petroleum,
petroleum-based or petroleum-derived products; (c) polychlorinated byphenyls;
(d) any substance exhibiting a hazardous waste characteristic including but
not limited to corrosivity, ignitability, toxicity or reactivity as well as
any radioactive or
21
<PAGE>
explosive materials; and (e) any asbestos-containing materials. The term
"Release" means any spilling, leaking, pumping, emitting, emptying,
discharging, injecting, escaping, leaching, migrating, dumping or disposing
of Hazardous Materials (including the abandonment or discarding of barrels,
containers or other closed receptacles containing Hazardous Materials) into
the environment.
3.11 Intangible Property; Copyrights. The Company and its
Subsidiaries own or have all rights to use all patents, trademarks, trade
names, service marks, brands, logos, copyrights, licenses, trade secrets,
customer lists and other proprietary intellectual property rights
(collectively "Intellectual Property") required for, used in or incident to
the businesses of the Company and its Subsidiaries as now conducted or
proposed to be conducted. All Intellectual Property owned by the Company is
valid and enforceable except as such invalidity or unenforceability would not
have or would reasonably be expected to have a Company Material Adverse
Effect. The Company has not received notice of any infringement, and has no
reason to know of any claim or threatened infringement of the rights of
others with respect to any Intellectual Property used or owned by the
Company, the loss of which could have a Company Material Adverse Effect.
Except as set forth in Section 3.11 of the Company Disclosure Schedule, the
Company and its Subsidiaries have not been sued within the past two years (or
with respect to a Subsidiary, since such Subsidiary was acquired by the
Company if acquired less than two years prior to the date hereof) for
infringing on the Intellectual Property of another entity or person. To the
knowledge of the Company, the Company is not now using, and has not in the
past used without appropriate authorization, any confidential information or
trade secrets of any third party. The Company has never received any notice
alleging such conduct. The Company has timely and accurately made all
requisite filings and payments with the Register of Copyrights and is
otherwise in compliance with all applicable rules and regulations of the
Copyright Office except where such noncompliance would not have a Company
Material Adverse Effect.
3.12 Compliance with Applicable Laws. Except as set forth in
Section 3.12 of the Company Disclosure Schedule, to the knowledge of the
Company, since January
22
<PAGE>
1, 1996 neither the Company nor any of its Subsidiaries has violated or
failed to comply with any statute, law, regulation, rule, judgment, decree or
order of any governmental entity applicable to its business or operations,
except for violations and failures to comply that would not, individually or
in the aggregate, reasonably be expected to result in a Company Material
Adverse Effect. The conduct of the business of the Company and its
Subsidiaries is in conformity with all federal, state and local governmental
and regulatory requirements applicable to its business and operations, except
where such nonconformities would not, in the aggregate, reasonably be
expected to result in a Company Material Adverse Effect. The Company and its
Subsidiaries have all permits, licenses and franchises from governmental
agencies required to conduct their businesses as now being conducted, except
for such permits, licenses and franchises the absence of which would not, in
the aggregate, reasonably be expected to result in a Company Material Adverse
Effect.
3.13 Insurance. To the knowledge of the Company, the Company and
its Subsidiaries have obtained and maintained in full force and effect
insurance with responsible and reputable insurance companies or associations
in such amounts, on such terms and covering such risks, including fire and
other risks insured against by extended coverage, as is reasonably prudent,
and each has maintained in full force and effect public liability insurance,
insurance against claims for personal injury or death or property damage
occurring in connection with the activities of the Company or its
Subsidiaries or any properties owned, occupied or controlled by the Company
or its Subsidiaries, in such amount as reasonably deemed necessary by the
Company or its Subsidiaries.
3.14 Approvals; Antitakeover Provisions. The Company has taken
all action necessary to approve the Transactions under the MGCL (except for
shareholder approval and the filing of a certificate or articles of merger),
including, but not limited to, all actions required to render the provisions
of Sections 3-601 through 3-604 of the MGCL restricting business combinations
with "interested shareholders" inapplicable to the Transactions. The Company
has taken all actions required to render the provisions of Section 3-702 of
the MGCL restricting voting rights of "control shares" inapplicable
23
<PAGE>
to Shares acquired by Parent, Newco or their affiliates pursuant to the Offer
or the Merger.
3.15 Voting Requirements. The affirmative vote of the holders of
two-thirds of the outstanding shares of Company Common Stock is the only vote
of the holders of any class of the Company's capital stock necessary to
approve this Agreement and the transactions contemplated by this Agreement.
3.16 Brokers and Finders. Other than as set forth on Section 3.16
of the Company Disclosure Schedule, the Company has not employed any
investment banker, broker, finder, advisor, consultant or intermediary in
connection with the transactions contemplated by this Agreement which would
be entitled to any investment banking, brokerage, finder's, advisory or
similar fee or commission in connection with this Agreement or the
transactions contemplated hereby.
3.17 Opinion of Financial Advisors. The Board of Directors has
received the opinion of Morgan Stanley & Co. Incorporated dated February 10,
1998, to the effect that, as of such date, the applicable Merger
Consideration is fair to the stockholders of the Company from a financial
point of view.
3.18 Information Supplied. None of the information supplied or to
be supplied by the Company for inclusion or incorporation by reference in (i)
the Offer Documents, (ii) the Schedule 14D-9, (iii) the information to be
filed by the Company in connection with the Offer pursuant to Rule 14f-1
promulgated under the Exchange Act (the "Information Statement") or (iv) the
proxy statement (together with any amendments or supplements thereto, the
"Proxy Statement") relating to the Special Meeting, if any, will, in the case
of the Offer Documents, the Schedule 14D-9 and the Information Statement, at
the respective times the Offer Documents, the Schedule 14D-9 and the
Information Statement are filed with the SEC or first published, sent or
given to the Company's stockholders, or, in the case of the Proxy Statement,
at the time the Proxy Statement is first mailed to the Company's stockholders
or at the time of the Special Meeting, if any, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in
24
<PAGE>
light of the circumstances under which they are made, not misleading. If at
any time prior to the Effective Time any event with respect to the Company or
its Subsidiaries should occur which is required to be described in a
supplement to (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
Information Statement, or (iv) the Proxy Statement, such event shall be so
described, and such supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the stockholders of the Company and to
Parent. The Schedule 14D-9, the Information Statement and the Proxy
Statement will comply in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder.
3.19 Confidentiality Agreements. Except as set forth in Section
3.19 of the Company Disclosure Schedule, the confidentiality agreements
entered into with any other potential purchasers are in substantially the
same form as the Confidentiality Agreement (as defined in Section 5.5) and
all benefits under such agreements shall inure to the Company as of the
Effective Time.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
AND NEWCO
Each of Parent and Newco represents and warrants jointly and severally
to the Company that:
4.1 Corporate Organization and Qualification. Each of Parent,
Newco and each of Parent's Subsidiaries which is both owned directly or
indirectly by Parent and directly or indirectly owns Newco is a corporation
duly organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation. Each of Parent, Newco and Parent's
Subsidiaries is qualified and in good standing as a foreign corporation in
each jurisdiction where the properties owned, leased or operated, or the
business conducted, by it require such qualification, except where the
failure to so qualify or be in good standing would not have a Parent Material
Adverse Effect (as defined in Section 8.10).
25
<PAGE>
4.2 Authority Relative to This Agreement. Each of Parent and
Newco has the requisite corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. This
Agreement and the consummation by Parent and Newco of the transactions
contemplated hereby have been duly and validly authorized by the respective
Boards of Directors of Parent and Newco and by Parent as the sole stockholder
of Newco, and no other corporate proceedings on the part of Parent and Newco
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by each of Parent and Newco and, assuming this Agreement
constitutes the valid and binding agreement of the Company, constitutes the
valid and binding agreement of each of Parent and Newco, enforceable against
each of them in accordance with its terms, except that the enforcement hereof
may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
4.3 Consents and Approvals; No Violation. Neither the execution
and delivery of this Agreement by Parent or Newco nor the consummation by
Parent and Newco of the transactions contemplated hereby will (a) conflict
with or result in any breach of any provision of the Articles of
Incorporation or the By-Laws, respectively, of Parent or Newco; (b) except as
set forth in Section 4.3 of the Disclosure Schedule delivered to the Company
by Parent concurrently with the execution hereof (the "Parent Disclosure
Schedule"), require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority,
except (i) in connection with the applicable requirements of the HSR Act,
(ii) pursuant to the applicable requirements of the Exchange Act, (iii) the
filing of the Articles of Merger pursuant to the MGCL and appropriate
documents with the relevant authorities of other states in which Parent or
Newco is authorized to do business or (iv) as may be required by any
applicable state corporation, securities or "blue sky" laws or state takeover
laws, (v) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications would not
have a Parent Material
26
<PAGE>
Adverse Effect; (c) result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration or liens or other
charges or encumbrances) under any of the terms, conditions or provisions of
any note, license, agreement or other instrument or obligation to which
Parent or any of its Subsidiaries is a party or by which any of them or any
of their respective assets may be bound, except for such violations, breaches
and defaults (or rights of termination, cancellation or acceleration or lien
or other charge or encumbrance) as to which requisite waivers or consents
have been obtained or which would not have a Parent Material Adverse Effect;
or (d) assuming the consents, approvals, authorizations or permits and
filings or notifications referred to in this Section 4.3 are duly and timely
obtained or made, violate any order, writ, injunction, decree, statute, rule
or regulation applicable to Parent or any of its Subsidiaries or to any of
their respective assets, except for violations which would not have a Parent
Material Adverse Effect.
4.4 Interim Operations of Newco. Newco was formed solely for the
purpose of engaging in the transactions contemplated hereby and has not
engaged in any business activities or conducted any operations other than in
connection with the transactions contemplated hereby.
4.5 Sufficient Funds. Either Parent or Newco has sufficient
funds available (through existing credit arrangements or otherwise) to
purchase all of the Shares outstanding on a fully diluted basis and to pay
all fees, expenses and payments related to the Transactions.
4.6 Share Ownership. None of Parent and Newco, or any of their
respective "affiliates" or Associates (as such terms are defined in Rule
12b-2 under the Exchange Act), beneficially own any Shares.
4.7 Information in Proxy Statement and Schedule 14D-9. None of
the information supplied by Parent or Newco for inclusion or incorporation by
reference in the Proxy Statement or the Schedule 14D-9 will, at the date
mailed to stockholders and at the time of the Special Meeting, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated
27
<PAGE>
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If at any time
prior to the Effective Time any event with respect to Parent or any of its
Subsidiaries should occur which is required to be described in a supplement
to the Proxy Statement or the Schedule 14D-9, such event shall be so
described, and such supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the stockholders of the Company and Parent.
With respect to information relating to Parent or Newco, the Proxy Statement
will comply in all material respects with the provisions of the Exchange Act
and the rules and regulations thereunder.
4.8 Investigation by Parent. Parent and Newco have conducted
their own independent review and analysis of the businesses, assets,
condition, operations and prospects of the Company and its Subsidiaries and
acknowledge that Parent and Newco have been provided access to the
properties, premises and records of the Company and its Subsidiaries for this
purpose. In entering into this Agreement, Parent and Newco:
(a) acknowledge that none of the Company, its Subsidiaries or any
of their respective directors, officers, employees, affiliates, agents or
representatives makes any representation or warranty, either express or
implied, as to the accuracy or completeness of any of the information
provided or made available to Parent and Newco or their agents or
representatives prior to the execution of this Agreement, and
(b) agree, to the fullest extent permitted by law, that none of the
Company, its Subsidiaries or any of their respective directors, officers,
employees, affiliates, agents or representatives shall have any liability or
responsibility whatsoever to Parent and Newco on any basis based upon any
information provided or made available, or statements made, to Parent and
Newco prior to the execution of this Agreement, except that the foregoing
limitations shall not apply with respect to representations or warranties of
the Company in any Company SEC Report or in Article III of this Agreement and
in the Company Disclosure Schedule, but always subject to the limitations and
restrictions contained in such representations and warranties.
28
<PAGE>
4.9 Brokers and Finders. Other than Credit Suisse First Boston
Corporation, which has been retained by Parent's Board of Directors, Parent
and Newco have not employed any investment banker, broker, finder, advisor,
consultant or intermediary in connection with the transactions contemplated
by this Agreement which would be entitled to any investment banking,
brokerage, finder's, advisory or similar fee or commission in connection with
this Agreement or the transactions contemplated hereby.
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS
5.1 Interim Operations of the Company. Except as set forth on
Section 5.1 of the Company Disclosure Schedule, during the period from the
date of this Agreement to the time the directors of Newco have been elected
to, and shall constitute a majority of, the Board of Directors of the Company
pursuant to Section 1.3 (unless Parent shall otherwise agree in writing and
except as otherwise contemplated by this Agreement), the Company will conduct
its operations according to its ordinary and usual course of business
consistent with past practice and seek to preserve intact its current
business organizations, keep available the service of its current officers
and employees and preserve its relationships with customers, suppliers and
others having business dealings with it. Without limiting the generality of
the foregoing, and except as otherwise contemplated by this Agreement or as
set forth on Section 5.1 of the Company Disclosure Schedule, the Company will
not, without the prior written consent of Parent:
(i) issue, sell, grant, dispose of, pledge or
otherwise encumber, or authorize or propose the issuance, sale,
disposition or pledge or other encumbrance of (A) any additional
shares of capital stock of any class (including the Shares), or any
securities or rights convertible into, exchangeable for, or evidencing
the right to subscribe for any shares of capital stock, or any rights,
warrants, options, calls, commitments or any other agreements of any
character to purchase or acquire any shares of capital stock or any
29
<PAGE>
securities or rights convertible into, exchangeable for, or evidencing the
right to subscribe for, any shares of capital stock or (B) any other
securities in respect of, in lieu of, or in substitution for, Shares
outstanding on the date hereof;
(ii) redeem, purchase or otherwise acquire, or propose
to redeem, purchase or otherwise acquire, any of its outstanding
Shares;
(iii) split, combine, subdivide or reclassify any
Shares or declare, set aside for payment or pay any dividend, or make
any other actual, constructive or deemed distribution in respect of
any Shares or otherwise make any payments to stockholders in their
capacity as such, other than the declaration and payment of regular
quarterly cash dividends in accordance with past dividend policy and
except for dividends by a direct or indirect wholly owned Subsidiary
of the Company;
(iv) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of the Company or any of its direct or indirect
Subsidiaries (other than the Merger);
(v) adopt any amendments to its Articles of
Incorporation or By-Laws or alter through merger, liquidation,
reorganization, restructuring or in any other fashion the corporate
structure or ownership of any direct or indirect Subsidiary of the
Company;
(vi) make any material acquisition, by means of
merger, consolidation or otherwise, or material disposition, of assets
or securities (other than the Merger);
(vii) other than in the ordinary course of business
consistent with past practice, incur any indebtedness for borrowed
money or guarantee any such indebtedness or issue any
30
<PAGE>
debt securities or make any loans, advances or capital contributions to, or
investments in, any other person other than the Company or any direct or
indirect wholly owned Subsidiary of the Company;
(viii) grant any material increases in the
compensation of any of its directors, officers or key employees,
except in the ordinary course of business and in accordance with past
practice, provided, however, that the Company shall be entitled to
pay, prior to the Effective Time, bonuses with respect to 1997
pursuant to the Company's Incentive Plan, and shall further be
entitled to disregard for purposes of the calculation of the amount of
such bonuses any effect that results from, or action that is taken in
contemplation of, this Agreement or the transaction contemplated
hereby;
(ix) enter into any new or amend any existing
employment or severance or termination agreement with any director or
officer of the Company;
(x) except as may be required to comply with
applicable law, become obligated under any new pension plan, welfare
plan, multiemployer plan, employee benefit plan, severance plan,
benefit arrangement, or similar plan or arrangement, which was not in
existence on the date hereof, or amend, other than in the ordinary
course of business consistent with past practice, any such plan or
arrangement in existence on the date hereof if such amendment would
have the effect of materially enhancing any benefits thereunder;
(xi) (A) take, or agree or commit to take, any action
that would make any representation or warranty of the Company
hereunder inaccurate at the Effective Time (except for representations
and warranties which speak as of a particular date, which need be
accurate only as of such date), (B) omit, or agree or commit to omit,
to take any action necessary to
31
<PAGE>
prevent any such representation or warranty from being inaccurate in any
material respect at the Effective Time (except for representations and
warranties which speak as of a particular date, which need be accurate only
as of such date), provided however that the Company shall be permitted to
take or omit to take such action which can be cured, and in fact is cured,
at or prior to the Effective Time or (C) take, or agree or commit to take,
any action that would result in, or is reasonably likely to result in, any
of the conditions of the Merger set forth in Article VI not being
satisfied; or
(xii) authorize, recommend, propose or announce an
intention to do any of the foregoing, or enter into any contract,
agreement, commitment or arrangement to do any of the foregoing.
5.2 Alternative Proposals. Subject to the last sentence of this
Section 5.2, from and after the date hereof and prior to the Effective Time,
the Company (a) will not, and will cause its officers, directors, employees,
representatives and agents not to, initiate, solicit or encourage, directly
or indirectly, any Alternative Proposal (as defined in Section 8.10) or
engage in any negotiations or enter into any agreement or provide any
confidential information or data to any person in connection with or relating
to any Alternative Proposal; (b) will immediately cease any existing
discussions or negotiations, if any, with any parties conducted heretofore
with respect to any Alternative Proposal; and (c) will notify Parent as soon
as practicable if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations and/or discussions
are sought to be initiated or continued with, the Company. Notwithstanding
the foregoing, nothing in this Section 5.2 shall require the Board of
Directors of the Company on behalf of the Company to act, or refrain from
acting, in any manner which, in the opinion of the Board of Directors of the
Company after consultation with its counsel, could reasonably be deemed
inconsistent with its fiduciary duties to the Company's stockholders under
applicable law.
32
<PAGE>
5.3 Certain Filings. The Company and Newco shall reasonably
cooperate with one another (a) in connection with the preparation of the
Proxy Statement and the Schedule 14D-9, and (b) in determining whether any
action by or in respect of, or filing with, any governmental body, agency or
official, or authority is required, or any actions, consents, approvals or
waivers are required to be obtained from parties to any material contracts,
in connection with the consummation of the transactions contemplated by this
Agreement and (c) in seeking any such actions, consents, approvals, or
waivers or making any such filings, furnishing information required in
connection therewith or with the Proxy Statement and the Schedule 14D-9 and
seeking timely to obtain any such actions, consents, approvals or waivers.
5.4 Satisfaction of Conditions; Receipt of Necessary Approvals.
(a) Subject to the terms and conditions herein provided, each
of the parties hereto agrees to (i) promptly effect all necessary
registrations, submissions and filings, including, but not limited to,
filings under the HSR Act, German Law Against Restraints of Competition and
submissions of information requested by governmental authorities, which may
be necessary or required in connection with the consummation of the
transactions contemplated by this Agreement, (ii) use its reasonable best
efforts to secure federal antitrust clearance (including taking steps to
avoid or set aside any preliminary or permanent injunction or other order of
any federal or state court of competent jurisdiction or other governmental
authority), (iii) use its reasonable best efforts to take all other action
and to do all other things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by
this Agreement and (iv) use its reasonable best efforts to obtain all other
necessary or appropriate waivers, consents and approvals (including but not
limited to such filings, consents, approvals, orders, registrations and
declarations as may be required under the laws of any foreign country in
which the Company or any of its Subsidiaries or Parent or any of its
Subsidiaries conducts any business or owns any assets) and to lift any
injunction or other legal bar to the Merger (and, in such case, to proceed
with the Merger as expeditiously as possible), subject, however, to the
requisite
33
<PAGE>
vote of the stockholders of the Company. Parent represents and warrants to
the Company that Parent's affiliates have full power and authority to effect
the transactions contemplated by this Section 5.4.
(b) Notwithstanding the foregoing, the Company shall not be
obligated to use its reasonable efforts or take any action pursuant to this
Section 5.4 if in the opinion of the Board of Directors after consultation
with its counsel such actions could reasonably be deemed inconsistent with
its fiduciary duties to the Company's stockholders under applicable law.
5.5 Access to Information. To the extent permitted by applicable
law, upon reasonable notice, the Company shall (and shall cause each of its
Subsidiaries to) afford to the officers, employees, accountants, counsel,
financing sources and other representatives of Parent, access, during normal
business hours during the period prior to the Effective Time, to all its
properties, books, contracts, commitments and records and, during such
period, the Company shall (and shall cause each of its Subsidiaries to)
furnish promptly to the Parent (a) a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of federal securities laws and (b) all
other information concerning its business, properties and personnel as Parent
may reasonably request. Parent will hold any such information which is
nonpublic in confidence in accordance with the provisions of the
Confidentiality Agreement between the Company and Parent, dated as of
December 5, 1997 (the "Confidentiality Agreement").
5.6 Publicity. The initial press release with respect to the
execution of this Agreement shall be a joint press release acceptable to
Parent and the Company. Thereafter, so long as this Agreement is in effect,
neither the Company, Parent nor any of their respective affiliates shall
issue or cause the publication of any press release or other announcement
with respect to the Merger, this Agreement or the other transactions
contemplated hereby without prior consultation with the other party, except
as may be required by law, the rules and regulations of any national
securities exchange or over-the-counter market or by any listing agreement
with a national securities exchange.
34
<PAGE>
5.7 Directors' and Officers' Insurance and Indemnification.
(a) From and after the consummation of the Offer, Parent
shall, and shall cause the Company (or, if after the Effective Time, the
Surviving Corporation) to, indemnify, defend and hold harmless any person who
is now, or has been at any time prior to the date hereof, or who becomes
prior to the Effective Time, an officer or director (the "Company Indemnified
Party") of the Company and its Subsidiaries against all losses, claims,
damages, liabilities, costs and expenses (including attorney's fees and
expenses), judgments, fines, losses, and amounts paid in settlement in
connection with any actual or threatened action, suit, claim, proceeding or
investigation (each a "Claim") to the extent that any such Claim is based on,
or arises out of, the fact that such person is or was a director or officer
of the Company or any of its Subsidiaries, and to the extent that any such
Claim pertains to any matter or fact arising out of any act or omission prior
to or at the Effective Time, regardless of whether such Claim is asserted or
claimed prior to, at or after the Effective Time, to the full extent
permitted under applicable law or the Company's Articles of Incorporation,
By-laws or indemnification agreements in effect at the date hereof identified
on Section 5.7 of the Company Disclosure Schedule, or otherwise as permitted
by contracts identified on Section 5.7 of the Company Disclosure Schedule,
including provisions relating to advancement of expenses incurred in the
defense of any action or suit. Without limiting the foregoing, in the event
any Company Indemnified Party becomes involved in any capacity in any Claim,
then from and after consummation of the Offer Parent shall, or shall cause
the Company (or the Surviving Corporation if after the Effective Time) to,
periodically advance to such Company Indemnified Party its legal and other
expenses (including the cost of any investigation and preparation incurred in
connection therewith), subject to the provision by such Company Indemnified
Party of an undertaking to reimburse the amounts so advanced in the event of
a final non-appealable determination by a court of competent jurisdiction
that such Company Indemnified Party is not entitled thereto.
(b) Parent and the Company agree that all rights to
indemnification and all limitations on liability existing in favor of a
Company Indemnified Party as provided
35
<PAGE>
in the Company's Articles of Incorporation and By-laws as in effect as of the
date hereof shall survive the Merger and shall continue in full force and
effect, without any amendment thereto, for a period of six years from the
Effective Time to the extent such rights are consistent with the MGCL;
provided, that in the event any claim or claims are asserted or made within
such six year period, all rights to indemnification in respect of any such
claim or claims shall continue until disposition of any and all such claims;
provided further, that nothing in this Section 5.7 shall impair any rights or
obligations of any present or former directors or officers of the Company
(c) Parent shall cause to be maintained in effect for the
Indemnified Parties (as defined below) for not less than six years after the
Effective Time policies of directors' and officers' liability insurance and
fiduciary liability insurance with respect to matters occurring at or prior
to the Effective Time (including, without limitation, the transactions
contemplated by this Agreement) providing substantially the same coverage
and containing terms and conditions which are no less advantageous, in any
material respect, to those currently maintained by the Company for the
benefit of the Company's present or former directors, officers, employees or
agents covered by such insurance policies prior to the Effective Time (the
"Indemnified Parties").
(d) In the event Parent or Newco or any of their successors
or assigns (i) consolidates with or merges into any other person and shall
not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers or conveys all or substantially
all of its properties and assets to any person, then, and in each such case,
to the extent necessary to effectuate the purposes of this Section 5.7,
proper provision shall be made so that the successors and assigns of Parent
and Newco assume the obligations set forth in this Section 5.7 and none of
the actions described in clauses (i) or (ii) shall be taken until such
provision is made.
36
<PAGE>
5.8 Employees.
(a) Parent agrees that individuals who are employed by the
Company and its Subsidiaries immediately prior to the Effective Time shall be
employees of the Company and its Subsidiaries as of the Effective Time (each
such employee, an "Affected Employee" and together with all former employees
of the Company and its Subsidiaries "Company Employees").
(b) Parent will, or will cause the Surviving Corporation to,
give Affected Employees full credit for purposes of eligibility and vesting
and determination of the level of benefits under any employee benefit plans
or arrangements maintained by Parent, the Surviving Corporation or any
Subsidiary of Parent for such Affected Employees' service with the Company or
any Subsidiary of the Company to the same extent recognized by the Company
immediately prior to the Effective Time.
(c) Parent will, or will cause the Surviving Corporation to,
(i) waive all limitations as to preexisting conditions exclusions and waiting
periods with respect to participation and coverage requirements applicable to
the Company Employees under any welfare benefit plans that such employees may
be eligible to participate in after the Effective Time, other than
limitations or waiting periods that are already in effect with respect to
such employees and that have not been satisfied as of the Effective Time
under any welfare plan maintained for the Company Employees immediately prior
to the Effective Time, and (ii) provide each Company Employee with credit for
any co-payments and deductibles paid prior to the Effective Time in
satisfying any applicable deductible or out-of-pocket requirements under any
welfare plans that such employees are eligible to participate in after the
Effective Time.
(d) Parent agrees that until December 31, 2000, the coverage
and benefits provided to Affected Employees pursuant to employee benefit
plans or arrangements maintained by Parent, the Surviving Corporation, or any
Subsidiaries of the Parent shall be, in the aggregate, not less favorable
than those provided to such employees immediately prior to the Effective Time
determined in accordance with the benefits set forth on Section 5.8(d)(i) of
the Company Disclosure Schedule, and after
37
<PAGE>
December 31, 2000, Parent agrees to provide or cause the Surviving
Corporation to provide coverage and benefits in the aggregate, at least as
favorable to the Affected Employees as the coverage and benefits provided to
Parent's employees. Without limiting the generality of the foregoing, Parent
agrees to honor, or to cause the Surviving Corporation to honor, until
December 31, 2000, the severance policy of the Company as in effect as of the
Effective Time, as set forth on Section 5.8(d)(ii) of the Company Disclosure
Schedule.
(e) Through December 31, 2000, Parent agrees to provide, or
to cause the Surviving Corporation to provide, to each currently retired
Company Employee and to each Company Employee who retires prior to December
31, 2000 (the "Retired Employees"), the benefits (other than stock options)
set forth on Section 5.8(e)(i) of the Company Disclosure Schedule. From
December 31, 2000 until December 31, 2002, Parent agrees to continue to
provide or to cause the Surviving Corporation to provide the Retired
Employees with the post-retirement medical insurance premium percentage
subsidy (as described on Section 5.8(e)(i) of the Company Disclosure
Schedule) which each such Retired Employee is receiving as of December 31,
2000 and that in all other respects, the post-retirement medical benefits
available to Retired Employees will be no less favorable than those available
to Parent's employees who are eligible for post-retirement medical benefits
under its retiree medical benefit plan. From and after December 31, 2002,
Parent will provide the Retired Employees the post-retirement medical
coverage provided to employees or former employees of Parent who are eligible
for post-retirement medical benefits, treating for all purposes of such
coverage the Retired Employee's service with the Company as service with
Parent.
(f) Parent and the Surviving Corporation hereby agree to
honor without modification and assume the employment agreements, executive
termination agreements and individual benefit arrangements set forth on
Section 5.8(f) of the Company Disclosure Schedule, all as in effect at the
Effective Time.
(g) Parent shall advise the employees of the Company, in a
written communication issued to the Company Employees as soon as practicable
following the
38
<PAGE>
date of this Agreement, of Parent's undertakings set forth in this Section
5.8.
(h) Until December 31, 2000, Parent agrees that there shall
be no termination or merger or consolidation of the Waverly, Inc. Pension
Plan (the "Pension Plan") and the Pension Plan shall not be amended except as
required by applicable law.
5.9 Corporate Presence. Parent and Newco agree that the Surviving
Corporation shall maintain a substantial operating presence in the City of
Baltimore, Maryland, including maintaining a substantial work force and
operations in Baltimore, for a period of five (5) years following the
Effective Time.
5.10 Conduct of Business of Newco. During the period of time from
the date of this Agreement to the Effective Time, Newco shall not engage in
any activities of any nature except as provided in or contemplated by this
Agreement.
5.11 Certain Filings. The Company and Newco shall reasonably
cooperate with one another (a) in connection with the preparation of the
Proxy Statement and the Schedule 14D-9, and (b) in determining whether any
action by or in respect of, or filing with, any governmental body, agency or
official, or authority is required, or any actions, consents, approvals or
waivers are required to be obtained from parties to any material contracts,
in connection with the consummation of the transactions contemplated by this
Agreement and (c) in seeking any such actions, consents, approvals, or
waivers or making any such filings, furnishing information required in
connection therewith or with the Proxy Statement and the Schedule 14D-9 and
seeking timely to obtain any such actions, consents, approvals or waivers.
5.12 Further Assurances. Upon the terms and subject to the
conditions herein provided, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all action and to do,
or cause to be done, all things necessary under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement. The provisions of Sections 5.7 are intended to benefit the
Company Indemnified Parties, and with respect to paragraph 5.7(c)
39
<PAGE>
hereof the Indemnified Parties, as the case may be, and shall be binding on
all successors and assigns of Parent, Newco, the Company and the Surviving
Corporation and shall be enforceable by the Company Indemnified Parties and
the Indemnified Parties, as the case may be, after the Effective Time.
Parent hereby guarantees the performance by the Surviving Corporation of the
obligations pursuant to Sections 5.7, 5.8. and 5.9.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
6.1 Conditions to Each Party's Obligations to Effect the Merger.
The respective obligations of each party to effect the Merger are subject to
the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. This Agreement shall have been
duly approved by the stockholders of the Company entitled to vote with
respect thereto in accordance with applicable law and the Articles of
Incorporation and By-Laws of the Company.
(b) Injunction. There shall not be in effect any statute,
rule, regulation, executive order, decree, ruling or injunction or other
order of a court or governmental or regulatory agency of competent
jurisdiction directing that the transactions contemplated herein not be
consummated or otherwise materially limiting or restricting ownership or the
operation of the business of the Surviving Corporation; provided, however,
that, subject to the terms and provisions herein provided (including but not
limited to Section 5.4 of this Agreement), prior to invoking this condition
each party shall use its reasonable efforts to have any such decree, ruling,
injunction or order vacated.
(c) Governmental Filings and Consents. Subject to the terms
and provisions herein provided (including but not limited to Section 5.4
hereof), all governmental consents, orders and approvals legally required for
the consummation of the Merger and the transactions contemplated hereby shall
have been obtained and be in effect at the Effective Time, other than
non-material consents, orders or approvals and the waiting periods
40
<PAGE>
under the HSR Act and under antitrust laws of applicable jurisdictions
outside the United States shall have expired or been terminated.
6.2 Additional Conditions to the Obligations of Parent and Newco.
The respective obligations of Parent and Newco to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the
following conditions, any or all of which may be waived in whole or in part
by Parent or Newco, as the case may be, to the extent permitted by applicable
law.
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and
correct as of the Effective Time as though made on and as of the Effective
Time (except for changes permitted by this Agreement and that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date), except in any case where
such failures to be true and correct in the aggregate would not have a
Company Material Adverse Effect.
(b) Performance. The Company shall have performed in all
material respects all of its respective covenants and agreements under this
Agreement theretofore to be performed.
(c) Officer's Certificate. Parent shall have received at the
Effective Time a certificate dated the Effective Time and executed by the
President or a Vice President of the Company certifying to the fulfillment of
the conditions specified in Sections 6.2(a) and (b) hereof.
6.3 Additional Conditions to the Obligations of the Company. The
obligation of the Company to effect the Merger is subject to the satisfaction
at or prior to the Effective Time of the following conditions, any and all of
which may be waived in whole or in part by the Company to the extent
permitted by applicable law:
(a) Representations and Warranties. The representations and
warranties of Parent and Newco set forth in this Agreement shall be true and
correct as of the Effective Time as though made on and as of the Effective
Time (except for changes permitted by this Agreement
41
<PAGE>
and that those representations and warranties which address matters only as
of a particular date shall remain true and correct as of such date), except
in any case where such failures to be true and correct in the aggregate would
not have a Parent Material Adverse Effect.
(b) Performance. Parent and Newco shall have performed in
all material respects all of their respective covenants and agreements under
this Agreement theretofore to be performed.
(c) Officer's Certificate. The Company shall have received
at the Effective Time a certificate dated the Effective Time and executed by
the President or a Vice President of Parent certifying to the fulfillment of
the conditions specified in Sections 6.3(a) and (b) hereof.
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement may be terminated and the Merger
contemplated herein may be abandoned at any time prior to the Effective Time,
whether before or after shareholder approval thereof:
(a) By the mutual consent of Parent, Newco and the Company.
(b) By either the Company or Parent:
(i) if shares of Company Common Stock shall not have
been purchased pursuant to the Offer on or prior to six (6) months
from the execution of this Agreement; provided, however, that the
right to terminate this Agreement under this Section 7.1(b)(i) shall
not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the
failure of Parent or Newco, as the case may be, to purchase shares of
Company Common Stock pursuant to the Offer on or prior to such date;
or
(ii) if any governmental entity of competent
jurisdiction in the United States
42
<PAGE>
or other country in which the Company or Parent directly or indirectly
has material assets or operations shall have issued an order, decree or
ruling or taken any other action (which order, decree, ruling or other
action the parties hereto shall use their respective reasonable best
efforts to lift), in each case permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement
and such order, decree, ruling or other action shall have become final
and non-appealable.
(c) By the Board of Directors of the Company:
(i) if, prior to the purchase of shares of Company
Common Stock pursuant to the Offer, (a) the Board of Directors of the
Company shall have entered into or shall have publicly announced its
intention to enter into an agreement or an agreement in principle with
respect to any Alternative Proposal that the Board of Directors
determines, in good faith after consultation with its financial
advisors, is a Superior Proposal (as defined in Section 8.10); (b)
the Board of Directors of the Company shall have withdrawn, or
modified or changed in a manner adverse to Parent or Newco its
approval or recommendation of the Offer, this Agreement or the Merger
or shall have recommended a Superior Proposal or shall have executed,
or shall have announced its intention to enter into, an agreement in
principle or definitive agreement relating to an Superior Proposal
with a person or entity other than Parent, Newco or their affiliates
(or the Board of Directors of the Company resolves to do any of the
foregoing); (c) any person or group (as defined in Section 13(d)(3) of
the Exchange Act) (other than Parent, Newco or any affiliate thereof)
shall have become, after the date of this Agreement, the beneficial
owner (as defined in Rule 13d-3 promulgated under the Exchange Act) of
a majority of the outstanding Shares, or (d) any representation or
warranty made by Parent or Newco in this Agreement shall not have been
true and correct in all material respects when made, or
43
<PAGE>
Parent or Newco shall have failed to observe or perform in any material
respect any of its material obligations under this Agreement; provided
that prior to exercising such right of termination, the Company shall
give prompt written notice to Parent of such misrepresentation or breach
of warranty or failure to observe or perform; provided, further, that
the Company shall not have such right of termination if the condition
resulting in such misrepresentation or breach of warranty or failure to
observe or perform is cured (i) in the event such notice is delivered on
or prior to the fourth business day prior to the then-scheduled
expiration date of the Offer, not later than the earlier of (A) such
expiration date and (B) ten business days following delivery of such
notice and (ii) in the event such notice is delivered on or after the
third business day prior to such expiration date, not later than three
business days following such delivery (it being agreed that in such
event the Offer shall be extended as necessary at least until the end of
such cure period); or
(ii) if Parent or Newco shall have terminated the
Offer, or the Offer shall have expired, without Parent or Newco, as
the case may be, purchasing any shares of Company Common Stock
pursuant thereto; provided that the Company may not terminate this
Agreement pursuant to this Section 7.1(c)(ii) if the Company is in
material breach of this Agreement; or
(iii) if Parent, Newco or any of their affiliates
shall have failed to commence the Offer on or prior to five business
days following the date of the initial public announcement of the
Offer; provided, that the Company may not terminate this Agreement
pursuant to this Section 7.1(c)(iii) if the Company is in material
breach of this Agreement.
(d) By Parent or Newco:
(i) if, due to an occurrence that if occurring after
the commencement of the Offer would result in a failure to satisfy any
44
<PAGE>
of the conditions set forth in Annex A hereto, Parent, Newco, or any of
their affiliates shall have failed to commence the Offer on or prior to
five business days following the date of the initial public announcement
of the Offer; provided that Parent may not terminate this Agreement
pursuant to this Section 7.1(d)(i) if Parent or Newco is in material
breach of this Agreement; or
(ii) prior to the purchase of shares of Company Common
Stock pursuant to the Offer, if (a) the Company shall have received
any Alternative Proposal which the Board of Directors of the Company
has determined is a Superior Proposal; (b) the Board of Directors of
the Company shall have withdrawn, or modified or changed in a manner
adverse to Parent or Newco its approval or recommendation of the
Offer, this Agreement or the Merger or shall have recommended an
Alternative Proposal or shall have executed, or shall have announced
its intention to enter into, an agreement in principle or definitive
agreement relating to an Alternative Proposal with a person or entity
other than Parent, Newco or their affiliates (or the Board of
Directors of the Company resolves to do any of the foregoing); (c) any
person or group (as defined in Section 13(d)(3) of the Exchange Act)
(other than Parent, Newco or any affiliate thereof) shall have become,
after the date of this Agreement, the beneficial owner (as defined in
Rule 13d-3 promulgated under the Exchange Act) of more than one-third
of the outstanding Shares, or (d) any representation or warranty made
by the Company in this Agreement shall not have been true and correct
in all material respects when made, or the Company shall have failed
to observe or perform in any material respect any of its material
obligations under this Agreement; provided that prior to exercising
such right of termination, Parent and Newco shall give prompt written
notice to the Company of such misrepresentation or breach of warranty
or failure to observe or perform; provided, further, that Parent and
Newco shall not have such right of termination if the condition
45
<PAGE>
resulting in such misrepresentation or breach of warranty or failure to
observe or perform is cured (i) in the event such notice is delivered on
or prior to the fourth business day prior to the then-scheduled
expiration date of the Offer, not later than the earlier of (A) such
expiration date and (B) ten business days following delivery of such
notice and (ii) in the event such notice is delivered on or after the
third business day prior to such expiration date, not later than three
business days following such delivery (it being agreed that in such
event the Offer shall be extended as necessary at least until the end of
such cure period).
7.2 Effect of Termination. In the event of the termination of
this Agreement as provided in Section 7.1, written notice thereof shall
forthwith be given to the other party or parties specifying the provision
hereof pursuant to which such termination is made, and this Agreement shall
forthwith become null and void, and there shall be no liability on the part
of Parent, Newco or the Company or their respective directors, officers,
employees, representatives, agents, advisors or shareholders other than the
obligations pursuant to this Section 7.2, except that the agreements
contained in Sections 8.1, 8.2, 8.3, 8.4, 8.6, 8.7, 8.8, 8.12, 8.14, 8.15,
8.16 and the last sentence of Section 5.5 shall survive the termination
hereof, provided, however, that if Parent or Newco terminates this Agreement
pursuant to Section 7.1(d)(ii)(a), (b) and (c) hereof, then immediately
following such termination the Company shall pay to Parent $10,000,000 in
full satisfaction of the obligations of the Company under this Agreement.
Nothing contained in this Section 7.2 shall relieve any party from liability
for fraud or for willful breach of this Agreement.
ARTICLE VIII
MISCELLANEOUS AND GENERAL
8.1 Payment of Expenses and Other Payments. Whether or not the
Merger shall be consummated, each party hereto shall pay its own expenses
incident to preparing for, entering into and carrying out this Agreement and
the consummation of the transactions contemplated hereby.
46
<PAGE>
8.2 Survival of Representations and Warranties; Survival of
Confidentiality Agreement. The representations and warranties made herein
shall not survive beyond the earlier of termination of this Agreement or the
Effective Time. This Section 8.2 shall not limit any covenant or agreement
of the parties hereto which by its terms contemplates performance after the
Effective Time. The Confidentiality Agreement shall survive any termination
of this Agreement, and the provisions of such Confidentiality Agreement shall
apply to all information and material delivered by any party hereunder.
8.3 Modification or Amendment. Subject to the applicable
provisions of the MGCL, at any time prior to the Effective Time, the parties
hereto may modify or amend this Agreement, by written agreement executed and
delivered by duly authorized officers of the respective parties; provided,
however, that after approval of this Agreement by the stockholders of the
Company, no amendment shall be made which reduces or changes the
consideration payable in the Merger or adversely affects the rights of the
Company's stockholders hereunder without the approval of such stockholders.
8.4 Waiver of Conditions. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party or parties
entitled to the benefits thereof only by a written instrument signed by the
party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
8.5 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each
of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
8.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of
47
<PAGE>
the State of Maryland without giving effect to the principles of conflicts of
law thereof.
8.7 Notices. Any notice, request, instruction or other document
to be given hereunder by any party to the other parties shall be in writing
and delivered personally or sent by registered or certified mail, postage
prepaid, or by facsimile transmission (with a confirming copy sent by
overnight courier), as follows:
(a) If to the Company, to
Waverly, Inc.
351 West Camden Street
Baltimore, Maryland 21117
(410) 528-4000 (telephone)
(410) 528-4414 (telecopier)
with copies to:
Michael P. Rogan
Skadden, Arps, Slate, Meagher &
Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005-2111
(202) 371-7000 (telephone)
(202) 393-5760 (telecopier)
Ariel Vannier
Venable, Baetjer, Howard & Civiletti,
LLP
1201 New York Avenue, N.W.
Suite 1000
Washington, D.C. 20005
(202) 962-4800 (telephone)
(202) 962 8300 (telecopier)
(b) If to Parent or Newco, to
Bruce C. Lenz, Executive Vice
President
Wolters Kluwer United States Inc.
161 North Clark Street
Chicago, IL 60601
(312) 425-7020 (telephone)
(312) 425-0233 (telecopier)
48
<PAGE>
with a copy to:
Arnold J. Schaab, Esq.
Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, NY 10022
(212) 326-0168 (telephone)
(212) 326-0806 (telecopier)
or to such other persons or addresses as may be designated in writing by the
party to receive such notice.
8.8 Entire Agreement; Assignment. This Agreement and the
Confidentiality Agreement (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all other
prior agreements and understandings, both written and oral, among the parties
or any of them with respect to the subject matter hereof and (b) shall not be
assigned by operation of law or otherwise without the prior written consent
of the other parties. Subject to the preceding sentence, this Agreement will
be binding upon, inure to the benefit of and be enforceable by the parties
and their respective permitted successors and assigns.
8.9 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and their respective
successors and assigns. Nothing in this Agreement, express or implied, other
than the right to receive the consideration payable in the Merger pursuant to
Article II hereof, is intended to or shall confer upon any other person any
rights, benefits or remedies of any nature whatsoever under or by reason of
this Agreement; provided, however, that the provisions of Sections 5.7 shall
inure to the benefit of the Company Indemnified Parties and the Indemnified
Parties and shall be binding on all successors and assigns of Parent, Newco,
the Company and the Surviving Corporation and shall be enforceable by the
Company Indemnified Parties and the Indemnified Parties, as the case may be,
after the Effective Time.
8.10 Certain Definitions. As used herein:
(a) "Alternative Proposal" shall mean any proposal or offer
for a merger, asset acquisition or other
49
<PAGE>
business combination involving the Company or any proposal or offer to
acquire a significant equity interest in, or a significant portion of the
assets of, the Company other than the transactions contemplated by this
Agreement.
(b) "Company Material Adverse Effect" shall mean any adverse
change in the assets, liabilities, financial condition, or results of
operations of the Company or any of its Subsidiaries which is material to the
Company and its Subsidiaries taken as a whole other than any change or effect
arising out of general economic conditions.
(c) "Parent Material Adverse Effect" shall mean any material
adverse change in the assets, liabilities, financial condition, or results of
operations of Parent or any of its Subsidiaries which is material to Parent
and its Subsidiaries taken as a whole other than any change or effect arising
out of general economic conditions.
(d) "Subsidiary" shall mean, when used with reference to any
entity, any corporation a majority of the outstanding voting securities of
which are owned directly or indirectly by such entity.
(e) "Superior Proposal" means any bona fide proposal to
acquire, directly or indirectly, for consideration consisting of cash and/or
securities, all of the Shares then outstanding or all or substantially all
the assets of the Company, and otherwise on terms which the Board of
Directors of the Company determines in good faith to be more favorable to the
Company and its shareholders than the Offer and the Merger (after
consultation with the Company's financial advisor).
8.11 Obligation of Parent. Whenever this Agreement requires Newco
to take any action, such requirement shall be deemed to include an
undertaking on the part of Parent to cause Newco to take such action and a
guarantee of the performance thereof.
8.12 Validity. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions
50
<PAGE>
of this Agreement shall remain in full force and effect and shall in no way
be affected, impaired or invalidated so long as the economic or legal
substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party.
8.13 Interpretation. The words "hereof", "herein", and "herewith"
and words of similar import shall, unless otherwise stated, be construed to
refer to this Agreement as a whole and not to any particular provision of
this Agreement, and article, section, paragraph, exhibit and schedule
references are to the articles, sections, paragraphs, exhibits and schedules
of this Agreement unless otherwise specified. Whenever the words "include",
"includes" or "including" are used in this Agreement they shall be deemed to
be followed by the words "without limitation". The words describing the
singular number shall include the plural and vice versa, and words denoting
any gender shall include all genders and words denoting natural persons shall
include corporations and partnerships and vice versa. The phrase "to the
best knowledge of" or any similar phrase shall mean such facts and other
information which as of the date of this Agreement are actually known (or
after reasonable inquiry would have been known) to (i) in the case of the
Company, any officer of the Company; and (ii) in the case of Parent or Newco,
any of their respective officers. The phrase "made available" in this
Agreement shall mean that the information referred to has been made available
if requested by the party to whom such information is to be made available.
The phrases "the date of this Agreement", "the date hereof", and terms of
similar import, unless the context otherwise requires, shall be deemed to
refer to February 10, 1998. As used in this Agreement, the term
"affiliate(s)" shall have the meaning set forth in Rule l2b-2 of the Exchange
Act. No presumption or burden of proof shall arise favoring or disfavoring
any party by virtue of the authorship of any provisions of this Agreement.
8.14 Captions. The Article, Section and paragraph captions herein
are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof.
8.15 Specific Performance. Each of the parties hereto
acknowledges and agrees that in the event of any
51
<PAGE>
breach of this Agreement, each non-breaching party would be irreparably and
immediately harmed and could not be made whole by monetary damages. It is
accordingly agreed that the parties hereto (a) will waive, in any action for
specific performance, the defense of adequacy of a remedy at law and (b)
shall be entitled, in addition to any other remedy to which they may be
entitled at law or in equity, to compel specific performance of this
Agreement in any action instituted in a court of competent jurisdiction.
8.16 Joint and Several Liability. Parent and Newco hereby agree
that they will be jointly and severally liable for all covenants, agreements,
obligations and representations and warranties made by either of them in this
Agreement.
8.17 Schedules. The Company Disclosure Schedule and the Parent
Disclosure Schedule shall be construed with and as an integral part of this
Agreement to the same extent as if the same had been set forth verbatim
herein. No such disclosure shall be deemed to be an admission or
representation as to the materiality of the item so disclosed.
52
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective duly authorized officers as of the date
first above written.
Attest: WAVERLY, INC.
[seal]
By: /s/ William M. Passano, Jr.
---------------------------------
Name: William M. Passano, Jr.
Title: Chairman
Attest: WOLTERS KLUWER U.S. CORPORATION
[seal]
By: /s/ Peter W. van Wel
---------------------------------
Name: Peter W. van Wel
Title: President
Attest: MP ACQUISITION CORP.
[seal]
By: /s/ Bruce C. Lenz
---------------------------------
Name: Bruce C. Lenz
Title: Vice President
53
<PAGE>
ANNEX A
CONDITIONS TO THE OFFER
The capitalized terms used in this Annex A shall have the meanings
ascribed to them in the Agreement and Plan of Merger to which it is attached,
except that the term "Merger Agreement" shall be deemed to refer to such
Agreement and Plan of Merger.
Notwithstanding any other provisions of the Offer, and in addition
to (and not in limitation of) Newco's rights to extend and amend the Offer at
any time in its sole discretion (subject to the provisions of the Merger
Agreement), Newco shall not be required to accept for payment or, subject to
any applicable rules and regulations of the SEC, including Rule 14e-1(c)
under the Exchange Act (relating to Newco's obligation to pay for or return
tendered Shares promptly after termination or withdrawal of the Offer), pay
for, and may delay the acceptance for payment of or, subject to the
restriction referred to above, the payment for, any tendered Shares, and may
terminate the Offer if (i) any applicable waiting period under the HSR Act or
the antitrust laws of applicable jurisdictions outside the United States has
not expired or terminated prior to the expiration of the Offer, (ii) the
Minimum Condition has not been satisfied, (iii) at any time on or after the
date hereof, and before the expiration of the Offer any of the following
conditions exist:
(a) there shall be any statute, rule, regulation, judgment,
order or injunction promulgated, entered, enforced, enacted, issued or
applicable to the Offer or the Merger by any governmental entity of competent
jurisdiction in the United States or other country in which the Company or
Parent directly or indirectly has material assets or operations which (l)
seeks to prohibit the consummation of the Offer or the Merger, (2) as a
result of the Offer or the Merger, seeks to restrain or prohibit, or impose
any material limitations on, Parent's or Newco's ownership or operation of
all or a material portion of the businesses or assets of the Company and its
Subsidiaries, taken as a whole, or of Parent and its subsidiaries, taken as a
whole, or compel Parent or any of its subsidiaries or affiliates to dispose
of or hold
A-1
<PAGE>
separate all or any material portion of the business or assets of the Company
and its Subsidiaries, taken as a whole, or of Parent and its subsidiaries,
taken as a whole or requires the Company, Parent or Newco to pay damages that
are material in relation to the Company and its Subsidiaries, taken as a
whole, (3) seeks to challenge, prohibit, or make illegal the acceptance for
payment, payment for or purchase of Shares pursuant to, or consummation of,
the Offer or the Merger, (4) seeks to impose material limitations on the
ability of Newco or Parent effectively to exercise full rights of ownership
of the Shares accepted for payment pursuant to the Offer, including, without
limitation, the right to vote the Shares purchased by it on all matters
properly presented to the Company's shareholders (5) seeks to require
divestiture by Parent or any of its Subsidiaries or affiliates of any Shares,
provided that Parent shall have used all reasonable efforts to cause any such
judgment, order or injunction to be vacated or lifted;
(b) there shall be threatened, instituted or pending any
action, suit, or proceeding by any governmental entity of competent
jurisdiction in the United States, or any other country in which the Company
or Parent directly or indirectly has material assets or operations, that is
reasonably likely, directly or indirectly, to result in any of the
consequences referred to in clauses (1) through (5) of paragraph (a) above;
(c) there has been since the date hereof any event,
occurrence or development or state of circumstances or facts which has had or
would reasonably be expected to have a Company Material Adverse Effect (as
defined in Section 8.10);
(d) the representations and warranties of the Company set
forth in the Merger Agreement shall not be true and accurate as of the date
of consummation of the Offer as though made on or as of such date or the
Company shall have breached or failed in any material respect to perform or
comply with any material obligation, agreement or covenant required by the
Merger Agreement to be performed or complied with by it except, (i) those
representations and warranties that address matters only as of a particular
date or only with respect to a specified period of time which need only be
true and accurate as of such date or with respect to such period or (ii)
A-2
<PAGE>
where the failure of such representations and warranties to be true and
accurate, or the breach, non-performance or non-compliance with such
obligations, agreements or covenants, do not have, individually or in the
aggregate, or would not reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect;
(e) the Merger Agreement shall have been terminated in
accordance with its terms;
(f) the Company shall have entered into a definitive
agreement or agreement in principle with any person with respect to an
Alternative Proposal;
(g) the Company's Board of Directors shall have withdrawn,
or modified or changed in a manner adverse to Parent or Newco (including by
amendment of the Schedule 14D-9) its recommendation of the Offer, the Merger
Agreement, or the Merger, or recommended an Alternative Proposal, or shall
have resolved to do any of the foregoing;
which in the sole judgment of Parent or Newco, in any such case, and
regardless of the circumstances giving rise to such condition, makes it
inadvisable to proceed with the Offer and/or with such acceptance for payment
or payments.
The foregoing conditions are for the sole benefit of Newco and
Parent and may be waived by Parent or Newco, in whole or in part at any time
and from time to time in the sole discretion of Parent or Newco.
A-3
<PAGE>
CERTAIN TRANSACTIONS
The Company and Mr. David J. Callard have an agreement pursuant to which
Mr. Callard provides financial advisory services in his capacity as Chair of
the Executive Committee and advisory services in the area of acquisition and
development ("A&D"). Under this agreement, Mr. Callard was retained at an
annual compensation rate of $90,000 through March 31, 1996, and in fiscal
1995 was awarded an option to purchase 5,000 shares of Common Stock at an
exercise price of $14.25 per share, which was the fair market value on the
grant date. The option is excercisable to the extent of 25% of the shares one
year from the grant date, an additional 25% two years from the grant date, an
additional 25% three years from the grant date and in full four years from
the grant date. Beginning in April 1996, the Company agreed to pay Mr.
Callard an annual retainer of $50,000. The agreement also entitles Mr.
Callard to receive contingent compensation for each A&D transaction in which
he plays an active role at the Company's request. Such additional
compensation is to be determined by mutual agreement at the outset of each
A&D project, reflecting its complexity and size. Pursuant to the agreement,
Mr. Callard is reimbursed for out-of-pocket expenses. In connection with the
agreement, Mr. Callard has waived his right to director's fees and future
participation in the Company's Director Stock Plan.
Waverly has entered into an agreement with Mr. John F. Spahr, Jr., which
replaces his prior employment agreement, pursuant to which Mr. Spahr will
provide consulting services to the Company. Under this agreement, Mr. Spahr
received $110,000 for 1995 and is entitled to receive $50,000 for each of the
years 1996 through 2000. In connection with the agreement, Mr. Spahr has
waived his right to director's fees and future participation in the Company's
Director Stock Plan.
The Company's subsidiary, Urban & Schwarzenberg Verlag fur Medizin GmbH,
is indebted to Gisela Urban, Dr. Urban's mother, for 150,000 DM
(approximately $97,410) bearing interest at 8% per annum payable on demand on
one year's notice. Loan amounts have been converted into dollars based upon
the currency exchange rate of .6494 DM per dollar in effect on December 31,
1996.
MANAGEMENT COMMITTEE REPORT
The Management Committee (the "Committee"), composed entirely of
nonemployee directors, meets periodically to formulate recommendations for
approval by the Board of Directors for executive compensation. The Committee
consisted in fiscal 1996 of Carolyn Manuszak (Chair), Michael E. Johns,
Ackneil M. Muldrow, II and Joseph M. Palazzolo.
The Committee's compensation recommendations are designed to enable the
Company to attract and retain qualified executives, reward achievement of
corporate and personal goals and motivate officers to meet divisional and
corporate financial and strategic objectives and to contribute to increasing
the shareholder value. Executive officers receive a salary, are eligible for
a bonus under Waverly's Incentive Plan ("WIN Plan") and participate in the
Company's Defined Benefit Pension Plan and in the Company's Incentive Savings
Plan ("WISP"), a tax-qualified plan that permits employees to make
contributions, a portion of which is matched by the Company. In addition,
executive officers are eligible to receive grants of options to purchase
Company stock. The Committee emphasizes stock ownership by executives as
highly desirable in that it closely aligns the economic interests of the
executives with those of the shareholders.
Salaries for executive officers (other than for the Chief Executive
Officer and the Chairman) are reviewed each year by the Company's Chief
Executive Officer and the Committee. Salaries for the Chief Executive Officer
and the Chairman are reviewed annually by the Committee. Salaries are
assessed in light of executives' performances for the prior year and other
economic and industry-specific conditions that prevail.
9
<PAGE>
The Company pays annual cash bonuses to executives under the WIN Plan for
achievement of corporate and/or divisional financial targets and for
achievement of individual performance objectives established as part of the
Company's long-range planning process. At the beginning of each year, the
Board meets with senior management to review the Company's long-range
strategic objectives and its annual budget. Financial and performance
targets, derived from this process, are used by the Committee to establish
objectives under the WIN Plan. In 1996, these objectives included achievement
of certain levels of earnings per share and return on equity. For each
operating division officer, 50% of bonus is based on his or her division
performance against budget and 50% is based on corporate results against
budget. For certain corporate officers (such as the Chief Executive Officer),
100% of bonus depends on overall corporate performance. Maximum bonuses for
each officer may not exceed 50% of salary. Bonuses paid for performance in
1996 are reflected in the Summary Compensation Table shown below.
The Company awards stock options to its executives from time to time to
provide additional financial incentives and reward superior performance. The
Committee grants options to individual officers based on its evaluation of a
number of factors, including level of base salary, level of responsibility,
expected level of contribution to the Company, prior individual performance
and prior stock option grants. The largest grants are awarded to the most
senior employees who, in the view of the Management Committee, have the
greatest potential impact on the Company's profitability and growth. Options
under the plan may be either incentive stock options or nonqualified stock
options at the discretion of the Management Committee. The exercise price of
these options will be at least equal to the fair market value of the Common
Stock on the date of grant. In 1996, the Committee granted stock options
exercisable at fair market value to certain key employees, including the
Company's officers. Stock option awards to the executive officers named in
the Summary Compensation Table are disclosed in that table.
Mr. Hutton, the Company's Chief Executive Officer, received compensation
in 1996 in accordance with the guidelines referred to above. Mr. Hutton's
base salary effective February 1996 was $350,000, reflecting the Committee's
conclusion that the performance of the Company in 1995 warranted a 4.5%
increase in 1996. The Committee had established budget, earnings per share
and return on equity targets for Mr. Hutton under the WIN Plan for 1996 based
on the long-range strategic business plan. The Company met its budget and
performance targets in 1996 and, in light of this performance, Mr. Hutton was
awarded a bonus of $61,250 and an option to purchase 20,000 shares of Common
Stock at an exercise price of $21.50 per share, which was equal to the fair
market value on the grant date (2/14/97). The Company also pays 100% of the
premium on a $2,000,000 term-life insurance policy for Mr. Hutton.
Rules proposed pursuant to Section 162(m) of the Internal Revenue Code
limit the allowable deduction for certain covered compensation paid to the
Company's officers to $1 million per year per executive. The rules provide
that certain qualifying, performance-based compensation will not be subject
to the deduction limit. The Company has structured its Employee Stock Option
Plan to cause option awards issuable under the Plan to comply with these
rules. In view of the current levels of other compensation paid to its
executives, the Company expects that its compensation will fall well within
the limits imposed by the Code and that Section 162(m) will not limit the
deductibility of its compensation to officers.
Carolyn Manuszak, Chair
Michael E. Johns, M.D.
Ackneil M. Muldrow, II
Joseph M. Palazzolo
10
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
paid by the Company in the last three fiscal years to the Chief Executive
Officer of the Company and the four next most highly compensated executive
officers:
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Annual Compensation (1) Compensation All Other
Name and Awards Compensation
Principal Position Year Salary ($)(2) Bonus ($)(3) Options (#) ($)(4)
- ------------------ ---- --------- --------- ------------- ---
<S> <C> <C> <C> <C> <C>
William M. Passano, Jr. 1996 325,000 56,875 0 9,260
Chairman of the Board 1995 300,000 71,800 0 8,610
1994 300,000 75,000 0 8,610
Edward B. Hutton, Jr. 1996 350,000 61,250 17,000 10,693
President and CEO 1995 335,000 80,200 15,000 12,952
1994 310,000 77,500 15,000 7,000
Michael Urban 1996 302,000 67,000 0 0
President and CEO, Urban 1995 313,000 52,500 0 540
& Schwarzenberg Verlag 1994 263,000 47,700 5,000 2,899
fur Medizin GmbH (5)
Arthur E. Newman 1996 205,000 35,875 9,000 2,960
Executive Vice President 1995 194,000 46,500 9,000 2,811
1994 183,500 45,875 9,000 2,908
Alma J. Wills 1996 135,000 45,900 6,000 1,836
President, Periodical Publishing 1995 130,000 20,300 6,000 2,018
1994 121,500 26,669 6,000 2,087
</TABLE>
- ----------
(1) Does not include perquisites and other personal benefits where the
aggregate value of such compensation to the executive officer is less than
10% of annual salary and bonus.
(2) Includes salary deferrals under the WISP.
(3) Comprises bonuses under the WIN Plan, which were accrued during the
fiscal year indicated but were paid in the following fiscal year.
11
<PAGE>
(4) Includes life insurance premiums paid by the Company and Company
matching contributions under the WISP. Under the WISP, the Company makes
matching contributions of 25% of each participant's contribution subject to a
maximum of 1.5% of an employee's compensation up to $9,240. The amounts for
1996 are as follows:
WISP Insurance
---- ---------
Passano, W. $ 2,375 $ 6,885
Hutton $ 2,375 $ 8,318
Urban $ 0 $ 0
Newman $ 2,375 $ 585
Wills $ 1,446 $ 390
(5) Dr. Urban's compensation has been converted into dollars based upon
the currency exchange rate of .6494 DM per dollar as of December 31, 1996,
.6961 DM per dollar in effect on December 29, 1995, and .6453 DM per dollar
in effect December 30, 1994.
Option Grants in Last Fiscal Year
The following table sets forth information concerning the grant and
exercise of options in the last fiscal year under the Waverly, Inc. 1996
Employee Stock Option Plan to the persons named in the Summary Compensation
Table:
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
Value at Assumed
Number Annual Rates of
of Securities % Of Total Stock Price
Underlying Options Granted Exercise Appreciation for
Options to Employees in Price Expiration Option Term (2)
Name Granted(1) Fiscal Year ($/Sh) Date 0% 5% 10%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Passano, W. 0 0.0% $ 0.00 N/A $0 $ 0 $ 0
Hutton 17,000 15.1% $21.125 2/9/06 $0 $225,852 $572,353
Urban 0 0.0% $ 0.00 N/A $0 $ 0 $ 0
Newman 9,000 8.0% $21.125 2/9/06 $0 $119,569 $303,010
Wills 6,000 5.3% $21.125 2/9/06 $0 $ 79,712 $202,007
</TABLE>
- ----------
12
<PAGE>
(1) All options were granted with an exercise price equal to the fair
market value of the Common Stock underlying the option on the date of the
grant. The options are exercisable to the extent of 25% of the shares one
year from the grant date, an additional 25% two years from the grant date, an
additional 25% three years from the grant date, and in full four years from
the grant date, subject to such limitations as are imposed by Section 162(m)
of the Internal Revenue Code on qualified options, unless accelerated upon a
change in control, retirement, death or disability. These options have a term
of ten years, unless terminated sooner in connection with death, disability,
retirement or termination.
(2) Amounts are based on the 0%, 5% and 10% annual compounded rates of
appreciation of the Common Stock price, prescribed by the Securities and
Exchange Commission, and are not intended to forecast future appreciation of
the Company's Common Stock. The prices of the Common Stock, assuming such
annual compounded rates of appreciation, would be $21.125, $34.41 and $54.79,
respectively.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
The following table provides information with respect to the stock
options exercised during fiscal year ended December 31, 1996 and the value as
of December 31, 1996 of unexercised in-the-money options held by the named
executive officers. The value realized on the exercise of options is
calculated using the difference between the per share option exercise price
and the market value of a share on the date of the exercise. The value of
unexercised in-the-money options at fiscal year end is calculated using the
difference between the per share option exercise price and the market value
of $23.75 per share at fiscal year end, December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED ON VALUE OPTIONS AT FY-END OPTIONS AT FY-END
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Passano, W. 9,600 $158,400 110,400 5,000 $1,600,100 $ 61,250
Hutton 0 0 208,644 53,356 2,914,639 482,486
Urban 5,000 $ 53,125 0 2,500 0 36,250
Newman 0 0 50,000 18,000 692,125 120,375
Wills 0 $ 0 41,100 12,000 578,213 80,250
</TABLE>
- ----------
DEFINED BENEFIT PENSION PLAN
The Company has a trusteed, noncontributory, defined benefit pension plan
in which all U.S. employees are eligible to participate. The plan provides
for an annual retirement benefit payable monthly based on the sum of (i)
amounts accrued to date under various career average pay formulae and (ii)
amounts accruing beginning for 1989 based on the following formula: 1.5% of
participant's compensation plus .65% of earnings in excess of the Social
Security Covered Compensation (the average of Social Security Taxable Wage
Basis for a specified 35-year period) for each year of credited service.
Earnings for purposes of the pension plan include base salary and commissions
but not overtime or bonuses. Benefits are payable upon retirement, death or
disability or upon termination of employment after five years of service.
Benefits are not subject to reduction for Social Security benefits. At their
normal retirement at age 65, the estimated annual retirement payments (based
on compensation for 1996 and subject to the limitations imposed by IRS
regulations) would be as follows: Mr. Hutton, $72,767; Mr.
13
<PAGE>
Newman, $70,113; and Ms. Wills, $63,513. Mr. William Passano, Jr.'s annual
retirement payments, assuming retirement at age 70, would be $103,282.
The Company's subsidiary, Urban & Schwarzenberg, has agreed to provide
supplementary retirement benefits to two current and thirteen former
employees, including Dr. Urban. Monthly benefits are payable upon retirement
based upon 50% of the retiree's highest achieved salary level. Upon the
retiree's death, his or her spouse and/or other specified beneficiaries are
generally entitled to receive a benefit payment. At his normal retirement at
age 65, the estimated annual retirement payment to Dr. Urban under this plan
(based on compensation for 1996) would be 232,500 DM (approximately $150,985).
14
<PAGE>
[WAVERLY, INC. LETTERHEAD]
PERSONAL AND CONFIDENTIAL December 5, 1997
Wolters Kluwer U.S. Corporation
CONFIDENTIALITY AGREEMENT
Dear Sirs:
In connection with your consideration of a possible transaction (the
"Transaction") with Waverly, Inc. ("Waverly"), you have requested certain
information concerning Waverly. Waverly is prepared, in its sole discretion,
to make available to you certain information which is non-public,
confidential or proprietary in nature concerning the business, financial
condition, operation and assets of Waverly for your use in connection with
your consideration of the Transaction.
As a condition to and in consideration of your being furnished such
information, you agree to treat any information concerning Waverly or its
business or operations (whether written, electronically recorded or oral, and
whether prepared by Waverly, its advisors or otherwise) which is furnished to
you by or on behalf of Waverly, including any materials prepared by you or
your representatives which reflect such information (herein collectively
referred to as the "Evaluation Material"), in accordance with the provisions
of this letter and to take or abstain from taking certain other actions
described in this letter. The term "Evaluation Material" does not include
information which (i) is already in your possession, provided that such
information is not subject to another confidentiality agreement with or other
obligation of secrecy to Waverly; (ii) becomes available to you on a
non-confidential basis from a source other than Waverly or its advisors,
provided that such source is not bound by a confidentiality agreement with or
other obligation of secrecy to Waverly; (iii) which hereafter becomes
generally available except through your fault.
You hereby agree that the Evaluation Material will be used solely for the
purpose of evaluating the Transaction, and that such information will be kept
confidential by you and may be disclosed only to those of
<PAGE>
Wolters Kluwer U.S. Corporation
December 5, 1997
Page 2
your directors, officers and employees, and representatives of your advisors
who need to know such information for the purpose of evaluating any such
possible transaction between Waverly and you (it being agreed that such
directors, officers, employees and representatives of your advisors shall be
informed by you of the confidential nature of such information, shall be
directed by you to treat such information confidentially, and shall agree to
be bound by the terms of this agreement prior to receipt of any Evaluation
Material), unless Waverly otherwise consents in writing. You hereby agree to
be responsible for any violations of this letter by any of the other persons
referred to in this paragraph other than Waverly.
In the event that you or any of your advisors are requested or required to
disclose any Evaluation Material by legal process or in connection with any
legal proceedings, you agree that you will provide prompt written notice of
such request or requirement to Waverly, so that Waverly may take whatever
steps it deems appropriate concerning disclosure of such information,
including requesting entry of appropriate protective orders, and/or waive
compliance with the provisions of this agreement. In the event that no such
protective order or other remedy is obtained, or that Waverly waives
compliance with the terms of this agreement, you and your advisors will
furnish only that portion of the information which, upon written advice of
counsel, is required to be provided and will exercise your best efforts at
Waverly's expense to obtain reliable assurance that the Evaluation Material
will be afforded confidential treatment.
You agree that nothing in this agreement will prevent Waverly from (i)
determining that certain Evaluation Material should be disclosed, if at all,
under terms and conditions which limit its disclosure further than the
limitations set forth above; and (ii) upon making any such determination,
conditioning access to any such Evaluation Material upon the execution of a
further agreement, satisfactory to Waverly, providing for such additional
terms and conditions. In addition, you will, and will to cause your
representatives to, honor the confidentiality provisions contained in any
agreements of Waverly which are made available to you and your
representatives.
<PAGE>
Wolters Kluwer U.S. Corporation
December 5, 1997
Page 3
You hereby acknowledge that you are aware, and that you will advise such
directors, officers, employees and representatives of your advisors who are
informed as to the matters which are the subject of this letter, that the
United States securities laws prohibit any person who has received from an
issuer material, non-public information from purchasing or selling securities
of such issuer or from communicating such information to any other person
under circumstances in which it is reasonably foreseeable that such person is
likely to purchase or sell such securities.
In addition, without the prior written consent of Waverly, you will not, and
will direct your directors, officers, employees and representatives of your
advisors not to, disclose to any person either the fact that discussions or
negotiations are taking place concerning a possible transaction between
Waverly and you or any of the terms, conditions or other facts with respect
to any such possible transaction, including the status thereof. Without
limiting the generality of the foregoing, you further agree that, without the
prior written consent of Waverly, you will not, directly or indirectly, enter
into any agreement, arrangement or understanding or any discussions which
might lead to such agreement, arrangement or understanding with any other
person regarding the Transaction. However, nothing in this agreement shall
prohibit you from disclosing or discussing negotiations concerning the
Transaction or any terms of a possible transaction between Waverly and you,
with and only with Reed Elsevier Inc.
In consideration of the Evaluation Material being furnished to you, you
hereby agree that, without the prior written consent of the Board of
Directors of Waverly, for a period of three (3) years from the date hereof,
neither you nor any of your affiliates, in any manner whatsoever, directly or
indirectly, will, acting alone or as part of a group, (a) acquire or offer or
agree to acquire, directly or indirectly, by purchase or otherwise, any
securities (or direct or indirect rights or options to acquire any
securities) of Waverly or any successor or affiliate of Waverly (subject to
an exception for de minimis passive investments to be mutually agreed upon by
the parties after the execution of this letter agreement), or seek by any
action not permitted under this letter agreement to influence or control the
management or policies of Waverly, or (b) publicly propose to (i) acquire
<PAGE>
Wolters Kluwer U.S. Corporation
December 5, 1997
Page 4
or offer or agree to acquire any securities (or direct or indirect rights or
options to acquire any securities) or assets of Waverly or (ii) otherwise act
or seek to influence or control the management, the board of directors or
policies of Waverly.
In addition, you agree that, for a period of three (3) years from the date
hereof, you will not, directly or indirectly, publicly present, or publicly
propose to present, to the stockholders of Waverly any proposal or offer for
a merger, tender or exchange offer or other form of business combination
involving Waverly, or effect, publicly propose to effect, or cause to occur
any of the foregoing, that previously has not been approved in writing by the
Board of Directors of Waverly, nor will you, directly or indirectly, solicit,
or propose (whether publicly or otherwise) to solicit, proxies or consents to
vote or become a participant in any "election contest" with respect to
Waverly (as such terms are used in Rule 14a-1 and Rule 14a-11 of Regulation
14A under the Securities Exchange Act of 1934, as amended).
Although Waverly has endeavored to include in the Evaluation Material
information known to it which it believes to be relevant for the purpose of
your investigation, you understand that neither Waverly nor any of its
directors, officers, employees, agents, representatives or advisors have made
or make any representation or warranty as to the accuracy or completeness of
the Evaluation Material. You agree that neither Waverly nor its directors,
officers, employees, agents, representatives or advisors shall have any
liability to you or any of your advisors resulting from the availability or
use of Evaluation Material.
If you determine that you do not wish to proceed with the Transaction, you
agree to promptly advise Waverly of such decision. In the event that you do
not proceed with the transaction which is the subject of this letter within a
reasonable time, you shall promptly return to Waverly at its request all
written Evaluation Material and any other written material containing or
reflecting any information in the Evaluation Material (whether prepared by
Waverly, its advisors or otherwise) and will not retain any copies, extracts,
or other reproductions in whole or in part of such written material, except
that all documents, memoranda, notes and other writings whatsoever prepared
by you or your
<PAGE>
Wolters Kluwer U.S. Corporation
December 5, 1997
Page 5
advisors based on the information in the Evaluation Material or which contain
information set forth in the Evaluation Material shall be destroyed, and such
destruction shall be certified in writing to Waverly by an authorized officer
supervising such destruction.
You agree that, for a period of two (2) years from the date of this
letter, you will not, directly or indirectly, solicit for employment any
employee of Waverly with whom you have had contact or who became known to you
in connection with your consideration of the Transaction. You agree not to
contact any person employed by Waverly regarding the subject matter of this
letter without the prior approval of Waverly.
You acknowledge that Waverly may establish procedures and guidelines (the
"Procedures") for the submission of proposals with respect to the
Transaction. You acknowledge and agree that (a) Waverly and its
representatives are free to conduct the process leading up to a possible
Transaction as Waverly and its representatives, in their sole discretion,
determine (including, without limitation, by negotiating with any third party
and entering into a preliminary or definitive agreement without prior notice
to you or any other person); and (b) Waverly reserves the right, in its sole
discretion, to change the Procedures relating to the consideration of the
Transaction at any time without prior notice to you or any other person, to
reject any and all proposals made by you or any of your representatives with
regard to the Transaction, and to terminate discussions and negotiations with
you at any time and for any reason.
You agree not to initiate or maintain contact (except for contacts made in
connection with existing commercial relationships and/or in the ordinary
course of business) with any officer, director, employee or agent of Waverly
except with the express prior permission of Waverly. It is understood that
Waverly will arrange for appropriate contacts for due diligence purposes. It
is further understood that all (a) communications regarding a possible
transaction, (b) requests for additional information, (c) requests for
facility tours or management meetings and (d) discussions or questions
regarding Procedures, will be submitted only to certain designated Waverly
employees.
<PAGE>
Wolters Kluwer U.S. Corporation
December 5, 1997
Page 6
You agree that unless and until a definitive agreement between Waverly and
you with respect to the Transaction referred to in the first paragraph of
this letter has been executed and delivered, neither Waverly nor you will be
under any legal obligation of any kind whatsoever with respect to the
Transaction by virtue of this or any other written, electronic or oral
communication with respect to the Transaction by any of Waverly's directors,
officers, employees, agents or any other representatives or their advisors
and representatives of those advisors, except for the matters specifically
agreed to in this letter. The agreements set forth in this letter may be
modified or waived only by a separate writing signed by Waverly and you
expressly modifying or waiving this agreement.
You also agree that in the event of any breach of the provisions of this
agreement, Waverly would be entitled to equitable relief, including an
injunction, because such a breach would cause irreparable harm for which
there would be no adequate remedy at law. You agree that you shall not
oppose the granting of such equitable relief.
In the event that you or your directors, officers, employees or
representatives shall have knowledge of any breach of the confidentiality of,
or the misappropriation of, any of the Evaluation Material, you shall
promptly give notice thereof to Waverly.
It is further understood and agreed that no failure or delay by Waverly in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other
or further exercise thereof or the exercise of any right, power or privilege
hereunder.
You understand and agree that if any provision contained in this letter
agreement or the application thereof to either you or Waverly, or any other
person or circumstance shall be invalid, illegal or unenforceable in any
respect under any applicable law as determined by a court of competent
jurisdiction, the validity, legality and enforceability of the remaining
provisions contained in this letter agreement, or the application of such
provision to such persons or circumstances other than those as to which it
has been held invalid or unenforceable, shall remain in full force and effect
and shall in no way be affected,
<PAGE>
Wolters Kluwer U.S. Corporation
December 5, 1997
Page 7
impaired or invalidated thereby. In the case of any such invalidity,
illegality or unenforceability, you agree to negotiate with Waverly in good
faith in an effort to agree upon a suitable and equitable substitute
provision to effect the original intent of the parties to this letter
agreement.
You agree that the rights and remedies of Waverly under or pursuant to this
letter agreement shall inure to the benefit of Waverly, its affiliates, and
their respective successors and assigns. This letter agreement shall not be
assigned by you without the prior written consent of Waverly. This letter
agreement shall be binding upon your successors and permitted assigns.
<PAGE>
Wolters Kluwer U.S. Corporation
December 5, 1997
Page 8
This letter agreement shall be governed by, and construed in accordance with,
the laws of the State of Maryland.
Very truly yours,
WAVERLY, INC.
By: /s/ Edward B. Hutton , Jr.
--------------------------------------
Name: Edward B. Hutton, Jr.
Title: President and CEO
Accepted and Agreed as
of the date first written
above:
WOLTERS KLUWER U.S. CORPORATION
By: /s/ Bruce C. Lenz
----------------------------------
Name: Bruce C. Lenz
Title: Executive Vice President
<PAGE>
STOCK OPTION AND TENDER AGREEMENT
Stock Option and Tender Agreement (this "Agreement"), dated February 10,
1998, is by and among Wolters Kluwer U.S. Corporation, a Delaware corporation,
("PARENT"), MP Acquisition Corp., a Maryland corporation and a wholly-owned
subsidiary of Parent ("SUB"), and the stockholders set forth in SCHEDULE I
hereto (each, a "STOCKHOLDER" and collectively, the "STOCKHOLDERS").
W I T N E S S E T H:
WHEREAS, Parent, Sub, and Waverly, Inc., a Maryland corporation (the
"Company") are entering into an Agreement and Plan of Merger (the "MERGER
AGREEMENT") pursuant to which Sub has agreed to make a tender offer (the
"Offer") for all outstanding shares of Common Stock, par value $2.00 per share
(the "COMMON STOCK"), of the Company at $39.00 per share (the "OFFER PRICE"),
net to the seller in cash, to be followed by a merger (the "Merger") of Sub with
and into the Company.
WHEREAS, as a condition to the willingness of Parent and Sub to enter into
the Merger Agreement, each of Parent and Sub has required that each Stockholder
agree, and in order to induce Parent and Sub to enter into the Merger Agreement,
each Stockholder has agreed, among other things, (i) to tender in the Offer all
of the shares of Common Stock now owned or which may hereafter be acquired by
such Stockholder (the "Shares"), (ii) to grant to Parent or Sub, as Parent shall
designate (the "Optionee") the option to purchase the Shares in certain
circumstances, (iii) as to certain Stockholders, to appoint Parent as such
Stockholder's proxy under certain circumstances to vote the Shares in connection
with the Merger Agreement, (iv) with respect to certain questions put to
stockholders of the Company for a vote, to vote the Shares, in each case, in
accordance with the terms and conditions of this Agreement, and (v) to restrict
transfers or exercises of Company Options (as defined in Section 8 below), if
any, held by such Stockholder except as provided herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the adequacy of
which is hereby acknowledged, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. TENDER OF SHARES. Each Stockholder severally (and not jointly)
agrees to tender and sell to Parent and/or Sub pursuant to the Offer all of the
Shares legally and/or beneficially owned by such Stockholder (as set forth on
SCHEDULE I hereto) and that once tendered, each Stockholder agrees that such
Shares will not be withdrawn from the Offer unless the Offer is terminated by
Parent or Sub without any shares of Common Stock being purchased thereunder.
Each Stockholder severally (and not jointly) agrees that such Stockholder shall
deliver to the depositary for the Offer, immediately following the commencement
of the Offer, either a letter of transmittal together with the certificates for
the Shares, if available, or a "Notice of Guaranteed Delivery", if the Shares
are not available.
<PAGE>
2. STOCK OPTION.
2.1 GRANT OF STOCK OPTION. Each Stockholder hereby grants to
Optionee an irrevocable option (the "STOCK OPTION") on the terms and conditions
set forth in this Section 2, to purchase all of the Shares legally and/or
beneficially owned by such Stockholder (as set forth on SCHEDULE I hereto), at
such time as Optionee may exercise the Stock Option during the Exercise Period
(as defined below), at a purchase price equal to the Offer Price.
2.2 EXERCISE OF STOCK OPTION. (a) The Stock Option may be exercised
by Optionee, in whole and for all of such Stockholder's Shares but not in part
or for less than all of such Stockholder's Shares, (i) if the Offer was
terminated by Parent or Sub for the reasons set forth in (f) or (g) of the
Conditions to the Offer (as set forth in Annex A to the Merger Agreement) or
(ii) in the case of the expiration of the Offer, if the Offer expired without
the purchase of Shares thereunder either without satisfaction of the Minimum
Condition (as defined in the Merger Agreement) or after the occurrence of
circumstances giving rise to a right of termination by Parent or Sub for the
reasons set forth in (f) or (g) of said Conditions of the Offer, in each case
without any violation of the Offer or the Merger Agreement by Parent or Sub.
Notice of exercise may be given at any time during the period (the "EXERCISE
PERIOD") commencing on the date on which the Offer is terminated or expires
(under the circumstances provided in this Section 2.2) and ending on the date
six months and one day after such commencement date. In addition, Optionee may
also exercise the Stock Option if the Merger Agreement shall terminate by reason
of the Company's exercise of its termination rights pursuant to Section
7.1(c)(i)(a) or (b) of the Merger Agreement, whereupon the Exercise Period shall
commence on the date such termination rights are exercised and end on the date
six months and one day thereafter.
(b) In the event Optionee wishes to exercise the Stock Option,
Optionee shall send a written notice (an "EXERCISE NOTICE") during the Exercise
Period to each Stockholder specifying that Optionee shall purchase the total
number of Shares held by such Stockholder and a date, which shall be a business
day, and a place, which shall be in the city of Baltimore, for the closing of
such purchase (the "STOCK OPTION CLOSING").
(c) Upon receipt of the Exercise Notice, each Stockholder shall
be obligated to deliver to Optionee a certificate or certificates representing
the number of Shares held by such Stockholder (or to direct the depositary for
the Offer to so deliver such certificate or certificates), in accordance with
the terms of this Agreement, on the later of the date specified in such Exercise
Notice or the first business day on which the conditions specified in Section
2.3 shall be satisfied. The date specified in such Exercise Notice may be as
early as one business day after the date of such Exercise Notice but shall not
be later than five (5) business days after the later of (i) the date of such
Exercise Notice, or (ii) the date all conditions under Section 2.3 are
satisfied.
2
<PAGE>
2.3 CONDITIONS TO DELIVERY OF THE SHARES. The obligation of the
Stockholders to deliver, and of the Optionee to pay for, the Shares upon
exercise of the Stock Option is subject to the following conditions:
(a) All waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, applicable to the exercise of the Stock
Option and the delivery of the Shares shall have expired or been terminated; and
(b) There shall be no permanent injunction or other order by any
court of competent jurisdiction restricting, preventing or prohibiting the
exercise of the Stock Option or the delivery of the Shares in respect of such
exercise.
2.4 STOCK OPTION CLOSING. At the Stock Option Closing, each
Stockholder will deliver to Optionee a certificate or certificates evidencing
the number of Shares owned by such Stockholder, each such certificate being duly
endorsed in blank and accompanied by such stock powers and such other documents
as may be necessary in Optionee's judgment to transfer record ownership of the
Shares into Optionee's name on the stock transfer books of the Company, and
Optionee will purchase the delivered Shares at the Offer Price. All payments
made by Optionee to the Stockholders pursuant to this Section 2.4 shall be made
by wire transfer of immediately available funds or by certified bank check
payable to the Stockholders, in an amount for each Stockholder equal to the
product of (a) the Offer Price and (b) the number of Shares delivered by such
Stockholder in respect of the Stock Option Closing.
2.5 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of any
change in the number of issued and outstanding shares of Common Stock by reason
of any stock dividend, subdivision, merger, recapitalization, combination,
conversion or exchange of shares, or any other change in the corporate or
capital structure of the Company (including, without limitation, the declaration
or payment of an extraordinary dividend of cash or securities) which would have
the effect of diluting or otherwise adversely affecting Optionee's rights and
privileges under this Agreement, the number and kind of the shares and the
consideration payable in respect of the Shares shall be appropriately and
equitably adjusted to restore to Optionee its rights and privileges under this
Agreement. Without limiting the scope of the foregoing, in any such event, at
the option of Optionee, the Stock Option shall represent the right to purchase,
in addition to the number and kind of Shares which Optionee would be entitled to
purchase pursuant to the immediately preceding sentence, whatever securities,
cash or other property the Shares subject to the Stock Option shall have been
converted into or otherwise exchanged for, together with any securities, cash or
other property which shall have been distributed with respect to such Shares.
3. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS.
Each Stockholder severally (and not jointly), represents and warrants
to Parent and Sub that:
3
<PAGE>
3.1 POWER AND AUTHORITY. Such Stockholder has all necessary power
and authority to enter into this Agreement and to sell, assign, transfer and
deliver to Parent and/or Sub, pursuant to the terms and conditions of this
Agreement and the Merger Agreement, the Shares legally and/or beneficially owned
by such Stockholder (as set forth on SCHEDULE I hereto).
3.2 NO OTHER RIGHTS. Except for this Agreement, there are no
outstanding options, warrants or rights to purchase or acquire such Shares of
such Stockholder.
3.3 ONLY SHARES. Such Shares of such Stockholder subject to this
Agreement are the only shares of Common Stock owned of record, or owned
beneficially with the power to sell, by such Stockholder.
3.4 TITLE. Such Stockholder has, and upon the closing of the Offer,
Sub shall receive good and marketable title to such Shares of such Stockholder,
free and clear of all liens, claims, encumbrances and security interests of any
nature whatsoever.
3.5 VALIDITY. This Agreement is the legal, valid and binding
agreement of such Stockholder enforceable against such Stockholder in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights generally and
except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought.
3.6 NON-CONTRAVENTION. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both) by
Stockholder under, or give rise to a right of termination, cancellation or
acceleration of any obligation under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
such Stockholder under, any provision of (i) the charter or organizational
documents of such Stockholder, if any (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to such Stockholder or (iii) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to such Stockholder or any of its properties or assets, other than, in the case
of clauses (ii) and (iii), any such conflicts, violations, defaults, rights,
liens, security interests, charges or encumbrances that, individually or in the
aggregate, would not materially impair the ability of such Stockholder to
perform its obligations hereunder or prevent, limit or restrict the consummation
of any of the transactions contemplated hereby.
4. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB. Parent and Sub
hereby represent and warrant to each Stockholder as follows:
4.1 POWER AND AUTHORITY. Each of Parent and Sub has all necessary
power and authority to enter into the Agreement and to purchase the Shares
pursuant to the terms and conditions of this Agreement and the Merger Agreement.
4
<PAGE>
4.2 SUFFICIENT FUNDS. Parent and/or Sub has, or prior to the date of
the Stock Option Closing will have, all of the funds necessary to consummate the
transactions contemplated hereby on a timely basis and to pay any and all of its
related fees and expenses.
4.3 VALIDITY. This Agreement is the legal, valid and binding
agreement of Parent and Sub enforceable against them in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights generally and
except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought.
4.4 NON-CONTRAVENTION. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of Parent, Sub or any
of Parent's other subsidiaries which are both owned directly or indirectly by
Parent and which directly or indirectly owns Sub ("Owning Subs") under, any
provision of (i) the Charter or Bylaws of Parent (or any comparable
organizational documents) or any provision of the comparable charter or
organizational documents of Sub or any Owning Sub, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Parent, Sub
or any Owning Sub or (iii) any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Parent, Sub or any Owning Sub or any of their
respective properties or assets, other than, in the case of clauses (ii) or
(iii), any such conflicts, violations, defaults, rights, liens, security
interests, charges or encumbrances that, individually or in the aggregate would
not have a Parent Material Adverse Effect (as defined in the Merger Agreement),
materially impair the ability of Parent or Sub to perform its obligations
hereunder or prevent, limit or restrict the consummation of any of the
transactions contemplated hereby.
5. COVENANTS OF STOCKHOLDERS.
5.1 NO DISPOSITION OR ENCUMBRANCE OF SHARES; NO ACQUISITION OF
SHARES. (a) Each Stockholder severally (and not jointly) covenants and agrees
that, except as contemplated by this Agreement, no Stockholder shall, and no
Stockholder shall offer or agree to, sell, transfer, tender, assign, hypothecate
or otherwise dispose of, or create any security interest, lien, claim, pledge,
option, right of first refusal, agreement, limitation on such Stockholder's
voting rights, charge or other encumbrance of any nature whatsoever with respect
to the Shares now legally and/or beneficially owned by, or that may hereafter be
acquired by, such Stockholder. Each Stockholder severally (and not jointly)
agrees that such Stockholder shall not grant any proxy or power of attorney with
respect to the voting of Shares (each a "Voting Proxy") to any person except to
vote in favor of any of the transactions contemplated by this Agreement or the
Merger Agreement. Each Stockholder hereby represents and warrants that such
Stockholder has granted no Voting Proxy which is currently (or which will
hereafter become) effective with respect to
5
<PAGE>
Shares owned by such Stockholder except Voting Proxies, if any, granted to
another Stockholder, and if such Stockholder has granted a Voting Proxy to any
person other than a Stockholder, such Voting Proxy is hereby revoked; PROVIDED,
HOWEVER, that nothing contained in the foregoing sentence shall be deemed to
revoke, limit or otherwise affect the terms of the Passano Voting Trust, the
Urban Voting Trust or the Spahr Voting Trusts (as described in the Company's
Proxy Statement, dated March 25, 1997) as such terms pertain to the voting of
Shares subject to such voting trusts. No Voting Proxy shall be given or written
consent executed by such Stockholder after the date hereof with respect to such
Stockholder's Shares (and if given or executed, shall not be effective) so long
as this Agreement remains in effect; PROVIDED, HOWEVER, that such Stockholder
may hereafter grant Voting Proxies in furtherance of such Stockholder's
obligations under Section 7.1 hereof.
(b) Each Stockholder hereby severally (and not jointly)
covenants and agrees that it shall not, and shall not offer to agree to, acquire
any additional shares of Common Stock, or options, warrants or other rights to
acquire shares of Common Stock, without the prior written consent of Parent or
Sub.
5.2 NO SOLICITATION OF TRANSACTIONS. Each Stockholder shall
immediately cease any existing discussions or negotiations, if any, with any
parties conducted heretofore with respect to any acquisition or exchange of all
or any material portion of the assets of, or any equity interest in, the Company
or any of its subsidiaries or any business combination with the Company or any
of its subsidiaries. From and after the date hereof, no Stockholder shall,
directly or indirectly, solicit or initiate any takeover proposal or offer from
any person, or (except to the extent permitted by the last sentence of Section
5.2 of the Merger Agreement) engage in discussions or negotiations relating
thereto (including by way of furnishing information). Each Stockholder shall
promptly advise Parent of the receipt of any Alternative Proposal (as defined in
the Merger Agreement).
5.3 STOCKHOLDERS' REPRESENTATIVE. Each Stockholder hereby appoints
William M. Passano, Jr. as Stockholders' Representative to act as Stockholders'
Representative for purposes of giving and receiving notices under this
Agreement.
6. COVENANTS OF PARENT AND SUB.
6.1 NO SALE. Neither Parent nor Sub will sell, offer to sell or
otherwise dispose of the Shares in violation of the Securities Act of 1933, as
amended.
6.2 PERFORMANCE. Parent and Sub shall perform in all material
respects all of their respective obligations under the Merger Agreement.
7. VOTING AGREEMENT: PROXY OF STOCKHOLDER.
7.1 VOTING AGREEMENT. (a) Each Stockholder hereby severally (and
not jointly) agrees that, during the time this Agreement is in effect, at any
meeting of the stockholders of the Company, however called, and in any action by
written consent of the
6
<PAGE>
stockholders of the Company, such Stockholder shall (i) vote all of the Shares
legally and/or beneficially owned by such Stockholder in favor of the Merger,
the Merger Agreement (as amended from time to time) and any of the transactions
contemplated by the Merger Agreement; (ii) vote such Shares against any action
or agreement that would result in a breach in any material respect of any
covenant, representation or warranty or any other obligation of the Company
under the Merger Agreement; and (iii) vote the Shares against any action or
agreement that would materially impede, interfere with or attempt to discourage
the Offer or the Merger.
(b) Each Stockholder hereby severally (and not jointly) further
agrees that, if the Merger Agreement shall terminate solely by reason of the
Company's exercise of its termination rights pursuant to Section 7.1(c)(i)(a) or
(b) of the Merger Agreement and for as long as the Exercise Period has not
ended, such Stockholder (i) shall attend or otherwise participate in all duly
called stockholder meetings and in all actions by written consent of
stockholders, (ii) shall vote the Shares legally and/or beneficially owned by
such Stockholder to enlarge the Board of Directors of the Company and to provide
the Optionee with a majority of members of the Board, (iii) shall not, without
the prior written consent of Parent or Sub, vote any of such Shares in favor of
any actions requiring stockholder approval which are described in Section 5 of
the Merger Agreement and (iv) shall otherwise vote such Shares, and use its
reasonable efforts in its capacity as stockholder of the Company, to prevent the
actions prohibited by Section 5 of the Merger Agreement.
7.2 IRREVOCABLE PROXY. With respect to those persons set forth in
Schedule II hereto, in the event that any Stockholder shall breach its covenant
set forth in Section 7.1, such Stockholder (without any further action on such
Stockholder's part) shall be deemed to have hereby irrevocably appointed Parent
as the attorney-in-fact and proxy of such Stockholder pursuant to the provisions
of Section 2-507 of the MGCL, with full power of substitution, to vote, and
otherwise act (by written consent or otherwise) with respect to all shares of
Common Stock (including the Shares) that such Stockholder is entitled to vote at
any meeting of stockholders of the Company (whether annual or special and
whether or not an adjourned or postponed meeting) or consent in lieu of any such
meeting or otherwise to vote such shares as set forth in Section 7.1 above;
PROVIDED that in any such vote or other action pursuant to such proxy, Parent
shall not have the right (and such proxy shall not confer the right) to vote to
reduce the Offer Price or the Merger Consideration (as defined in the Merger
Agreement) or to otherwise modify or amend the Merger Agreement to reduce the
rights or benefits of the Company or any stockholders of the Company (including
the Stockholders) under the Offer or the Merger Agreement or to reduce the
obligations of Parent and/or Sub thereunder; and PROVIDED FURTHER, that this
proxy shall irrevocably cease to be in effect at any time that (x) the Offer
shall have expired or terminated without any share of Common Stock being
purchased thereunder, in violation of the terms of the Offer or the Merger
Agreement or (y) Parent or Sub shall be in violation of the terms of this
Agreement. THIS PROXY AND POWER OF ATTORNEY IS IRREVOCABLE AND COUPLED WITH AN
INTEREST. Each Stockholder shall execute and deliver to Parent any proxy cards
that such Stockholder receives to vote in favor of the consummation of the
Merger. Parent shall deliver to the Secretary of the Company any such proxy
cards received by it at any meeting called to approve the consummation of the
Merger.
7
<PAGE>
8. TRANSFER OF OPTIONS. Each of the Stockholders identified on Schedule
I hereto as holding options to purchase shares of Common Stock of the Company
(each a "Company Option") severally (and not jointly) agrees that so long as
this Agreement shall remain in effect, such Stockholder (for purposes of this
Section 8, an "Optionholder") will not transfer or exercise any Company Options
held by such Optionholder provided, however, that at the Effective Time, (as
defined in the Merger Agreement) each Optionholder agrees to accept an amount in
respect of such Company Options equal to the product of (A) the excess, if any,
of the Offer Price over the per share exercise price of each such Company Option
and (B) the number of Shares subject thereto (such payment to be net of
applicable withholding taxes) and each such Company Option shall thereafter be
canceled.
9. EFFECTIVENESS: TERMINATION: NO SURVIVAL. This Agreement shall become
effective as to each Stockholder upon its execution by such Stockholder, Parent
and Sub hereto and upon the execution of the Merger Agreement. This Agreement
may be terminated as to each Stockholder at any time by mutual written consent
of such Stockholder, Parent and Sub. Other than the Stock Option, which shall
be governed by Section 2.2(a), this Agreement shall terminate, without any
action by the parties hereto, on the date on which the Merger Agreement
terminates in accordance with its terms. No such termination shall relieve any
party from liability for any breach of this Agreement. The representations and
warranties of the parties set forth in Sections 3 and 4 hereof shall not survive
the termination of this Agreement (except that if the Stock Option is duly
exercised, Sections 3.1, 3.2, 3.4 and 3.5 shall survive the exercise of the
Stock Option and the purchase of the Shares pursuant thereto, regardless of any
investigation made by Parent or Sub).
10. MISCELLANEOUS.
10.1 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered personally
or sent by registered or certified mail, postage prepaid, with return receipt
requested, as follows:
If to Parent or Sub, to:
Wolters Kluwer United States Inc.
161 North Clark Street
Chicago, Illinois 60601
Attention: Bruce C. Lenz
Executive Vice President
with a copy to:
Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, New York 10022
Attention: Arnold J. Schaab, Esq.
8
<PAGE>
If to the Stockholders, to the Stockholders'
Representative at:
Waverly, Inc.
351 West Camden Street
Baltimore, Maryland 21117
Attention: William M. Passano, Jr.
with a copy to:
Venable, Baetjer, Howard & Civiletti, LLP
1201 New York, Avenue, N.W.
Suite 1000
Washington, D.C. 20005
Attention: Ariel Vannier, Esq.
and a copy to:
Skadden, Arps, Slate, Meagher & Flom
1440 New York Avenue, N.W.
Washington, D.C. 20005
Attention: Michael P. Rogan, Esq.
10.2 WAIVER AND AMENDMENT. Any provision of this Agreement may be
waived at any time by the party which is entitled to the benefits thereof and
this Agreement may be amended or supplemented at any time. No such waiver,
amendment or supplement shall be effective unless in writing and signed by the
party sought to be bound thereby.
10.3 NO PRIOR AGREEMENTS. This Agreement and the Merger Agreement
contain the entire agreement, and supersede all other prior agreements and
understandings, both written and oral, among the parties hereto with respect to
the subject matter hereof. This Agreement is not intended to confer upon any
other person any rights or remedies hereunder.
10.4 SUCCESSORS AND ASSIGNS. This Agreement shall not be assignable,
except that Parent or Sub may assign its rights under this Agreement to another
direct or indirect wholly-owned subsidiary of Parent, but such assignment shall
not relieve Parent or Sub of their respective obligations hereunder. This
Agreement shall be binding upon, inure to the benefit of and be enforceable by
and against the parties hereto and their successors (including heirs,
administrators and executors of individuals) and permitted assigns.
10.5 REMEDIES. Parent and Sub, on the one hand, and the Stockholders,
on the other hand, each acknowledge and agree that the other would be
irreparably damaged in the event any of the provisions of this Agreement were
not performed by the other in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that each party shall be
9
<PAGE>
entitled to an injunction or injunctions to redress the breaches of this
Agreement and to specifically enforce the terms and provisions hereof in any
action instituted in any court of the United States or any state thereof having
jurisdiction, in addition to any other remedy to which such party may be
entitled at law or in equity.
10.6 EXPENSES. Each of the parties shall pay its own expenses in
connection with the negotiation, execution and performance of the Agreement.
10.7 COUNTERPARTS. This Agreement and any amendments hereto may be
executed in two or more counterparts, each of which shall be considered to be an
original, both of which together shall constitute the same instrument.
10.8 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the state of Maryland, without regard to the
principles of conflicts of laws.
10.9 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.
11. EFFECT OF HEADINGS. The section headings herein are for convenience
only and shall not affect the meaning or interpretation of this Agreement.
10
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement to take effect
as of the date set forth above.
WOLTERS KLUWER U.S. CORPORATION
By: /s/ Peter W. van Wel
--------------------------------
Name: Peter W. van Wel
Title: President
MP ACQUISITION CORP.
By: /s/ Bruce C. Lenz
--------------------------------
Name: Bruce C. Lenz
Title: Vice President
11
<PAGE>
STOCKHOLDERS
/s/ William M. Passano, Jr. /s/ Matthew K. Hill
- --------------------------- -------------------------------
William M. Passano, Jr. Matthew K. Hill
/s/ Helen A. Passano By: /s/ Kemp Passano Hill
- --------------------------- ----------------------------
Helen A. Passano Legal Representative of
Matthew K. Hill
/s/ Thomas J. Hill /s/ Edward Passano Hill
- --------------------------- -------------------------------
Thomas J. Hill Edward Passano Hill
/s/ Kemp Passano Hill By: /s/ Kemp Passano Hill
- --------------------------- ----------------------------
Kemp Passano Hill Legal Representative of
Edward Passano Hill
/s/ William Harrison Hill /s/ Leslie H. Passano
- --------------------------- -------------------------------
William Harrison Hill Leslie H. Passano
By: /s/ Kemp Passano Hill
---------------------------
Legal Representative of
William Harrison Hill
/s/ Virginia J. Hill /s/ Terry D. Passano
- --------------------------- -------------------------------
Virginia J. Hill Terry D. Passano
By: /s/ Kemp Passano Hill
---------------------------- Trust for Ida K. Passano
Legal Representative of
Virginia J. Hill
By: /s/ William M. Passano, Jr.
----------------------------
Name: William M. Passano, Jr.
Title: Trustee
By: /s/ Susan P. Macfarlane
----------------------------
Name: Susan P. Macfarlane
Title: Trustee
12
<PAGE>
Passano Family Life Estate
By: /s/ Edward M. Passano, Sr. /s/ C. Alexandra Passano
------------------------------- ------------------------------
Name: Edward M. Passano, Sr. C. Alexandra Passano
Title: Trustee
By: /s/ William M. Passano, Jr. /s/ William M. Passano, Jr.
------------------------------- ------------------------------
Name: William M. Passano, Jr. Legal Representative of
Title: Trustee C. Alexandra Passano
By: /s/ Susan P. Macfarlane /s/ Nicholas Bartlett
------------------------------- ------------------------------
Name: Susan P. Macfarlane Nicholas Bartlett
Title: Trustee
/s/ Cannon Passano By: /s/ Joanne Bartlett
- ----------------------------------- ---------------------------
Cannon Passano Legal Representative of
Nicholas Bartlett
By: /s/ William M. Passano, Jr. /s/ E. Magruder Passano, Jr.
------------------------------- ---------------------------
Legal Representative of E. Magruder Passano, Jr.
Cannon Passano
/s/ Caroline Passano /s/ Helen M. Passano
- ----------------------------------- ---------------------------
Caroline Passano Helen M. Passano
By: /s/ William M. Passano, Jr. /s/ Joanne B. Bartlett
-------------------------------- ---------------------------
Legal Representative of Joanne B. Bartlett
Caroline Passano
/s/ Tamara A. Passano /s/ Christopher Bartlett
- ---------------------------------- ---------------------------
Tamara A. Passano Christopher Bartlett
By: /s/ Helen M. Passano /s/ Elizabeth Bartlett
------------------------------ ---------------------------
Legal Representative of Elizabeth Bartlett
Tamara A. Passano
13
<PAGE>
/s/ Edward M. Passano, Sr. By:
- ------------------------------- ----------------------------
Edward M. Passano Legal Representative of
Elizabeth Passano
/s/ Mary F. Passano /s/ Catherine M. Passano
- ------------------------------- -------------------------------
Mary F. Passano Catherine M. Passano
/s/ Mary T. Fleming By: /s/ E. Magruder Passano, Jr.
- ------------------------------- ----------------------------
Mary T. Fleming Legal Representative of
Catherine M. Passano
/s/ Samuel G. Macfarlane /s/ Graham Long
- ------------------------------- -------------------------------
Samuel G. Macfarlane Graham Long
/s/ Sarah R. Passano By: /s/ Margaret M. Long
- -------------------------------- ---------------------------
Sarah R. Passano Legal Representative of
Graham Long
By: /s/ Helen M. Passano /s/ Margaret M. Long
----------------------------- -------------------------------
Legal Representative of Margeret P. Long
Sarah R. Passano
/s/ Anne Hutton
-------------------------------
Anne Hutton
/s/ Katherine Long
- -------------------------------
Katherine Long
By: /s/ Margaret M. Long
----------------------------
Legal Representative of
Katherine Long
/s/ Eleanor Macfarlane By: /s/ Edward B. Hutton, Jr.
- -------------------------------- ----------------------------
Eleanor Macfarlane Legal Representative of
Anne Hutton
14
<PAGE>
By: /s/ David Macfarlane /s/ Michael Urban
----------------------------- ------------------------------
Legal Representative of Michael Urban
Eleanor Macfarlane Urban Voting Trust
/s/ James P. Macfarlane By: /s/ William M. Passano, Jr.
- -------------------------------- ---------------------------
James P. Macfarlane Name: William M. Passano, Jr.
Title: Trustee
/s/ Jamie M. Macfarlane By: /s/ Michael Urban
- -------------------------------- ---------------------------
Jamie M. Macfarlane Name: Michael Urban
Title: Trustee
By: /s/ James P Macfarlane /s/ John Spahr, Jr.
----------------------------- ---------------------------
Legal Representative of John Spahr, Jr.
Jamie M. Macfarlane
/s/ Grace S. Macfarlane /s/ Robert Spahr
- -------------------------------- ---------------------------
Grace S. Macfarlane Robert Spahr
By: /s/ David G. Macfarlane /s/ Edward B. Hutton
---------------------------- ---------------------------
Legal Representative of Edward B. Hutton
Grace S. Macfarlane
/s/ David G. Macfarlane
- -------------------------------
David G. Macfarlane
15
<PAGE>
The Company hereby consents to the provisions of Section 7 of this
Agreement as applicable to the Shares held by the Spahr Voting Trusts which are
subject to that certain Escrow Agreement dated January 10, 1991 among the
Company, the Spahrs and First National Bank of Maryland, as Escrow Agent.
WAVERLY, INC.
By: /s/ Edward B. Hutton, Jr.
----------------------------
Edward B. Hutton, Jr.
Chief Executive Officer and President
The subscribers to each of the Passano Voting Trust, the Urban Voting Trust
and the Spahr Voting Trusts hereby consent to any and all actions taken or
contemplated to be taken by the Trustees who are Stockholders pursuant to this
Agreement.
SUBSCRIBERS:
/s/ William M. Passano, Jr.
- ---------------------------------
/s/ Susan P. Macfarlane
- ---------------------------------
/s/ Edward M. Passano, Jr.
- ---------------------------------
/s/ John Spahr, Jr.
- ---------------------------------
/s/ Robert Spahr, Jr.
- ---------------------------------
/s/ Michael Urban
- ---------------------------------
/s/ Catsfield, Inc
- ---------------------------------
By: Michael Urban
----------------------------
Beneficial Owner
16
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
WAVERLY, INC. As of 1/30/98 09-Feb-98
Directors and Officers Stock Ownership
Actual
Holdings @ 401K Total Options GRAND
01/30/98 Holdings Outstanding TOTAL
-------- ---------- ------------ -----------
William M. Passano Jr. O/D
- -----------------------
<S> <C> <C> <C> <C>
133,255 4,689 85,000 222,944
Helen A. (Wife) 45,384 45,384
Kemp H. (Adult) 27,001 27,001
Thomas (Adult) 0 0
Kemp & Thomas (Adult) 400 400
William (Minor) 1,903 1,903
Virginia (Minor) 2,703 2,703
Matthew (Minor) 100 100
Edward(Minor) 600 600
Leslie H. (Adult) 11,644 11,644
Will (Adult) 11,460 11,460
Terry D. (Adult) 1,708 1,708
Caroline (Minor) 1,753 1,753
C. Alexandra (Minor) 1,753 1,753
Cannon (Minor) 1,648 1,648
Joanne B. (Adult) 20,215 20,215
Christopher (Adult) 1,703 1,703
Nicholas (Minor) 1,703 1,703
Elizabeth (Minor) 2,103 2,103
------- ------- -------- ----------
Subtotal 267,036 4,689 85,000 356,725
Trust (Ida K.) 15,662 15,662
------- ------- -------- ----------
GRAND TOTAL 282,698 4,689 85,000 372,387
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
WAVERLY, INC. As of 2/8/98 10-Feb-98
Directors and Officers Stock Ownership
Actual
Holdings @ 401K Total Options GRAND
01/30/98 Holdings Outstanding TOTAL
-------- ---------- ------------ -----------
E. Magruder Passano, Jr. O/D
- -----------------------
<S> <C> <C> <C> <C>
Self 7,616 497 29,000 37,113
Helen M. (Wife) 79,769 79,769
Catherine M. (Minor) 62,435 62,435
Sarah R. (Minor) 30,333 30,333
Tamara A. (Minor) 44,115 44,115
-------- ------- -------- --------
GRAND TOTAL 224,268 497 29,000 253,765
Edward M. Passano
- ----------------- D
Self 2,600 2,600
Mary F. (Wife) 6,130 6,130
Mary T. Fleming 2,610 2,610
-------- ------- -------- --------
GRAND TOTAL 11,340 0 0 11,340
LIFE ESTATE 3,227,822 3,227,822
--------- ---------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
WAVERLY, INC. As of 2/8/98 10-Feb-98
Directors and Officers Stock Ownership
Actual Total
Holdings @ 401K Options GRAND
01/30/98 Holdings Outstanding TOTAL
-------- ---------- ------------ -----------
Samuel G. Macfarlane D
- -----------------------
<S> <C> <C> <C> <C>
Self 1,320 1,320
Susan P. (Wife) 0 0
Margaret P. Long (Adult) 20,664 20,664
Katherine Long (Minor) 900 900
Graham Long (Minor) 900 900
David G. (Adult) 21,552 21,552
Grace S. (Minor) 100 100
Eleanor (Minor) 100 100
James P. (Adult) 29,566 29,566
Jamie M. (Minor) 100 100
--------- -------- ----------- -----------
Subtotal 75,202 0 0 75,202
Trust 7,800 7,800
--------- -------- ----------- -----------
GRAND TOTAL 83,002 0 0 83,002
TOTAL FAMILY 3,829,130 5,186 114,000 3,948,316
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
WAVERLY, INC. As of 2/8/98 10-Feb-98
Directors and Officers Stock Ownership
Actual Total
Holdings @ 401K Options GRAND
1/30/98 Holdings Outstanding TOTAL
-------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Spahr, John Mr. Dir 155,000 0 0 155,000
Hutton, Edward B, Jr. O/D 850 1,817 282,000 284,667
Anne (Minor) 200 0 0 200
Urban, Michael O/D 800,000 0 2,500 802,500
Spahr, Robert O/D 155,000 0 0 155,000
--------- --------- ----------- -----------
Total 1,111,050 1,817 284,500 1,397,367
GRAND TOTAL 4,940,180 7,003 398,500 5,345,683
</TABLE>
20
<PAGE>
SCHEDULE II
Passano Family Life Estate
Robert Spahr
John Spahr, Jr.
Dr. Michael Urban
William M. Passano, Jr.
Helen A. Passano
Helen M. Passano, individually and as
legal guardian of:
- Catherine M. (minor)
- Sarah R. (minor)
- Tamara A. (minor)
Kemp Passano Hill, individually and as
egal guardian of:
- William (minor)
- Virginia (minor)
- Matthew (minor)
- Edward (minor)
James P. MacFarlane, individually and
as legal guardian of:
- Jamie M. (minor)
Edward B. Hutton, Jr., individually and
as legal guardian of:
- Anne (minor)
21
<PAGE>
WOLTERS KLUWER nv
Box 818
1000 AV Amsterdam THE NETHERLANDS
February 11, 1998
Waverly, Inc.
251 West Camden Street
Baltimore, Maryland
In connection with and pursuant to your entering into the Agreement and
Plan of Merger dated as of February 10, 1998 with MP Acquisition Corp. and
Wolters Kluwer U.S. Corporation, we hereby unconditionally guarantee the
payment obligations of MP Acquisition Corp. and Wolters Kluwer U.S. Corporation
under that Agreement.
Sincerely,
WOLTERS KLUWER nv
By: /s/ Peter W. van Wel
--------------------------
Peter W. van Wel
Member, Executive Board
Agreed and Accepted:
WAVERLY, INC.
By: /s/ Edward B. Hutton, Jr.
---------------------------
Name: Edward B. Hutton, Jr.
Its: Chief Executive Officer
and President
<PAGE>
[LOGO]
February 18, 1998
To the Stockholders of
Waverly, Inc.:
We are pleased to inform you that on February 10, 1998, Waverly, Inc.
("Waverly" or the "Company") entered into an Agreement and Plan of Merger (the
"Merger Agreement") with Wolters Kluwer U.S. Coporation ("Parent") and MP
Acquisition Corp. ("Newco"), an indirect wholly owned subsidiary of Parent,
pursuant to which Newco has today commenced a tender offer (the "Offer") to
purchase all of the outstanding shares of common stock, $2.00 par value per
share (the "Shares"), of the Company for $39.00 per Share in cash. Under the
terms of the Merger Agreement, following the successful completion of the Offer,
Newco will be merged (the "Merger") with and into the Company and all Shares not
purchased in the Offer (other than Shares held by Parent, Newco or the Company)
will be converted into the right to receive $39.00 per Share in cash.
Your Board of Directors has unanimously approved the Merger Agreement, the
Offer and the Merger and has determined that the Offer and the Merger are fair
to and in the best interests of Waverly's stockholders. The Board unanimously
recommends that the Company's stockholders accept the Offer and tender their
Shares in the Offer.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors described in the attached Schedule 14D-9
that is being filed today with the Securities and Exchange Commission,
including, among other things, the opinion of Morgan Stanley & Co. Incorporated,
the Company's financial advisor, that the consideration to be received by the
holders of Shares in the Offer is fair, from a financial point of view, to the
stockholders of Waverly.
In addition to the attached Schedule 14D-9 relating to the Offer, also
enclosed is the Offer to Purchase, dated February 18, 1998, of Newco, together
with related materials, including a Letter of Transmittal to be used for
tendering your Shares. These documents set forth the terms and conditions of the
Offer and the Merger and provide instructions as to how to tender your Shares.
We urge you to read the enclosed materials carefully.
Sincerely,
/s/ Edward B. Hutton, Jr.
--------------------------
Edward B. Hutton, Jr.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
/s/ William M. Passano, Jr.
---------------------------
William M. Passano, Jr.
CHAIRMAN OF THE BOARD
<PAGE>
February 11, 1998 PRESS RELEASE
For Immediate Release:
For more information, contact:
WAVERLY, INC. WOLTERS KLUWER U.S.
Edward B. Hutton, Jr. Mary Dale Walters
President and CEO Director, Public Relations
Phone: (410) 528-4241 Phone: 312-425-7014
Fax: (410) 528-4414 Fax: 312-425-0232
WAVERLY AGREES TO BE ACQUIRED BY WOLTERS KLUWER
TENDER OFFER AT $39 TO COMMENCE
Baltimore, MD...Waverly, Inc. (NASDAQ: WAVR) and Wolters Kluwer N.V.,
Amsterdam, announced today that they have reached a definitive merger
agreement through which Waverly would be acquired by Wolters Kluwer in a
transaction valued at approximately $375 million. As previously announced,
Waverly has been exploring the possible sale of the Company.
Under the agreement, Wolters Kluwer will promptly commence a tender
offer for all of the outstanding shares of Waverly common stock at US$39 per
share, net to the seller in cash. The tender offer is conditional on Wolters
Kluwer receiving tenders of at least 66 2/3% of Waverly's outstanding common
stock and the expiration of any waiting periods under applicable law.
Shareholders representing a majority of the outstanding shares of Waverly,
including members of the founding Passano family, have entered into a
definitive agreement to tender their shares into the tender offer and vote
for the merger. These shareholders have also granted Wolters Kluwer an option
to purchase shares.
William M. Passano, Jr., Chairman of Waverly, stated, "Waverly is very
pleased to have been able to achieve this level of value for our
shareholders. The $39 price represents a premium of over 42% to the trading
price of Waverly common stock prior to the announcement of the commencement
of the sale process. We are also impressed with Wolters Kluwer's
capabilities and commitment to the medical publishing business and their
employees."
Mr. Passano noted there will be integration between Waverly's business and
Lippincott-Raven Publishers, Inc., Wolters Kluwer's medical publishing
operations headquartered in Philadelphia. It is anticipated that certain
operations, such as medical society journals and others, will be based in
Baltimore. Other operations will be centered in Philadelphia. Mr. Passano
said that Wolters Kluwer has agreed to maintain a substantial operating
presence and a substantial work force in Baltimore, which is an important
consideration for the Passano family. He said he also believes "the combined
companies should have greatly enhanced strength and opportunities which
should, in the long run, increase job opportunities in Baltimore. I am
confident that Waverly's important presence in the Baltimore community will
continue for years to come."
"This acquisition is an excellent fit with Wolters Kluwer's operating
approach," said Peter W. van Wel, a member of the Executive Board of Wolters
Kluwer N.V. with responsibility for its activities in the United States. "In
today's highly competitive medical publishing markets, marked by a gradual
ongoing shift to electronic publishing, both the quality and quantity of
content ownership are becoming increasingly important. A strategic alliance
between Wolters Kluwer and
<PAGE>
PAGE 2
PRESS RELEASE
FEBRUARY 11, 1998
Waverly is a natural step towards securing long-term success in the medical
publishing marketplace. These are all things Wolters Kluwer values for
long-term growth."
Edward B. Hutton, Jr., President and Chief Executive Officer of Waverly,
stated, "We believe Wolters Kluwer is very well positioned to broaden the
company's products and market development capabilities. I am looking forward
to working with Wolters Kluwer's management, whom I know very well, to
continue to build a premier medical publishing company with worldwide
presence."
Morgan Stanley & Co. Incorporated is acting as financial advisor to Waverly
and rendered a fairness opinion to the Waverly Board of Directors. Credit
Suisse First Boston is acting as financial advisor to Wolters Kluwer in the
transaction and will serve as Dealer Manager in the tender offer.
Waverly, Inc., based in Baltimore, Maryland, for over one hundred years, is a
leading international publisher of medical and scientific books, periodicals,
and electronic media. Waverly's sales in 1997 were approximately $172
million. The company has over 600 employees.
Wolters Kluwer is a multidomestic publishing company active in 25 countries.
Core activities are legal and tax publishing, business publishing,
medical/scientific publishing, educational publishing/professional training
and trade publishing for select markets. Wolters Kluwer has sales of
approximately $2.5 billion. The company's U.S. holdings include Aspen
Publishers, CCH Incorporated, Facts and Comparisons, Legal Information
Services, and Lippincott-Raven Publishers.
<PAGE>
[LETTERHEAD OF MORGAN STANLEY]
February 10, 1998
Board of Directors
Waverly, Inc.
351 West Camden Street
Baltimore, MD 21117
Members of the Board:
We understand that Waverly, Inc. ("Waverly" or the "Company"), Wolters Kluwer
U.S. Corporation ("Wolters Kluwer") and MP Acquisition Corp., a wholly owned
subsidiary of Wolters Kluwer ("MP"), have entered into an Agreement and Plan of
Merger dated as of February 10, 1998 (the "Merger Agreement") which provides,
among other things, for (i) the commencement by MP of a tender offer (the
"Tender Offer") for all outstanding shares of common stock, par value $2.00 per
share (the "Waverly Common Stock") of Waverly for $39.00 per share net to the
seller in cash, and (ii) the subsequent merger (the "Merger") of MP with and
into Waverly. Pursuant to the Merger, Waverly will become a wholly owned
subsidiary of Wolters Kluwer, and each outstanding share of Waverly Common
Stock, other than shares held in treasury or held by Wolters Kluwer or any
affiliate of Wolters Kluwer, will be converted into the right to receive $39.00
per share in cash. 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 Waverly 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 the Company;
(ii) reviewed certain internal financial statements and other financial
and operating data concerning the Company prepared by the
management of the Company;
(iii) analyzed certain financial projections prepared by the management
of the Company;
<PAGE>
(iv) discussed the past and current operations and financial condition
and the prospects of the Company with senior executives of the
Company;
(v) reviewed the reported prices and trading activity for the Waverly
Common Stock;
(vi) compared the financial performance of the Company and the prices
and trading activity of the Waverly Common Stock 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 the Company, Wolters Kluwer and certain other parties and their
financial and legal advisors;
(ix) reviewed the Merger Agreement; and
(x) performed such other analyses 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 the Company. We
have assumed that the Merger will be consummated in accordance with the terms
set forth in the Merger Agreement. We have not made any independent valuation
or appraisal of the assets or liabilities of the Company, nor have we been
furnished with any such appraisals. 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
financing services for Wolters Kluwer N.V., the parent of Wolters Kluwer, and
have received fees for the rendering of these services.
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. In addition, Morgan Stanley expresses no opinion or
recommendation as to whether the holders of shares of Waverly Common Stock
should accept the Tender Offer.
<PAGE>
Based on the foregoing, we are of the opinion on the date hereof that the
consideration to be received by the holders of shares of Waverly Common Stock
pursuant to the Merger Agreement is fair from a financial point of view to such
holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Stuart J. Epstein
------------------------------
Stuart J. Epstein
Managing Director
