<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
DONNELLEY ENTERPRISE SOLUTIONS INCORPORATED
(Name of Issuer)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
25786M108
(CUSIP Number)
DENISE K. FLETCHER
CHIEF FINANCIAL OFFICER
BOWNE & CO., INC.
345 HUDSON STREET
NEW YORK, NEW YORK 10014
TELEPHONE: (212) 924-5500
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
Copy to:
ALAN G. SCHWARTZ
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
TELEPHONE: (212) 455-2000
MAY 27, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 8 Pages
<PAGE> 2
SCHEDULE 13D
- --------------------------------------------------------------------------------
CUSIP NO. 25786M108 PAGE 2 OF 8 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Bowne & Co., Inc.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC, BK
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
None
NUMBER OF --------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 2,140,000
EACH -------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH None
-------------------------------------------------------
10 SHARED DISPOSITIVE POWER
None
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,140,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
42.8%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
<PAGE> 3
SCHEDULE 13D
- --------------------------------------------------------------------------------
CUSIP NO. 25786M108 PAGE 3 OF 8 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
DESI Acquisition, Inc.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
None
NUMBER OF -------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 2,140,000
EACH -------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH None
-------------------------------------------------------
10 SHARED DISPOSITIVE POWER
None
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,140,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
42.8%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
<PAGE> 4
Page 4 of 8 Pages
This Statement on Schedule 13D (the "Schedule 13D") relates to
the tender offer by DESI Acquisition, Inc. (the "Purchaser"), a Delaware
corporation and a wholly owned subsidiary of Bowne & Co., Inc. (the "Parent"), a
New York corporation, to purchase all of the outstanding shares of Common Stock,
par value $.01 per share (the "Shares"), of Donnelley Enterprise Solutions
Incorporated (the "Issuer" or the "Company"), at $21.00 per Share, net to the
seller in cash and without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated June 3, 1998 (the "Offer to
Purchase"), a copy of which is attached hereto as Exhibit 7.1, and in the
related Letter of Transmittal, a copy of which is attached hereto as Exhibit
7.2.
ITEM 1. SECURITY AND ISSUER.
This Schedule 13D relates to the Common Stock, par value $.01
per Share, of Donnelley Enterprise Solutions Incorporated, a Delaware
corporation. The Issuer's principal executive office is located at 161 North
Clark Street, Suite 2400, Chicago, Illinois 60601.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(c), (f) This Schedule 13D is filed by the Purchaser and
Parent. The information set forth in the Introduction, Section 8 ("Certain
Information Concerning the Purchaser and the Parent") and Schedule I to the
Offer to Purchase is incorporated herein by reference.
(d)-(e) During the last five years, neither the Purchaser nor
the Parent nor, to the best knowledge of the Purchaser or the Parent, any of the
persons listed in Schedule I to the Offer to Purchase (i) has been convicted in
a criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgement, decree or final order enjoining future violations or, or prohibiting
activities subject to, federal or state securities laws or finding any violation
of such laws.
<PAGE> 5
Page 5 of 8 Pages
ITEM 3. SOURCE AND AMOUNT OF FUNDS.
The information set forth in Section 9 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
ITEM 4. PURPOSE OF THE TRANSACTION.
(a)-(g), (j) The information set forth in the Introduction,
Section 10 ("Background of the Offer; Contact with the Company"), Section 11
("The Merger Agreement"), Section 12 ("Purpose of the Offer; the Merger; Plans
for the Company") and Section 13 ("Dividends and Distributions") of the Offer
to Purchase is incorporated herein by reference.
(h)-(i) The information set forth in Section 14 ("Effect of
the Offer on the Market for the Shares, Nasdaq Listing and Exchange Act
Registration") of the Offer to Purchase is incorporated herein by reference.
ITEM 5. INTEREST IN THE SECURITIES OF THE ISSUER.
(a), (c) The information set forth in the Introduction,
Section 11 (the "Merger Agreement") and Schedule I of the Offer to Purchase
is incorporated herein by reference.
Pursuant to the irrevocable proxy granted to Purchaser
pursuant to the Stockholders' Agreement, dated as of May 27, 1998 between
Parent and R.R. Donnelley & Sons Company, a copy of which is attached hereto
as Exhibit 7.11, Purchaser and Parent may be deemed beneficial owners of
2,140,000 Shares (constituting 42.8% of the outstanding Shares of the Issuer).
None of the persons identified on Schedule I of the Offer to Purchase (which
is incorporated herein by reference) beneficially owns or has a right to
acquire directly or indirectly any Shares.
(b) Each of the Parent and the Purchaser has sole voting
power with respect to none of the Shares; may be deemed to have shared
voting power with respect to 2,140,000 of the Shares; has sole dispositive
power with respect to none of the Shares; and has shared dispositive power
with respect to none of the Shares.
(d) Except as set forth in this Schedule 13D, the Parent and
the Purchaser do not know of any other person who has the right to receive or
the power to direct the receipt of dividends from, or the proceeds from the
sale of, the Shares beneficially owned by the Parent or the Purchaser.
(e) Not applicable.
<PAGE> 1
EXHIBIT 7.1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
DONNELLEY ENTERPRISE SOLUTIONS INCORPORATED
AT
$21 NET PER SHARE
BY
DESI ACQUISITION, INC.
A WHOLLY OWNED SUBSIDIARY
OF
BOWNE & CO., INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:01 A.M., NEW YORK CITY TIME,
ON WEDNESDAY, JULY 1, 1998, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A
NUMBER OF SHARES OF COMMON STOCK WHICH, TOGETHER WITH ANY SHARES LEGALLY OR
BENEFICIALLY OWNED BY BOWNE & CO., INC. (THE "PARENT") OR DESI ACQUISITION, INC.
OR ANY OF ITS AFFILIATES AT THE COMMENCEMENT OF THE OFFER ("THE PURCHASER"),
CONSTITUTES MORE THAN 50% OF THE VOTING POWER (DETERMINED ON A FULLY-DILUTED
BASIS), ON THE DATE OF PURCHASE, OF ALL OF THE SECURITIES OF DONNELLEY
ENTERPRISE SOLUTIONS INCORPORATED (THE "COMPANY") ENTITLED TO VOTE GENERALLY IN
THE ELECTION OF DIRECTORS OR A MERGER AND (ii) THE EXPIRATION OR TERMINATION OF
ALL APPLICABLE WAITING PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST
IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"). THE OFFER IS ALSO SUBJECT
TO OTHER TERMS AND CONDITIONS. SEE THE INTRODUCTION AND SECTIONS 1 AND 15.
------------------------
THE BOARD OF DIRECTORS OF DONNELLEY ENTERPRISE SOLUTIONS INCORPORATED HAS
DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING EACH OF THE OFFER AND THE MERGER, ARE ADVISABLE AND FAIR TO AND IN THE
BEST INTERESTS OF THE STOCKHOLDERS OF DONNELLEY ENTERPRISE SOLUTIONS
INCORPORATED AND UNANIMOUSLY RECOMMENDS THAT HOLDERS OF SHARES ACCEPT THE OFFER
AND TENDER THEIR SHARES TO DESI ACQUISITION, INC.
------------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares (as defined herein) of Donnelley Enterprise Solutions Incorporated should
either (1) complete and sign the Letter of Transmittal (or a facsimile thereof)
in accordance with the instructions in the Letter of Transmittal, mail or
deliver the Letter of Transmittal (or such facsimile) and any other required
documents to the Depositary (as defined herein), and either deliver the
certificates representing the tendered Shares and any other required documents
to the Depositary or tender such Shares pursuant to the procedure for book-entry
transfer set forth in Section 3 or (2) request such stockholder's broker,
dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. Stockholders having Shares registered in the
name of a broker, dealer, commercial bank, trust company or other nominee must
contact such broker, dealer, commercial bank, trust company or other nominee if
they desire to tender Shares so registered.
A stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available, or who cannot comply
with the procedure for book-entry transfer on a timely basis, may tender such
Shares by following the procedures for guaranteed delivery set forth in Section
3.
Questions and requests for assistance may be directed to Goldman, Sachs &
Co. (the "Dealer Managers") or to D.F. King & Co., Inc. (the "Information
Agent") at their respective addresses and telephone numbers set forth on the
back cover of this Offer to Purchase. Additional copies of this Offer to
Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
also be obtained from the Information Agent or the Dealer Managers, or from
brokers, dealers, commercial banks or trust companies.
------------------------
The Dealer Managers for the Offer are:
GOLDMAN, SACHS & CO.
------------------------
The date of this Offer to Purchase is June 3, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION................................................ 1
THE TENDER OFFER............................................ 3
1. Term of the Offer, Expiration Date..................... 3
2. Acceptance for Payment and Payment for Shares.......... 4
3. Procedure for Tendering Shares......................... 6
4. Withdrawal Rights...................................... 8
5. Certain Federal Income Tax Consequences................ 9
6. Price Range of Shares; Dividend Policy................. 10
7. Certain Information Concerning the Company............. 10
8. Certain Information Concerning the Purchaser and the
Parent................................................. 13
9. Source and Amount of Funds............................. 15
10. Background of the Offer; Contacts with the Company..... 16
11. The Merger Agreement................................... 18
12. Purpose of the Offer; the Merger; Plans for the
Company................................................ 30
13. Dividends and Distributions............................ 32
14. Effect of the Offer on the Market for the Shares,
Nasdaq Listing and Exchange Act Registration........... 32
15. Certain Conditions of the Offer........................ 34
16. Certain Legal Matters and Regulatory Approvals......... 35
17. Fees and Expenses...................................... 37
18. Miscellaneous.......................................... 38
</TABLE>
SCHEDULE I Certain Information Regarding the Directors and Executive Officers
of the Purchaser and Parent.
i
<PAGE> 3
To the Stockholders of Donnelley Enterprise Solutions Incorporated:
INTRODUCTION
DESI Acquisition, Inc., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Bowne & Co., Inc., a New York corporation (the
"Parent"), hereby offers to purchase all of the outstanding shares of Common
Stock, par value $.01 per share (the "Shares"), of Donnelley Enterprise
Solutions Incorporated, a Delaware corporation (the "Company"), at a purchase
price of $21 per Share, net to the seller in cash without interest thereon, upon
the terms and subject to the conditions set forth in this Offer to Purchase and
in the related Letter of Transmittal (which, as amended from time to time,
together constitute the "Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, subject to Instruction 6 of the Letter of Transmittal, stock
transfer taxes on the transfer and sale of Shares pursuant to the Offer. The
Purchaser will pay all fees and expenses of Goldman, Sachs & Co. ("Goldman
Sachs"), which are acting as Dealer Managers for the Offer (in such capacity,
the "Dealer Managers"), The Bank of New York, which is acting as the Depositary
(in such capacity, the "Depositary") and D.F. King & Co., Inc. (in such
capacity, the "Information Agent") incurred in connection with the Offer. See
Section 17.
The Board of Directors of the Company (the "Board of Directors") has
unanimously determined that the Merger Agreement (as defined below) and the
transactions contemplated thereby, including each of the Offer and the Merger
(as defined below), are advisable and fair to and in the best interests of the
stockholders of the Company and recommends that the holders of the Shares accept
the Offer and tender their Shares to the Purchaser.
The Board of Directors of the Company has received the written opinion of
William Blair & Company, L.L.C., financial advisor to the Company ("William
Blair"), that the $21 per Share in cash to be received by the holders of Shares
in the Offer and the Merger is fair from a financial point of view to such
holders. A copy of the opinion of William Blair is attached to the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
which is being distributed to the stockholders of the Company, and stockholders
are urged to read the opinion in its entirety.
R.R. DONNELLEY & SONS COMPANY ("R.R. DONNELLEY" OR THE "LOCKED-UP
STOCKHOLDER"), THE BENEFICIAL OWNER OF APPROXIMATELY 43% OF THE ISSUED AND
OUTSTANDING SHARES HAS CONTRACTUALLY AGREED, AMONG OTHER THINGS, TO TENDER ITS
SHARES IN THE OFFER, PROVIDE PARENT WITH AN IRREVOCABLE PROXY, GRANT AN OPTION
AT THE $21 OFFER PRICE AND OTHERWISE SUPPORT THE TRANSACTION WITH PARENT. SEE
SECTION 11 FOR A DISCUSSION OF THE ARRANGEMENTS WITH R.R. DONNELLEY.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN
SECTION 1) A NUMBER OF SHARES WHICH, TOGETHER WITH ANY SHARES LEGALLY OR
BENEFICIALLY OWNED BY THE PARENT OR THE PURCHASER OR ANY OF ITS AFFILIATES AT
THE COMMENCEMENT OF THE OFFER, CONSTITUTES MORE THAN 50% OF THE VOTING POWER
(DETERMINED ON A FULLY-DILUTED BASIS), ON THE DATE OF PURCHASE, OF ALL THE
SECURITIES OF THE COMPANY ENTITLED TO VOTE IN THE ELECTION OF DIRECTORS OR IN A
MERGER (THE "MINIMUM CONDITION") AND (ii) THE EXPIRATION OR TERMINATION OF ALL
APPLICABLE WAITING PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS
ACT OF 1976, AS AMENDED THE ("HSR ACT") (THE "HSR CONDITION"). SEE SECTIONS 1
AND 15. IF THE PURCHASER PURCHASES NOT LESS THAN THAT NUMBER OF SHARES NEEDED TO
SATISFY THE MINIMUM CONDITION, IT WILL BE ABLE TO EFFECT THE MERGER WITHOUT THE
AFFIRMATIVE VOTE OF ANY OTHER STOCKHOLDER OF THE COMPANY. SEE SECTION 12.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of May 27, 1998 (the "Merger Agreement"), among the Parent, the Purchaser and
the Company. The Merger Agreement provides, among other things, for the making
of the Offer by the Purchaser, and further provides that, following the
completion of the Offer, upon the terms and subject to the conditions of
<PAGE> 4
the Merger Agreement and the Delaware General Corporation Law (the "DGCL"), the
Purchaser will be merged with and into the Company (the "Merger"). Following the
Merger, the Company will continue as the surviving corporation (the "Surviving
Corporation") and become a wholly owned subsidiary of the Parent, and the
separate corporate existence of the Purchaser will cease.
Pursuant to the Merger Agreement, the Company agrees, if and to the extent
permitted by law, and subject to the terms of the Merger Agreement, to take all
necessary and appropriate actions to cause the Merger to become effective as
soon as reasonably practicable after the purchase of the Shares pursuant to the
Offer without a meeting of the Company's stockholders in accordance with the
DGCL. See Section 11.
At the effective time of the Merger (the "Effective Time"), each Share
issued and outstanding immediately prior to the Effective Time (other than
Shares owned by the Parent, the Purchaser or the Company, or by any direct or
indirect subsidiary of any of them (which will be cancelled) or other than
Shares, if any (collectively, "Dissenting Shares"), held by stockholders who
have properly demanded appraisal of their Shares in accordance with Section 262
of the DGCL) will be converted into the right to receive $21 in cash (the "Per
Share Amount"), payable, without interest, to the holder thereof, upon the
surrender of the certificate that formerly represented such Share, less any
withholding taxes required under applicable law.
The Company has represented to the Parent that as of May 27, 1998, there
were 5,010,277 Shares issued and outstanding and 477,913 Shares reserved for
issuance upon the exercise of outstanding stock options. Based upon the
foregoing, the Purchaser believes that approximately 2,744,096 Shares constitute
a majority of the outstanding Shares on a fully-diluted basis.
The Company has advised the Purchaser that, to the knowledge of the
Company, all the directors of the Company intend to tender their Shares pursuant
to the Offer.
The Merger Agreement is more fully described in Section 11. Certain federal
income tax consequences of the sale of the Shares pursuant to the Offer and the
exchange of Shares for the Per Share Amount pursuant to the Merger are described
in Section 5.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
2
<PAGE> 5
THE TENDER OFFER
1. TERM OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of such extension or amendment), the Purchaser will accept
for payment and pay for all Shares validly tendered on or prior to the
Expiration Date and not properly withdrawn as permitted by Section 4. The term
"Expiration Date" means 12:01 a.m., New York City time, on Wednesday, July 1,
1998, unless and until the Purchaser, in its sole discretion (but subject to the
terms and conditions of the Merger Agreement), shall have extended the period
during which the Offer is open, in which event the term "Expiration Date" shall
mean the latest time and date at which the Offer, as so extended by the
Purchaser, shall expire.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, SATISFACTION OF THE
MINIMUM CONDITION AND THE HSR CONDITION. SEE SECTION 15, WHICH SETS FORTH IN
FULL THE CONDITIONS TO THE OFFER. SUBJECT TO THE PROVISIONS OF THE MERGER
AGREEMENT AND THE APPLICABLE RULES AND REGULATIONS OF THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION"), THE PURCHASER RESERVES THE RIGHT TO
WAIVE ANY OR ALL CONDITIONS TO THE OFFER (OTHER THAN THE MINIMUM CONDITION OR
THE HSR CONDITION) AND TO MAKE OTHER CHANGES IN THE TERMS AND CONDITIONS OF THE
OFFER. SUBJECT TO THE PROVISIONS OF THE MERGER AGREEMENT, INCLUDING THE
PROVISIONS OF THE MERGER AGREEMENT SET FORTH IN THE NEXT PARAGRAPH, AND THE
APPLICABLE RULES AND REGULATIONS OF THE COMMISSION, IF BY THE EXPIRATION DATE
ANY OR ALL OF SUCH CONDITIONS TO THE OFFER HAVE NOT BEEN SATISFIED, THE
PURCHASER RESERVES THE RIGHT (BUT SHALL NOT BE OBLIGATED) TO (i) TERMINATE THE
OFFER AND RETURN ALL TENDERED SHARES TO TENDERING STOCKHOLDERS, (ii) WAIVE SUCH
UNSATISFIED CONDITIONS AND PURCHASE ALL SHARES VALIDLY TENDERED OR (iii) EXTEND
THE OFFER AND, SUBJECT TO THE TERMS OF THE OFFER (INCLUDING THE RIGHTS OF
STOCKHOLDERS TO WITHDRAW THEIR SHARES), RETAIN THE SHARES WHICH HAVE BEEN
TENDERED, UNTIL THE TERMINATION OF THE OFFER, AS EXTENDED.
Subject to the applicable rules and regulations of the Commission and the
terms of the Merger Agreement, the Purchaser expressly reserves the right, in
its sole discretion, at any time and from time to time, and regardless of
whether or not any of the events set forth in Section 15 shall have occurred or
shall have been determined by the Purchaser to have occurred, to (i) extend the
period of time during which the Offer is open and thereby delay acceptance for
payment of, and the payment for, any Shares, by giving oral or written notice of
such extension to the Depositary and (ii) amend the Offer in any respect by
giving oral or written notice of such amendment to the Depositary. Under the
terms of the Merger Agreement, however, without the written consent of the
Company, neither Parent nor Purchaser will amend or waive the Minimum Condition
or the HSR Condition, amend any other condition of the Offer or set forth in the
Merger Agreement or in the Offer Conditions, reduce the Per Share Amount payable
in the Offer, change the form of consideration to be paid in the Offer (other
than by adding cash consideration), reduce the maximum number of Shares to be
purchased in the Offer, or amend any other terms of the Offer (other than as set
forth in the Merger Agreement) in a manner which, in the reasonable judgment of
the Company, is adverse to the holders of Shares. The Purchaser shall have no
obligation to pay interest on the purchase price of tendered Shares, including
in the event the Purchaser exercises its right to extend the period of time
during which the Offer is open. The rights reserved by the Purchaser in this
paragraph are in addition to the Purchaser's rights to terminate the Offer
pursuant to Section 15. Notwithstanding the foregoing, Purchaser may, without
the consent of the Company, subject to the Company's right to terminate the
Merger Agreement in accordance with its terms, (i) extend the Offer on one or
more occasions for up to ten business days for each such extension beyond the
then-scheduled expiration date (the initial scheduled expiration date being 20
business days following commencement of the Offer), if at the then-scheduled
expiration date of the Offer any of the conditions to Purchaser's obligation to
accept for payment and pay for the Shares shall not be satisfied or waived,
until such time as such conditions are satisfied or waived, and, at the request
of the Company, Purchaser shall, subject to Parent's right to terminate the
Merger Agreement in accordance with its terms, extend the Offer for additional
periods up to but not later than
3
<PAGE> 6
September 30, 1998, unless the conditions not satisfied or earlier waived on the
then-scheduled expiration date are one or more of the Minimum Condition or the
conditions set forth in paragraphs (a), (c), (d) or (f) in Section 15, provided
that (x) if the only condition not satisfied is the Minimum Condition, the
satisfaction or waiver of all other conditions shall have been publicly
disclosed at least five business days before termination of the Offer and (y) if
paragraph (a) or (f) in Section 15 has not been satisfied and the failure to so
satisfy can be remedied, the Offer shall not be terminated unless the failure is
not remedied within 30 calendar days after Parent has furnished the Company with
written notice of such failure), (ii) extend the Offer for any period required
by any rule, regulation, interpretation or position of the Commission or the
staff thereof applicable to the Offer, and (iii) extend the Offer for an
aggregate period of not more than five business days beyond the latest
expiration date that would otherwise be permitted under clause (i) or (ii) of
this sentence if there shall not have been tendered sufficient Shares (i.e.,
giving Purchaser 90% of the outstanding Shares) so that the Merger could be
effected without a meeting of the Company's stockholders in accordance with
Section 253 of the DGCL. Subject to the terms of the Offer, including the Offer
Conditions, Purchaser shall accept for payment and pay for all Shares duly
tendered at the earliest time at which it is permitted to do so under applicable
provisions of the Exchange Act; provided that, as set forth above, Purchaser
shall have the right, in its sole discretion, to extend the Offer for up to five
business days notwithstanding the prior satisfaction of the Offer Conditions, in
order to attempt to satisfy the requirements of Section 253 of the DGCL.
Any extension, delay, termination, waiver or amendment will be followed as
promptly as practicable by public announcement thereof, and such announcement in
the case of an extension will be made in accordance with Rule 14e-1(d) under the
Securities Exchange Act of 1934, as amended, (the "Exchange Act") no later than
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. Without limiting the manner in which the Purchaser
may choose to make any public announcement, except as provided by applicable law
(including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require
that material changes be promptly disseminated to holders of Shares), the
Purchaser shall have no obligation to publish, advertise or otherwise
communicate any such public announcement other than by issuing a release to the
Dow Jones News Service.
If the Purchaser makes a material change in the terms of the Offer or if it
waives a material condition of the Offer, the Purchaser will disseminate
additional tender offer material and extend the Offer to the extent required by
Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period
during which an offer must remain open following material changes in the terms
of the offer, other than a change in price or a change in the percentage of
securities sought, will depend upon the facts and circumstances, including the
materiality, of the changes. With respect to a change in price or, subject to
certain limitations, a change in the percentage of securities sought, a minimum
ten business day period from the day of such change is generally required to
allow for adequate dissemination to stockholders. For purposes of the Offer, a
"business day" means any day other than a Saturday, Sunday, or a federal holiday
and consists of the time period from 12:01 a.m. through 12:00 Midnight, New York
City time.
The Company has provided the Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of Transmittal
and other relevant materials will be mailed by the Purchaser to record holders
of Shares and furnished to brokers, dealers, commercial banks, trust companies
and similar persons whose names, or the names of whose nominees, appear on the
stockholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing, for subsequent transmittal to beneficial
owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Subject to the terms of
the Offer and the Offer Conditions (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment), the
Purchaser will accept for payment and pay for all Shares duly tendered
commencing at the earliest time at which, under applicable provisions of the
Exchange Act,
4
<PAGE> 7
Purchaser may accept for payment Shares tendered pursuant to the Offer,
provided, that Purchaser shall have the right, subject to the terms of the
Merger Agreement, to extend the Offer for five business days in order to attempt
to satisfy the requirements of Section 253 of the DGCL notwithstanding the prior
satisfaction of the Offer Conditions. In addition, subject to applicable rules
of the Commission, the Purchaser expressly reserves the right to delay
acceptance for payment of or payment for Shares pending receipt of any other
regulatory approvals specified in Section 16. Any such delays will be effected
in compliance with Rule 14e-1(c) under the Exchange Act.
For information with respect to approvals required to be obtained prior to
the consummation of the Offer, including the HSR Act, see Section 16.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
Certificates for such Shares ("Share Certificates") or timely confirmation (a
"Book-Entry Confirmation") of a book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in Section 3, (ii) the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or an Agent's Message (as defined below) in
connection with a book-entry transfer, and (iii) any other documents required by
the Letter of Transmittal.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to and received by the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against such participant.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares pursuant to
the Offer. Upon the terms and subject to the conditions of the Offer, payment
for Shares accepted for payment pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payments from the Purchaser
and transmitting such payments to stockholders whose Shares have been accepted
for payment. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR
SHARES BE PAID, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING
SUCH PAYMENT. If for any reason whatsoever acceptance for payment of or payment
for any Shares tendered pursuant to the Offer is delayed or the Purchaser is
unable to accept for payment or pay for Shares tendered pursuant to the Offer,
then without prejudice to the Purchaser's rights set forth herein, the
Depositary may nevertheless, on behalf of the Purchaser and subject to Rule
14e-1(c) under the Exchange Act, retain tendered Shares and such Shares may not
be withdrawn except to the extent that the tendering stockholder is entitled to
and duly exercises withdrawal rights as described in Section 4.
If any tendered Shares are not accepted for payment for any reason or if
Share Certificates are submitted for more Shares than are tendered, Share
Certificates evidencing unpurchased or untendered Shares will be returned
without expense to the tendering stockholder (or, in the case of Shares tendered
by book-entry transfer into the Depositary's account at the Book-Entry Transfer
Facility pursuant to the procedures set forth in Section 3, such Shares will be
credited to an account maintained at the Book-Entry Transfer Facility), as
promptly as practicable following the expiration, termination or withdrawal of
the Offer.
The Purchaser and Parent reserve the right to assign all or any of their
respective rights and obligations under the Merger Agreement to any direct or
indirect wholly owned subsidiary or subsidiaries of Parent, provided that no
such assignment shall relieve the assigning party of its obligations hereunder
if such assignee does not perform such obligations.
5
<PAGE> 8
3. PROCEDURE FOR TENDERING SHARES. Valid Tenders. Except as set forth
below, in order for Shares to be validly tendered pursuant to the Offer, the
Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, together with any required signature guarantees, or an Agent's Message
in connection with a book-entry delivery of Shares, and any other documents
required by the Letter of Transmittal, must be received by the Depositary at one
of its addresses set forth on the back cover of this Offer to Purchase on or
prior to the Expiration Date and either (i) Share Certificates evidencing
tendered Shares must be received by the Depositary at such address or such
Shares must be tendered pursuant to the procedure for book-entry transfer
described below and a Book-Entry Confirmation must be received by the
Depositary, in each case on or prior to the Expiration Date, or (ii) the
guaranteed delivery procedures described below must be complied with.
Book-Entry Transfer. The Depositary will make a request to establish
accounts with respect to the Shares at the Book-Entry Transfer Facility for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in the system of the
Book-Entry Transfer Facility may make book-entry delivery of Shares by causing
the Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at the Book-Entry Transfer Facility in accordance with the Book-Entry
Transfer Facility's procedures for such transfer. However, although delivery of
Shares may be effected through book-entry transfer at the Book-Entry Transfer
Facility, the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, together with any required signature guarantees, or an
Agent's Message in connection with a book-entry transfer, and any other
documents required by the Letter of Transmittal, must in any case be received by
the Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase on or prior to the Expiration Date, or the guaranteed delivery
procedures described below must be complied with.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE
WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY
TO THE DEPOSITARY.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND THE DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF
BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees. Signatures on Letters of Transmittal must be
guaranteed by a firm which is a bank, broker, dealer, credit union, savings
association or other entity which is a member in good standing of the Securities
Transfer Agents Medallion Program (each of the foregoing being referred to as an
"Eligible Institution"), except in cases where Shares are tendered (i) by a
registered holder of Shares who has not completed either the box labeled
"Special Payment Instructions" or the box labeled "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. See Instruction 1 of the Letter of Transmittal.
If the Share Certificates are registered in the name of a person other than
the signer of the Letter of Transmittal, or if payment is to be made, or Share
Certificates not accepted for payment or not tendered are to be returned, to a
person other than the registered holder, the Share Certificates must be endorsed
or accompanied by appropriate stock powers, in either case, signed exactly as
the name of the registered holder appears on such certificates, with the
signatures on such certificates or stock powers guaranteed as aforesaid. See
Instructions 1 and 5 of the Letter of Transmittal.
If Share Certificates are forwarded separately to the Depositary, a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) must accompany each such delivery.
6
<PAGE> 9
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates are not immediately
available, or such stockholder cannot deliver the Share Certificates and all
other required documents to reach the Depositary on or prior to the Expiration
Date, or such stockholder cannot complete the procedure for delivery by
book-entry transfer on a timely basis, such Shares may nevertheless be tendered,
provided that all of the following conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form made available by the Purchaser is
received by the Depositary as provided below on or prior to the Expiration
Date; and
(iii) the Share Certificates (or a Book-Entry Confirmation),
representing all tendered Shares in proper form for transfer, together with
the Letter of Transmittal (or a facsimile thereof) properly completed and
duly executed, with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message) and any other documents required
by the Letter of Transmittal are received by the Depositary within three
Nasdaq National Market trading days after the date of execution of such
Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution and a representation that the
stockholder owns the Shares tendered within the meaning of, and that the tender
of the Shares effected thereby complies with, Rule 14e-4 under the Exchange Act,
each in the form set forth in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of Share Certificates for, or of Book-Entry
Confirmation with respect to, such Shares, a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof), together with any
required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message), and any other documents required by the Letter of Transmittal.
Accordingly, payment might not be made to all tendering stockholders at the same
time and will depend upon when Share Certificates or Book-Entry Confirmations of
such Shares are received into the Depositary's account at the Book-Entry
Transfer Facility.
Appointment as Proxy. By executing the Letter of Transmittal, a tendering
stockholder irrevocably appoints designees of the Purchaser and each of them as
such stockholder's attorneys-in-fact and proxies, with full power of
substitution, in the manner set forth in the Letter of Transmittal, to the full
extent of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser (and with respect to any
and all other Shares, other securities or rights issued or issuable in respect
of such Shares on or after the date hereof). All such powers of attorney and
proxies shall be considered irrevocable and coupled with an interest in the
tendered Shares. Such appointment will be effective when, and only to the extent
that, the Purchaser accepts such Shares for payment. Upon such acceptance for
payment, all prior powers of attorney and proxies given by such stockholder with
respect to such Shares (and such other Shares and securities) will be revoked
without further action, and no subsequent powers of attorney and proxies may be
given nor any subsequent written consents executed (and, if given or executed,
will not be deemed effective). The designees of the Purchaser will, with respect
to the Shares (and such other Shares and securities) for which such appointment
is effective, be empowered to exercise all voting and other rights of such
stockholder as they in their sole discretion may deem proper at any annual or
special meeting of the Company's stockholders or any adjournment or postponement
thereof, by written consent in lieu of any such meeting or otherwise. The
Purchaser reserves the right to require that, in order for Shares to be deemed
validly tendered, immediately upon the Purchaser's payment for such Shares, the
Purchaser must be able to exercise full voting
7
<PAGE> 10
rights with respect to such Shares and other securities, including voting at any
meeting of stockholders.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by the Purchaser in its sole discretion, which
determination shall be final and binding on all parties. The Purchaser reserves
the absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance for payment of which may in the opinion of its
counsel be unlawful. The Purchaser also reserves the absolute right to waive any
of the conditions of the Offer or any defect or irregularity in any tender of
Shares of any particular stockholder whether or not similar defects or
irregularities are waived in the case of other stockholders. No tender of Shares
will be deemed to have been validly made until all defects and irregularities
have been cured or waived. None of the Purchaser, the Parent, any of their
affiliates or assigns, the Dealer Managers, the Depositary, the Information
Agent or any other person will be under any duty to give notification of any
defects or irregularities in tenders or incur any liability for failure to give
any such notification. The Purchaser's interpretation of the terms and
conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.
Backup Federal Income Tax Withholding and Substitute Form W-9. Under the
"backup withholding" provisions of federal income tax law, the Depositary may be
required to withhold 31% of the amount of any payments of cash pursuant to the
Offer. In order to avoid backup withholding, each stockholder surrendering
Shares in the Offer must, unless an exemption applies, provide the payor of such
cash with such stockholder's correct taxpayer identification number ("TIN") on a
substitute Form W-9 and certify, under penalties of perjury, that such TIN is
correct and that such stockholder is not subject to backup withholding. If a
stockholder does not provide its correct TIN or fails to provide the
certifications described above, the Internal Revenue Service ("IRS") may impose
a penalty on such stockholder and payment of cash to such stockholder pursuant
to the Offer may be subject to backup withholding of 31%. All stockholders
surrendering Shares pursuant to the Offer should complete and sign the
substitute Form W-9 included in the Letter of Transmittal to provide the
information and certification necessary to avoid backup withholding (unless an
applicable exemption exists and is proved in a manner satisfactory to the
Depositary). Certain stockholders (including among others all corporations and
certain foreign individuals and entities) are not subject to backup withholding.
Noncorporate foreign stockholders should complete and sign a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 9 of the
Letter of Transmittal.
Other Requirements. The Purchaser's acceptance for payment of Shares
tendered pursuant to any of the procedures described above will constitute a
binding agreement between the tendering stockholder and the Purchaser upon the
terms and subject to the conditions of the Offer, including the tendering
stockholder's representation and warranty that the stockholder is the holder of
the Shares within the meaning of, and that the tender of the Shares complies
with, Rule 14e-4 under the Exchange Act.
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are
irrevocable, except that Shares tendered pursuant to the Offer may be withdrawn
at any time on or prior to the Expiration Date and, unless theretofore accepted
for payment by the Purchaser pursuant to the Offer, may also be withdrawn at any
time after August 1, 1998. If the Purchaser extends the Offer, is delayed in its
acceptance for payment of Shares or is unable to purchase Shares validly
tendered pursuant to the Offer for any reason, then without prejudice to the
Purchaser's rights under the Offer, the Depositary may nevertheless, on behalf
of the Purchaser, retain tendered Shares and such Shares may not be withdrawn
except to the extent that tendering stockholders are entitled to withdrawal
rights as described in this Section 4. Any such delay in acceptance for payment
will be accompanied by an extension of the Offer to the extent required by law.
8
<PAGE> 11
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase. Any notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name of the registered holder, if different from that of the person who
tendered such Shares. If Share Certificates to be withdrawn have been delivered
or otherwise identified to the Depositary, then prior to the physical release of
such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary and the signatures on the notice of withdrawal must
be guaranteed by an Eligible Institution unless such Shares have been tendered
for the account of any Eligible Institution. If Shares have been tendered
pursuant to the procedure for book-entry transfer as set forth in Section 3, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares, in which
case a notice of withdrawal will be effective if delivered to the Depositary by
any method of delivery described in the first sentence of this paragraph.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. None of the
Purchaser, the Parent, any of their affiliates or assigns, the Dealer Managers,
the Depositary, the Information Agent or any other person will be under any duty
to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn
will thereafter be deemed not to have been validly tendered for purposes of the
Offer. However, withdrawn Shares may be re-tendered at any time prior to the
Expiration Date by following one of the procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The summary of tax
consequences set forth below is for general information only and is based on the
law as currently in effect. The tax treatment of each stockholder will depend in
part upon such stockholder's particular situation. Special tax consequences not
described herein may be applicable to particular classes of taxpayers, such as
financial institutions, broker-dealers, persons who are not citizens or
residents of the United States, stockholders who acquired their Shares through
the exercise of an employee stock option or otherwise as compensation, and
persons who received payments in respect of options to acquire Shares. ALL
STOCKHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICABILITY
AND EFFECT OF THE ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL OR FOREIGN INCOME
AND OTHER TAX LAWS AND CHANGES IN SUCH TAX LAWS.
The receipt of cash pursuant to the Offer or the Merger will be a taxable
transaction for Federal income tax purposes under the Internal Revenue Code of
1986, as amended, and may also be a taxable transaction under applicable state,
local, foreign income or other tax laws. Generally, for Federal income tax
purposes, a stockholder will recognize gain or loss in an amount equal to the
difference between the cash received by the stockholder pursuant to the Offer or
the Merger and the stockholder's adjusted tax basis in the Shares purchased
pursuant to the Offer or converted to cash in the Merger. For Federal income tax
purposes, such gain or loss will be a capital gain or loss if the Shares are a
capital asset in the hands of the stockholder, and a long-term capital gain or
loss if the stockholder's holding period is more than one year as of the date
the Purchaser accepts such Shares for payment pursuant to the Offer or the
effective date of the Merger, as the case may be. In the case of a non-corporate
stockholder, capital gain is eligible for a maximum federal income tax rate of
28% if the Shares were held for more than one year but not more than 18 months
or 20% if the Shares were held for more than 18 months. There are limitations on
the deductibility of capital losses.
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<PAGE> 12
6. PRICE RANGE OF SHARES; DIVIDEND POLICY. According to the Company's 1997
Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (the
"1997 Annual Report"), the Shares are listed and traded principally on the
Nasdaq National Market. The Registration Statement relating to the Company's
initial public offering of its Common Stock, par value $.01 per share, was
declared effective on October 31, 1996. The NASDAQ reported bid prices for the
common stock commencing on October 31, 1996. The following table sets forth, for
the quarters indicated, the high and low sales prices per Share on the NASDAQ as
reported in the 1997 Annual Report with respect to periods occurring in 1996 and
1997 and as reported by the Dow Jones News Service thereafter, and the amount of
cash dividends paid or declared per share for each quarter based on publicly
available sources.
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
---- --- ---------
<S> <C> <C> <C>
Year Ended December 31, 1996:
Fourth Quarter (October 31 to December 31)........... $26 1/4 $19 1/4 .00
Year Ended December 31, 1997:
First Quarter........................................ 25 9 1/8 .00
Second Quarter....................................... 11 3/8 9 1/2 .00
Third Quarter........................................ 14 1/8 8 1/8 .00
Fourth Quarter....................................... 10 7/8 7 3/8 .00
Year Ended December 31, 1998:
First Quarter........................................ 10 11/16 7 3/8 .00
Second Quarter (through June 1, 1998)................ 20 13/16 8 1/2 .00
</TABLE>
On May 27, 1998, the last full trading day prior to announcement of the
Offer, the closing sale price per Share reported on the Nasdaq National Market
was $13 1/16. On June 2, 1998, the last full trading day before commencement of
the Offer, the closing sale price per Share reported on the Nasdaq National
Market was $20 3/4. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION
FOR THE SHARES.
Since October 31, 1996, the date of the effectiveness of the Company's
initial public offering, the Company has not paid any cash dividends to its
stockholders and the Company does not anticipate paying any cash dividends in
the future. In addition, the Merger Agreement prohibits the Company from paying
dividends without the consent of the Parent.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning
the Company contained in this Offer to Purchase, including financial
information, has been taken from or based upon publicly available documents and
records on file with the Commission and other public sources. The summary
information concerning the Company in this Section 7 and elsewhere in this Offer
to Purchase is derived from the 1997 Annual Report and other publicly available
information. The summary information set forth below is qualified in its
entirety by reference to such reports (which may be obtained and inspected as
described below) and should be considered in conjunction with the more
comprehensive financial and other information in such reports and other publicly
available reports and documents filed by the Company with the Commission and
other publicly available information. Although the Purchaser and the Parent do
not have any knowledge that would indicate that any statements contained herein
based upon such reports are untrue, neither the Purchaser nor the Parent assumes
any responsibility for the accuracy or completeness of the information contained
therein, or for any failure by the Company to disclose events that may have
occurred and may affect the significance or accuracy of any such information but
which are unknown to the Purchaser and the Parent.
General. The Company was originally incorporated under the name
"LANSystems, Inc.," pursuant to an original certificate of incorporation filed
with the Secretary of State of Delaware on June 14, 1989. In 1988 through a
division known as Donnelley Business Services ("DBS"), R.R. Donnelley began
offering reprographic services, networked and electronic color printing,
10
<PAGE> 13
mailroom and facsimile services, word processing, desktop publishing and
imaging. In June 1995, DBS broadened its capabilities from managing paper-based
information to include the management of electronic information through the
acquisition of LANSystems, Inc. ("LANSystems"). As of January 1, 1996, R.R.
Donnelley contributed the assets of DBS to LANSystems and changed LANSystems'
corporate name to Donnelley Enterprise Solutions Incorporated. The Registration
Statement relating to the Company's initial public offering of its common stock
was declared effective on October 31, 1996, and the consummation of that
offering on November 5, 1996 resulted in the reduction of R.R. Donnelley's
ownership in the Company to approximately 43%. The Company had 1,192 employees
of which 1,147 were full-time as of December 31, 1997. The Company's principal
executive offices are located at 161 North Clark Street, Suite 2400, Chicago,
Illinois 60601. The telephone number of the Company at such offices is
(312)419-7600.
The Company is listed on the Nasdaq National Market (Nasdaq designation of
DEZI). It is a single-source provider of integrated information management
services to professional service organizations, primarily large law firms,
investment banks, and accounting firms. The Company offers its clients the
opportunity to focus on their core businesses by outsourcing a variety of
functions, including business services, integration services, and systems
management.
Financial Information. Set forth below are certain selected consolidated
financial information for the Company's last three fiscal years were derived
from the 1997 Annual Report. More comprehensive financial information is
included in the reports (including management's discussion and analysis of
financial condition and results of operations) and other documents filed by the
Company with the Commission, and the following financial data is qualified in
its entirety by reference to such reports and other documents including the
financial information and related notes contained therein. Such reports and
other documents may be examined and copies thereof may be obtained from the
offices of the Commission and the Nasdaq Stock Market in the manner set forth
below.
11
<PAGE> 14
DONNELLEY ENTERPRISE SOLUTIONS INCORPORATED
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
1997(1) 1996(1) 1995(1)
--------- -------- --------
<S> <C> <C> <C>
INCOME STATEMENT
Revenues............................................... $ 110,844 $ 96,464 $ 65,944
Cost of revenues....................................... 88,545 75,537 52,858
--------- -------- --------
Gross profit......................................... 22,299 20,927 13,086
Selling expenses....................................... 8,973 9,929 5,563
General and administrative expenses.................... 16,381 7,812 5,908
Amortization of goodwill............................... 1,072 804 295
Special charge......................................... -- 300 --
--------- -------- --------
Earnings (loss) from operations...................... (4,127) 2,082 1,320
Interest expense, net.................................. 553 384 522
--------- -------- --------
Earnings (loss) before income taxes.................. (4,680) 1,698 798
Income tax expense (benefit)........................... (1,400) 1,073 495
--------- -------- --------
Net income (loss).................................... $ (3,280) $ 625 $ 303
========= ======== ========
Basic and diluted earnings (loss) per share(2)......... $ (.66)
=========
Pro forma earnings per share(3)........................ $ .12
========
BALANCE SHEET (AT PERIOD END)
Total assets........................................... $ 77,073 $ 76,176 $ 39,696
Debt, including capital lease obligations.............. 8,296 2,467 3,125
Total shareholders' equity............................. 46,016 49,452 15,757
</TABLE>
- ---------------
(1) Income statement data for the years ended December 31, 1997, 1996 and 1995
includes the results of operations of LANSystems, which the Company acquired
in June 1995, beginning July 1, 1995.
(2) Basic and diluted earnings per share is based upon implementation of
Statement of Financial Accounting Standards No. 128, "Earnings per Share".
(3) Pro forma earnings per share is computed by dividing net income for the year
ended December 31, 1996 by the total shares outstanding subsequent to the
initial public offering of 5,005,000 shares.
The Shares are registered under the Exchange Act. Accordingly, the Company
is subject to the informational filing requirements of the Exchange Act and in
accordance therewith is obligated to file periodic reports, proxy statements and
other information with the Commission relating to its business, financial
condition and other matters. Information as of particular dates concerning the
Company's directors and officers, their remuneration, options granted to them,
the principal holders of the Company's securities and any material interest of
such persons in transactions with the Company is required to be disclosed in
such proxy statements and distributed to the Company's stockholders and filed
with the Commission. Such reports, proxy statements and other information should
be available for inspection at the public reference facilities of the Commission
located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
should also be available for inspection and copying at prescribed rates at the
regional offices of the Commission located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite
1300, New York, New York 10048. Such reports, proxy statements and other
12
<PAGE> 15
information may also be obtained at the Web site that the Commission maintains
at http://www.sec.gov. Copies of this material may also be obtained by mail,
upon payment of the Commission's customary fees, from the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, such
material should also be available for inspection at the library of the Nasdaq
Stock Market, 1735 K Street, NW, Washington, D.C. 20006. Except as otherwise
noted in this Offer to Purchase, all of the information with respect to the
Company set forth in this Offer to Purchase has been derived from publicly
available information.
8. CERTAIN INFORMATION CONCERNING THE PURCHASER AND THE PARENT. The
Purchaser, a Delaware corporation and a wholly owned subsidiary of the Parent,
was organized in connection with the Offer and has not carried on any activities
to date other than those incident to its formation and the commencement of the
Offer.
The Parent was established in 1775 and incorporated in the State of New
York in 1968. Parent and its subsidiaries manage and repurpose their clients'
information for distribution by digital, Internet or paper media to any
audience, in any language, anywhere in the world. Parent and its subsidiaries
manage documents on the clients' site or at their own facilities. Parent and its
subsidiaries also provide business services and solutions for transactional,
financial, corporate reporting and mutual fund printing, digital data
management, Internet services, localization, translation and document management
outsourcing, among others.
The Parent has its principal executive offices at 345 Hudson Street, New
York, New York 10014 and together with its subsidiaries has approximately 5,000
employees. The telephone number for the Parent is 212-924-5000.
The name, citizenship, business address, principal occupation or
employment, and five-year employment history of each of the directors and
executive officers of the Purchaser and the Parent and certain other information
are set forth in Schedule I hereto.
Set forth below are certain selected consolidated financial data relating
to the Parent and its subsidiaries which have been derived from the financial
statements contained in the Parent's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997 (the "Form 10-K") filed by the Parent with the
Commission. More comprehensive financial information is included in the reports
(including management's discussion and analysis of financial condition and
results of operations) and other documents filed by the Parent with the
Commission, and the following financial data is qualified in its entirety by
reference to such reports and other documents, including the financial
information and related notes contained therein. Such reports and other
documents may be examined and copies thereof may be obtained from the offices of
the Commission and the American Stock Exchange, Inc. (the "AMEX") in the manner
set forth below.
13
<PAGE> 16
BOWNE & CO., INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, YEAR ENDED OCTOBER 31,
------------ -----------------------------------
1997 1996 1995 1994
------------ --------- --------- ---------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net Sales.............................. $ 716,647 $ 501,369 $ 392,713 $ 380,653
Cost of Sales.......................... 392,120 276,141 233,493 221,943
Operating Income....................... 82,884 70,110 38,045 48,970
Income Before Income Taxes............. 120,613(1) 75,015 41,751 54,203
Income Taxes........................... 51,070 32,512 18,465 22,963
Net Income............................. 69,543 42,503 23,286 31,240
PER SHARE
Net Income
Basic................................ $ 3.84 $ 2.42 $ 1.34 $ 1.80
Diluted.............................. 3.74 2.39 1.33 1.77
Dividends.............................. .36 .36 .36 .315
BALANCE SHEET DATA (AT PERIOD END)
Total Assets........................... $ 500,653 $ 385,822 $ 325,670 $ 291,581
Working Capital........................ 164,865 147,362 133,049 106,497
Long-Term Indebtedness................. 2,537 2,495 2,830 3,178
Shareholders' Equity................... 358,600 280,734 241,509 222,795
</TABLE>
- ---------------
(1) Includes $35,273 from a gain on the sale of a subsidiary.
Parent is subject to the informational filing requirements of the Exchange
Act and in accordance therewith is obligated to file periodic reports, proxy
statements and other information with the Commission relating to its business,
financial condition and other matters. Information as of particular dates
concerning the Parent's directors and officers, their remuneration, options
granted to them, the principal holders of the Parent's securities and any
material interest of such persons in transactions with the Parent is required to
be disclosed in such proxy statements and distributed to the Parent's
stockholders and filed with the Commission. Such reports, proxy statements and
other information should be available for inspection at the public reference
facilities of the Commission located in Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and should also be available for inspection and copying
at prescribed rates at the regional offices of the Commission located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
and Seven World Trade Center, Suite 1300, New York, New York 10048. Such
reports, proxy statements and other information may also be obtained at the Web
site that the Commission maintains at http://www.sec.gov. Copies of this
material may also be obtained by mail, upon payment of the Commission's
customary fees, from the Commission's principal office at 450 Fifth Street,
N.W., Washington, D.C. 20549. Such material is also available for inspection at
the offices of the AMEX, 86 Trinity Place, New York, New York 10006.
None of the Purchaser, the Parent nor, to the best knowledge of the
Purchaser and the Parent, any of the persons listed on Schedule I hereto or any
associate or majority-owned subsidiary of the Purchaser, the Parent or any of
the persons so listed, beneficially owns or has a right to acquire directly or
indirectly any Shares, and none of the Purchaser, the Parent nor, to the best
knowledge of the Purchaser and the Parent, any of the persons or entities
referred to above, or any of the
14
<PAGE> 17
respective executive officers, directors or subsidiaries of any of the
foregoing, has effected any transactions in the Shares during the past 60 days.
Except as set forth in this Offer to Purchase, there have been no contacts,
negotiations or transactions between any of the Parent, the Purchaser or, to the
best knowledge of the Purchaser and the Parent, any of the persons listed in
Schedule I hereto, on the one hand, and the Company or its affiliates, on the
other hand, concerning a merger, consolidation or acquisition, a tender offer or
other acquisition of securities, an election of directors, or a sale or other
transfer of a material amount of assets.
9. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by the
Purchaser to purchase all outstanding Shares pursuant to the Offer and to pay
fees and expenses related to the Offer and the proposed Merger is estimated to
be approximately $108 million. The Purchaser plans to obtain all funds needed
for the Offer and the proposed Merger through capital contributions or advances
made by Parent. Parent plans to use funds it has available in its cash accounts
and by borrowing under its existing lines of credit. Parent expects that such
borrowings would be repaid from funds internally generated by Parent and its
subsidiaries. The Offer is not conditioned on obtaining financing.
Parent and the subsidiary borrowers thereto entered into a Credit Agreement
with a group of seven lender banks, Fleet Bank, as Administrative Agent, and the
Bank of Montreal, as Documentation Agent, dated as of July 7, 1997 (the "Credit
Agreement"). Pursuant to the Credit Agreement, the lenders will provide
revolving credit loans in the aggregate amount of up to $200 million. The
revolving credit loans may be used for the general corporate purposes of Parent
and its subsidiaries, including acquisitions. Parent has sufficient funds
available under the Credit Agreement to fund the transactions contemplated in
the Merger Agreement.
The Credit Agreement terminates on July 5, 2002, unless the parties thereto
elect to extend it. The Credit Agreement is unsecured.
Loans under the Credit Agreement will bear interest at one of four
different rates depending upon the type of loan requested by Parent or its
subsidiary borrowers and made by the lenders. The four different interest rates
are calculated as follows:
(1) Certain US dollar denominated advances bear interest at a rate equal to
the greater of (i) the Federal Funds Rate plus 1/2 of 1% and (ii) the
one month Eurodollar rate plus .150% to .325% depending upon certain
financial ratios applicable to Parent;
(2) Certain US dollar denominated advances for a term, selected by Parent,
ranging from 1 to 12 months, bear interest at the Eurodollar rate for
the applicable period, adjusted for Reserve requirements, if any, plus
.150% to .325% depending upon certain financial ratios applicable to
Parent;
(3) Certain foreign currency denominated advances for a term, selected by
Parent, ranging from 1 to 12 months, bear interest at the Eurocurrency
rate for the applicable period, adjusted for Reserve requirements, if
any, plus .150% to .325% depending upon certain financial ratios
applicable to Parent;
(4) The Parent may invite the lender banks to bid for fixed rate or
Eurodollar rate US dollar or foreign currency denominated advances, for
a term selected by Parent ranging from 1 to 12 months.
A facility fee will accrue on the total credit facility regardless of usage
at a rate from .100% to .175% per annum, depending upon certain financial ratios
applicable to Parent, of the average daily aggregate commitment amount. In
addition, Parent will pay each agent any fees that have been agreed to in
writing, all of which the Parent believes to be customary for commitments of
this type.
15
<PAGE> 18
The Credit Agreement contains conditions precedent, representations and
warranties, covenants (including financial covenants), events of default and
other provisions customary for such financing.
The obligation of each lender to continue to make revolving credit loans is
conditioned on, among other things, there being no defaults and the
representations and warranties contained in the Credit Agreement remaining true
and correct in all material respects.
It is anticipated that the indebtedness incurred through borrowing under
the Credit Agreement will be repaid from funds generated internally by Parent
and its subsidiaries. No final decisions have been made concerning the method
Parent will employ to repay such indebtedness. Such decisions, when made, will
be based upon Parent's review from time to time of the availability of
particular actions, as well as on prevailing interest rates and financial and
other economic conditions.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. Over the past
several years, the members of Parent's senior management have considered various
potential transactions which could enhance the value of Parent for its
stockholders, including the possibility of a strategic acquisition of the type
presented by this transaction.
In late 1996, prior to the Company's initial public offering, Robert M.
Johnson, Parent's Chief Executive Officer, initiated a discussion with John
Walters, then Chairman and Chief Executive Officer of R.R. Donnelley, during
which Parent expressed its interest in pursuing a potential acquisition of the
Company. A representative of R.R. Donnelley informed Mr. Johnson that R.R.
Donnelley was not interested in pursuing the sale of the Company at that time
and that they remained committed to the initial public offering.
In early 1998, Mr. Johnson, in response to industry rumors that the Company
might be interested in pursuing a sale transaction, contacted William Davis,
then Chairman and Chief Executive Officer of R.R. Donnelley, to express Parent's
interest in the Company. Mr. Johnson was informed by a representative of R.R.
Donnelley, that the Company was currently evaluating its strategic alternatives
and that the Company was not currently prepared to respond to his indications of
interest.
In early 1998, Parent engaged Goldman Sachs to act as Parent's financial
advisor in connection with several potential acquisition opportunities,
including a potential acquisition of the Company.
On March 4, 1998, at a regular meeting of Parent's Board of Directors, the
Board was informed of Mr. Johnson's contacts with R.R. Donnelley and the Board
authorized the officers of Parent to continue to pursue the matter.
After the March 4, 1998 Board meeting, Mr. Johnson contacted Rhonda
Kochlefl, the Chief Executive Officer of the Company and requested to meet with
her. On March 10, 1998 Mr. Johnson and Ms. Kochlefl met and Ms. Kochlefl
informed Mr. Johnson that a sale of the Company was only one of the strategic
alternatives being considered by the Board of Directors of the Company and that
she would have the appropriate person contact him if the Board of Directors of
the Company determined to pursue a possible sale.
In mid-March, 1998, William Blair, the Company's financial advisor,
contacted Parent to inform Parent that the Board of Directors of the Company was
interested in conducting a formal auction process in order to maximize
stockholder value and that Parent would be included in the auction process.
On March 19, 1998, the parties entered into a standstill and
confidentiality agreement.
On March 31, 1998, Parent received an offering memorandum from the
Company's financial advisor regarding the sale of the Company and commenced its
due diligence review of the Company.
16
<PAGE> 19
On April 14, 1998, at a special meeting of Parent's Board of Directors, in
anticipation of the April 15, 1998 due date set for preliminary indications of
interest, and following discussions and consultations with its management and
its legal and financial advisors, the Board authorized the officers of Parent to
submit a preliminary indication of interest to the Company in a range of $15-18
per share and authorized the Executive Committee of the Board of Directors (the
"Executive Committee") to take any required actions in connection with the
potential transaction.
On April 14, 1998, Parent and Goldman Sachs entered into a formal
engagement agreement with respect to the acquisition of the Company.
On April 15, 1998, Parent submitted a preliminary indication of interest to
the Company's financial advisor which stated that Parent was prepared to pursue
a transaction in a range from $15-18.
On May 5-6, 1998 the executive officers of the Company delivered a
management presentation to senior management of Parent and Parent's legal and
financial advisors and a data room was made available to Parent and its advisors
in Chicago, Illinois. Parent's legal, financial and business due diligence of
the Company continued until May 27, 1998.
On May 7, 1998, Parent received a bid package from the Company's financial
advisor. The bid package included a form of contract and instructions requiring
final bids no later than May 19, 1998.
From May 7-18, 1998 Parent's senior management and its financial and legal
advisors continued to evaluate the financial and strategic ramifications and
synergies of the transaction and the legal issues raised by the proposed Merger
Agreement.
On May 18, 1998, at a special meeting of the Executive Committee, the
Executive Committee analyzed and reviewed various strategic and financial
considerations concerning the potential acquisition and Parent's financial and
legal advisors advised the members of the Executive Committee with respect to
issues raised by the draft Merger Agreement. Management and Parent's financial
and legal advisors responded to questions from directors and after further
deliberation, the Executive Committee authorized the officers of Parent to
continue to pursue the transaction within a specified range.
On May 19, 1998, Parent submitted a bid in the amount of $20 per share and
a copy of the proposed Merger Agreement marked to reflect Parent's comments on
the draft.
From May 20-25, 1998, members of Parent senior management and Parent's
financial and legal advisors met to discuss the Company's reaction to the bid
submission, including concerns expressed regarding Parent's comments to the
Merger Agreement.
On May 25, 1998, on behalf of Parent, Parent's financial advisor indicated
to the Company's financial advisor that Parent was willing to increase its bid
to $21 per Share and would not insist on a number of significant conditions to
its bid if the Company would agree to immediately negotiate with Parent.
On May 26, 1998, Parent submitted a revised mark-up of the Merger Agreement
to the Company's legal advisors.
On May 26-27, 1998, the parties, together with their respective legal and
financial advisors, met to negotiate the terms of the Merger Agreement and
Parent agreed to terms with R.R. Donnelley with respect to a lock-up option and
agreement to otherwise support the Offer and the Merger.
On May 27, 1998, the Company informed Parent that at two special meetings
of the Company's Board of Directors, the Company's Board approved the Merger
Agreement and the transactions contemplated thereby. Parent, Purchaser and the
Company then entered into the Merger Agreement.
17
<PAGE> 20
11. THE MERGER AGREEMENT. The following is a summary of the Merger
Agreement, which summary is qualified in its entirety by reference to the Merger
Agreement which is filed as an exhibit to the Tender Offer Statement on Schedule
14D-1.
The Offer. The Merger Agreement provides for the commencement of the Offer
as soon as practicable, but in any event within five business days after the
public announcement of the execution thereof. The Offer shall be made by means
of an offer to purchase which shall contain as conditions only the Minimum
Condition and the Offer Conditions, and, subject to the succeeding sentence,
shall otherwise contain, and be entirely consistent with, the terms and
conditions of the Offer as described in the Merger Agreement. Each of Purchaser
and Parent has expressly reserved the right, in its sole discretion, to waive
any such condition and make any other changes to the terms of the Offer,
provided that, without the consent of the Company, neither Parent nor Purchaser
shall (a) amend or waive the Minimum Condition or the HSR Condition, (b) amend
any other condition of the Offer as set forth in the Merger Agreement or the
Offer Conditions, (c) reduce the Per Share Amount, (d) change the form of
consideration to be paid in the Offer (other than by adding cash consideration),
(e) reduce the maximum number of Shares to be purchased in the Offer, or (f)
amend any other term of the Offer in a manner which, in the reasonable judgment
of the Company, is adverse to holders of the Shares. Notwithstanding the
foregoing, Purchaser may, without the consent of the Company, subject to the
Company's right to terminate the Merger Agreement in accordance with its terms
as described under "-- Termination Events", (i) extend the Offer on one or more
occasions for up to ten business days for each such extension beyond the
then-scheduled expiration date (the initial scheduled expiration date being 20
business days following commencement of the Offer), if at the then-scheduled
expiration date of the Offer any of the conditions to Purchaser's obligation to
accept for payment and pay for the Shares shall not be satisfied or waived,
until such time as such conditions are satisfied or waived, and, at the request
of the Company, Purchaser shall, subject to Parent's right to terminate the
Merger Agreement in accordance with its terms, extend the Offer for additional
periods up to but not later than September 30, 1998, unless the conditions not
satisfied or earlier waived on the then-scheduled expiration date are one or
more of the Minimum Condition or the conditions set forth in paragraphs (a),
(c), (d) or (f) in Section 15, provided that (x) if the only condition not
satisfied is the Minimum Condition, the satisfaction or waiver of all other
conditions shall have been publicly disclosed at least five business days before
termination of the Offer and (y) if paragraph (a) or (f) in Section 15 has not
been satisfied and the failure to so satisfy can be remedied, the Offer shall
not be terminated unless the failure is not remedied within 30 calendar days
after Parent has furnished the Company with written notice of such failure),
(ii) extend the Offer for any period required by any rule, regulation,
interpretation or position of the Commission or the staff thereof applicable to
the Offer, and (iii) extend the Offer for an aggregate period of not more than
five business days beyond the latest expiration date that would otherwise be
permitted under clause (i) or (ii) of this sentence if there shall not have been
tendered sufficient Shares (i.e., Purchaser's ownership of 90% or more of the
outstanding Shares) so that the Merger could be effected without a meeting of
the Company's stockholders in accordance with Section 253 of the DGCL. Subject
to the terms of the Offer, including the Offer Conditions, Purchaser shall
accept for payment and pay for all Shares duly tendered at the earliest time at
which it is permitted to do so under applicable provisions of the Exchange Act;
provided that, as set forth above, Purchaser shall have the right, in its sole
discretion, to extend the Offer for up to five business days notwithstanding the
prior satisfaction of the Offer Conditions, in order to attempt to satisfy the
requirements of Section 253 of the DGCL.
The Minimum Condition of the Offer is that at the expiration of the Offer,
a number of Shares which, together with any Shares legally or beneficially owned
by Parent or Purchaser or any of its affiliates at the commencement of the
Offer, constitutes more than 50% of the voting power (determined on a
fully-diluted basis), on the date of purchase, of all the securities of the
Company entitled to vote in the election of directors or in a merger shall have
been validly tendered and not properly withdrawn prior to the expiration of the
Offer.
18
<PAGE> 21
The Merger. The Merger Agreement provides that, at the Effective Time and
subject to the conditions thereof (including those described in Section 15) and
the provisions of the General Corporation law of the State of Delaware ("DGCL"),
the Purchaser shall be merged with and into the Company in accordance with the
DGCL, the separate corporate existence of Purchaser shall cease, and the Company
shall continue as the surviving corporation of the Merger.
Pursuant to the Merger Agreement, at the Effective Time and by virtue of
the Merger, and without any action on the part of the holders of the Shares,
each Share issued and outstanding immediately prior to the Effective Time (other
than Shares owned by Parent, Purchaser or the Company, or by any direct of
indirect subsidiary of any of them (which will be cancelled) or any Dissenting
Shares) shall be converted into the right to receive the Per Share Amount,
without interest, less any withholding taxes required under applicable law.
Options. Pursuant to the Merger Agreement, the Company agreed to (i)
terminate each outstanding stock option plan for its employees and non-employee
directors, including the 1996 Stock Incentive Plan, the 1996 Broad-Based
Employee Stock Plan, the 1997 Non-Employee Director Plan (the "Option Plans")
and each employee stock purchase plan for its employees and non-employee
directors, including the 1997 Employee Stock Purchase Plan (the "ESPP")
(collectively the "Stock Plans"), immediately prior to the consummation of the
Offer without prejudice to the rights of the holders of options awarded pursuant
thereto and (ii) grant no additional options or similar rights under the Stock
Plans or otherwise on or after the date of the Merger Agreement.
With respect to options outstanding under the Option Plans (whether or not
then exercisable) immediately prior to consummation of the Offer, the Merger
Agreement provides that the Company shall (a) cancel immediately prior to
consummation of the Offer each such option it has the right to cancel, and (b)
with respect to options it does not have the right to cancel, use its reasonable
best efforts to obtain the consent of the holder of such option to its
cancellation and, subject to such consent, cancel such option immediately prior
to consummation of the Offer. In consideration, the Company shall agree to and
shall pay to the holder of each cancelled option under the Option Plans, upon
cancellation of such option and consummation of the Offer (whether or not such
option was exercisable immediately prior to its cancellation), an amount equal
to the excess, if any, of the Per Share Amount over the per-share exercise price
for such option, multiplied by the number of Shares subject to such option (such
payment to be net of applicable withholding taxes). The Company shall cancel
immediately prior to consummation of the Offer each option outstanding under the
ESPP or any other Stock Plan and shall pay to the holder thereof (a) a refund of
any amount withheld from the holder's compensation to pay the exercise price
thereof, and (b) an amount equal to the excess, if any, of the Per Share Amount
over the per-share exercise price for such option, multiplied by the number of
Shares subject to such option (such payment to be net of applicable withholding
taxes).
The Merger Agreement provides that Shares that are issued and outstanding
immediately prior to the Effective Time and that are held by stockholders who
shall have properly demanded appraisal of their Shares in accordance with
Section 262 of the DGCL shall not be converted into the right to receive the Per
Share Amount applicable to such Shares at or after the Effective Time unless and
until the holder of such Dissenting Shares shall have failed to perfect or shall
have effectively withdrawn or lost such right to appraisal and payment under the
DGCL. If a holder of Dissenting Shares shall have so failed to perfect or shall
have effectively withdrawn or lost such right to appraisal and payment, then, as
of the Effective Time or the occurrence of such event, whichever last occurs,
such holder's Dissenting Shares shall be converted into and shall represent
solely the right to receive the Per Share Amount applicable to such Shares,
without any interest thereon.
The Merger Agreement also provides that at the Effective Time and without
any further action on the part of the Company or Purchaser, the Certificate of
Incorporation of the Company, as in effect at the Effective Time, shall be the
certificate of incorporation of the Surviving Corporation. At the Effective Time
and without any further action on the part of the Company or Purchaser, the By-
19
<PAGE> 22
Laws of the Company, as in effect, at the Effective Time, shall be the By-Laws
of the Surviving Corporation. The Merger Agreement provides that the directors
of Purchaser immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation, each to hold office, subject to the
applicable provisions of the Certificate of Incorporation and By-Laws of the
Surviving Corporation, until the next annual stockholders' meeting of the
Surviving Corporation and until their successors shall be duly elected or
appointed and shall duly qualify. At the Effective Time, the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, until their respective successors are duly elected or
appointed and qualified.
Agreements of the Parent, the Purchaser and the Company.
Stockholders Meeting. The Merger Agreement provides that if a Company
stockholder vote is required under the DGCL in order to effect the Merger then
promptly after consummation of the Offer the Company shall take all actions in
accordance with the DGCL and the Company's Certificate of Incorporation and
By-Laws to convene and hold a meeting of its stockholders for the purpose of
adopting the Merger Agreement (the "Stockholders' Meeting"). Unless the
Company's Board of Directors by majority vote determines in good faith, based on
the advice of outside legal counsel that to do so would constitute a breach of
fiduciary duty to the stockholders of the Company under applicable law, the
Company shall (A) include in the proxy statement (i) the recommendation of the
Board of Directors that the stockholders of the Company vote in favor of
adoption and approval of the Merger Agreement and the Merger and (ii) the
written opinion of William Blair & Company, L.L.C. that the consideration to be
received by the holders of the Shares of the Company pursuant to the Offer and
the Merger is fair from a financial point of view to such stockholders and (B)
use its reasonable best efforts to obtain the necessary approval of the Merger
Agreement and the Merger by its stockholders. At the Stockholders Meeting,
Parent will vote, or cause to be voted, all Shares then owned by it or Purchaser
or any of Parent's other subsidiaries or affiliates in favor of the Merger and
the adoption of the Merger Agreement. If the Purchaser acquires at least a
majority of the outstanding Shares, the Purchaser will have sufficient voting
power to approve the Merger without the vote of any additional stockholder.
The Merger Agreement provides that notwithstanding the foregoing, in the
event that the Purchaser shall acquire at least 90% of the outstanding Shares,
the parties thereto, at the request of the Purchaser, subject to the respective
provisions of the Merger Agreement, to take all necessary and appropriate action
to cause the Merger to become effective as soon as reasonably practicable after
such acquisition, without a meeting of the Company's stockholders, in accordance
with Section 253 of the DGCL as soon as reasonably practicable after such
acquisition, without a meeting of the stockholders of the Company.
Proxy Statement. The Merger Agreement provides that, if a Company
stockholder vote is required under the DGCL or any other applicable law in order
to effect the Merger, then promptly after consummation of the Offer, the Company
shall file with the Commission under the Exchange Act and shall use all
reasonable efforts to have cleared by the Commission, and promptly thereafter
shall mail to its stockholders, the proxy statement. Parent, Purchaser and the
Company each agree promptly to correct any information provided by it for use in
the Proxy Statement which shall have become false or misleading. The proxy
statement shall contain the recommendation of the Board of Directors of the
Company in favor of the Merger and, if a Company Stockholder's meeting is
required, the Board of Directors of the Company shall recommend that the
stockholders of the Company vote for approval and adoption of the Merger
Agreement and the Merger; provided, however, that prior to the stockholders'
meeting such recommendation may be withheld, withdrawn, modified or amended to
the extent the Board of Directors determines by majority vote that the failure
to take such action would constitute a breach of fiduciary duty under applicable
law.
Designation of Directors. The Merger Agreement provides that, promptly
upon payment by Purchaser for the Shares tendered pursuant to the Offer in
accordance with the Merger Agreement, Parent shall be entitled to designate up
to such number of directors on the Board of Directors of the
20
<PAGE> 23
Company, rounded to the nearest whole number, as shall give Purchaser
representation on the Board of Directors equal to at least the number of
directors which equals the product of the total number of directors on such
Board of Directors (after giving effect to the directors elected pursuant to
this sentence) multiplied by the percentage that such number of Shares owned and
paid for by the Purchaser or any affiliate of Purchaser bears to the number of
Shares outstanding. Promptly after consummation of the Offer, the Company shall,
upon request of Parent, use its best efforts promptly either to increase the
size of the Board of Directors of the Company or, at the Company's election,
secure the resignations of such number of its incumbent directors as is
necessary to enable Parent's designees to be so elected or appointed to the
Company's Board of Directors, and shall cause Parent's designees to be so
elected or appointed. Notwithstanding the foregoing, until the Effective Time,
the Company and Parent shall use all reasonable best efforts to retain as
members of the Company's Board of Directors at least three directors who are
directors of the Company on the date hereof and who are not representatives of
Parent; provided that subsequent to the purchase of and payment for not less
than a majority of the outstanding Shares pursuant to the Offer, Parent shall
always have its designees represent at least a majority of the entire Board of
Directors. As used in the Merger Agreement, the term "Independent Directors"
initially means each of Ms. Rhonda I. Kochlefl and Messrs. Charles F. Moran and
Gregory A. Stoklosa; provided that in the event that any such initial director
resigns or otherwise ceases to be a director for any reason, then the other
Independent Directors will have the right, by majority vote, to designate a
replacement for such director (and such replacement will be an "Independent
Director"). If for any reason at any time prior to the Effective Time no
Independent Directors then remain, the other directors will use reasonable best
efforts to designate three persons to be the Independent Directors, none of whom
will be directors, officers, employees or affiliates of Parent or Purchaser or
employees of the Company. The Company's obligation to appoint the Purchaser's
designees to the Board of Directors is subject to compliance with Section 14(f)
of the Exchange Act and Rule 14f-1 promulgated thereunder.
Access to Information; Confidentiality. Pursuant to the Merger Agreement,
from the date thereof to earlier of the Effective Time or termination of the
Merger Agreement, the Company shall, and shall cause its subsidiaries, officers,
directors, employees, and agents to, afford the officers, employees, and agents
of Parent, complete access at all reasonable times to its officers, employees,
agents, properties, books, records and contracts of the Company and its
subsidiaries and shall furnish Parent and Purchaser and their officers,
employees and agents all financial, operating and other data and information as
Parent and Purchaser may reasonably request.
The Merger Agreement further provides that all information obtained by
Parent and Purchaser pursuant to the above paragraph shall be kept confidential
in accordance with the confidentiality and standstill agreement, dated on or
about March 19, 1998 (the "Confidentiality Agreement"), between Parent and the
Company and Parent shall cause Purchaser's officers, employees, agents and
representatives, including attorneys, accountants, consultants, financial
advisors and lenders and their respective counsel to comply as though they were
parties to the Confidentiality Agreement.
No Solicitation of Transactions. The Merger Agreement provides that
neither the Company nor any of its subsidiaries, nor any of their respective
directors, officers, employees, representatives or agents shall, directly or
indirectly, solicit or initiate offers or proposals from, or provide any
confidential information to, or participate in any discussions or negotiations
(or if currently engaged in any of the foregoing actions, the Company, its
affiliates and their respective officers, directors, employees, representatives
and agents shall immediately cease such activities) with, any person or entity
(other than Parent and its subsidiaries and their respective directors,
officers, employees, representatives and agents) concerning (i) any merger,
acquisition, exchange or sale of all or any material portion of the assets not
in the ordinary course of business consistent with past practice, or other
similar transaction involving the Company or any subsidiary or division of the
Company, or the sale of any equity interest in the Company or any subsidiary, or
(ii) except for Shares issuable upon exercise of the 477,913 options outstanding
under the Company's Stock Plans on the date hereof)
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any sale by the Company or its subsidiaries of authorized but unissued Shares or
of any shares (whether or not outstanding) of any of the Company's subsidiaries
(all such offers and proposals being referred to herein as "Acquisition
Proposals"), provided, however, that nothing contained in the Merger Agreement
will prohibit the Company or its Board of Directors from (i) subject to the
public announcement provision of the Merger Agreement, issuing a press release
or otherwise publicly disclosing the terms of the Merger Agreement, including
the no solicitation of transactions section of the Merger Agreement or the terms
of any Acquisition Proposal; (ii) proceeding with the transactions contemplated
by the Merger Agreement; (iii) communicating to the Company's stockholders a
position as contemplated by Rule 14e-2 promulgated under the Exchange Act;
provided, however, that the Board of Directors shall not recommend that the
stockholders of the Company tender their Shares in connection with any such
tender offer unless the Board of Directors by majority vote determines in good
faith, based on the advice of outside legal counsel to the Company, that failing
to take such action would constitute a breach of the Board of Director's
fiduciary duty to the stockholders of the Company under applicable law; (iv)
making any disclosure to the Company's stockholders which, in the judgment of
the Board of Directors of the Company, based on the advice of outside counsel,
is required to be made under applicable law (including laws relating to the
fiduciary duties of directors); or (v) taking any non-appealable, final action
ordered to be taken by the Company by any court of competent jurisdiction; and,
provided, further, that the Board of Directors of the Company may, on behalf of
the Company, furnish or cause to be furnished information and may direct the
Company, its directors, officers, employees, representatives or agents to
furnish information and to participate in discussions or negotiations, in each
case in response to an unsolicited oral or written Acquisition Proposal or
expression of intention to make an Acquisition Proposal (except that discussion
or negotiations cannot proceed prior to receipt of such Acquisition Proposal) if
the Board of Directors by majority vote determines in good faith based on the
advice of outside legal counsel that failing to take such action would
constitute a breach of the Board of Director's fiduciary duty under applicable
law (an Acquisition Proposal which satisfies the above requirement being
referred to herein as a "Superior Proposal"). The Board of Directors shall
provide a copy of any written Acquisition Proposal (or describe the material
terms of any oral Acquisition Proposal) to Parent promptly after receipt
thereof, shall notify Parent promptly if any such proposal is made and shall
keep Parent promptly advised of all developments which could reasonably be
expected to culminate in the Board of Directors withdrawing, modifying or
amending its recommendation of the Offer, the Merger and the other transactions
contemplated by the Merger Agreement. Except as set forth in this paragraph,
neither the Company or any of its affiliates, nor any of its or their respective
officers, directors, employees, representatives or agents, shall, directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Parent and Purchaser, any affiliate
or associate of Parent and Purchaser or any designees of Parent or Purchaser)
concerning any merger, sale of assets, sale of shares of capital stock or
similar transactions (including an exchange of stock or assets) involving the
Company or any subsidiary or division of the Company. The Company has agreed not
to release any third-party from, or waive any provisions of, any confidentiality
or standstill agreement to which the Company is a party unless the Board of
Directors of the Company, by a majority vote, determines in good faith, based on
the advice of outside legal counsel that the failure to provide such release or
waiver would constitute a breach of fiduciary duty to the stockholders of the
Company under applicable law. Notwithstanding the foregoing, the Board of
Directors of the Company may (subject to the terms of this and the following
sentence) withdraw or modify its approval or recommendation of the Merger
Agreement or the Merger, approve or recommend a Superior Proposal or enter into
an agreement with respect to a Superior Proposal, in each case if the Board of
Directors of the Company by a majority vote determines in good faith based on
the advice of outside legal counsel that failing to take such action would
constitute a breach of fiduciary duty to the stockholders of the Company under
applicable law; provided that the Company shall not enter into an agreement with
respect to a Superior Proposal unless the Company shall have furnished Parent
with written notice specifying the material terms and conditions of such
Superior Proposal and identifying the person making such Superior
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<PAGE> 25
Proposal not later than 48 hours in advance of the time that it intends to enter
into such agreement and shall have caused its financial and legal advisors to
negotiate with Parent to make such amendments to the terms and conditions of the
Merger Agreement as would make the Merger Agreement as so amended at least as
favorable to the Company's stockholders from a financial point of view as the
Superior Proposal, unless the Board of Directors of the Company, by majority
vote, determines in good faith, based on the advice of outside legal counsel to
the Company, that failure to enter into an agreement with respect to a Superior
Proposal without regard to such notice or 48-hour period would constitute a
breach of fiduciary duty to the stockholders of the Company under applicable
law. In addition, if the Company proposes to enter into an agreement with
respect to any Superior Proposal, it shall concurrently with entering into such
agreement pay, or cause to be paid, to Parent the amount required to be paid
pursuant to the terms of the Merger Agreement described under the first
paragraph under "-- Termination Fees and Expenses" below.
Directors' and Officers' Indemnification and Insurance. The Merger
Agreement provides that at all times after consummation of the Offer, Parent
shall indemnify, or shall cause the Company (or the Surviving Corporation if
after the Effective Time) and its subsidiaries to indemnify, each person who is
now, or has been at any time prior to the date of the Merger Agreement, an
employee, agent, director or officer of the Company or of any of the Company's
subsidiaries, together with each such person's heirs, representatives,
successors and assigns (individually an "Indemnified Party") to the same extent
and in the same manner as currently provided in the respective charters or
by-laws of the Company and such subsidiaries or otherwise in effect on the date
hereof, with respect to any claim, liability, loss, damage, cost or expense
(whenever asserted or claimed) ("Indemnified Liability") based in whole or in
part on, or arising in whole or in part out of, any matter existing or occurring
at or prior to the Effective Time. Parent shall, and shall cause the Company (or
the Surviving Corporation if after the Effective Time) to, maintain in effect
for not less than six years after consummation of the Offer the current policies
of directors' and officers' liability insurance maintained by the Company and
the Company's subsidiaries on the date hereof (provided that Parent may
substitute therefor policies having at least the same coverage and containing
terms and conditions which are no less advantageous to the persons currently
covered by such policies as insureds) with respect to matters existing on or
occurring at or prior to the Effective Time; provided, however, that if the
aggregate annual premiums for such insurance at any time during such period
shall exceed 300% of the per annum rate of premium currently paid by the Company
and its subsidiaries for such insurance on the date of this Agreement (which the
Company represents and warrants is $788,000 as of the date of the Merger
Agreement), then Parent shall cause the Company (or the Surviving Corporation if
after the Effective Time) to, and the Company (or the Surviving Corporation if
after the Effective Time) shall, provide the maximum coverage that shall then be
available at an annual premium equal to 300% of such rate.
Without limiting the foregoing, the Merger Agreement also provides that in
the event any Indemnified Party becomes involved in any capacity in any action,
proceeding or investigation based in whole or in part on, or arising in whole or
in part out of, any matter, including the transactions contemplated hereby,
existing or occurring at or prior to the Effective Time, then to the extent
permitted by law, Parent shall, or shall cause the Company (or the Surviving
Corporation if after the Effective Time) to, periodically advance to such
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 Indemnified Party of an undertaking to reimburse the amounts
so advanced in the event of a final determination by a court of competent
jurisdiction that such Indemnified Party is not entitled thereto. Such
provisions of the Merger Agreement are intended for the benefit of, and shall be
enforceable by, current and former employees, officers and directors of the
Company and their respective heirs and legal representatives and shall be
binding on all successors and assigns of Parent.
Filings; Reasonable Efforts. The Merger Agreement provides that, upon the
terms and subject to the conditions thereof, the parties thereto shall (a)
promptly after the date of the Merger
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<PAGE> 26
Agreement make their respective filings and thereafter make any other required
submissions under the HSR Act with respect to the Offer and the Merger and (b)
use their reasonable efforts promptly to take, or cause to be taken, and to
cooperate with each other with respect to, all other actions, and to do, or
cause to be done, all things necessary, proper or appropriate under applicable
laws and regulations to consummate and make effective the transactions
contemplated by the Merger Agreement. Notwithstanding the foregoing, the Company
shall not be obligated to use its reasonable efforts or take any action pursuant
to this paragraph if the Board of Directors of the Company by majority vote
determines in good faith, based on the advice of outside legal counsel to the
Company, that such actions would constitute a breach of the Board of Directors'
fiduciary duties to the stockholders of the Company under applicable law.
Public Announcement. Parent, Purchaser and the Company have agreed to
consult with each other before issuing any press release or otherwise making any
public statements with respect to the Offer or the Merger, and shall not issue
any such press release or make any such public statement prior to such
consultation, except as may be required by law or any listing agreement with a
national securities exchange.
Conduct of Business Pending the Merger. The Company agreed and agreed to
cause its subsidiaries to operate their businesses in the ordinary course. The
Company and its subsidiaries will also use reasonable efforts to seek to
preserve intact their current business organizations, keep available the service
of its current officers, employees and consultants, and preserve its
relationships with customers, suppliers and other persons with which the Company
has significant business relations.
The Company and its subsidiaries will also refrain from taking various
actions without Parent's consent (such consent not to be unreasonably withheld)
pending consummation of the Merger. These limitations cover, among other things,
changes in governing documents, changes in capital stock, declaration or payment
of dividend or other distribution, increases in the compensation of directors,
officers and employees (except to the extent required under existing plans,
including certain sales incentive arrangements, or, subject to certain limits,
agreements or increases in compensation of officers and employees made in the
ordinary course of business consistent with past practice), adopting a plan of
complete or partial dissolution, incurring debt beyond specified limits, making
capital expenditures beyond specified limits, entering into transactions, making
any material tax election changing accounting principles and paying or
discharging any claims, liabilities or obligations.
Employee Benefits Matters. The Merger Agreement provides that prior to the
Effective Time, the Company shall pay all compensation and benefits earned
through or prior to the Effective Time as provided pursuant to the terms of any
compensation arrangements, employment agreements and employee or director
benefit plans, programs and policies in existence as of the date hereof for all
employees (and former employees) and directors (and former directors) of the
Company and its subsidiaries, as well as all compensation and benefits earned
and required to be paid prior to the Effective Time pursuant to the terms of an
individual agreement with any employee, former employee, director or former
director in effect as of the date of the Merger Agreement.
Pursuant to the Merger Agreement, the Purchaser has agreed that during the
period from the Effective Time until the first anniversary thereof (the
"Employment Continuation Period"), Parent shall provide for each employee of the
Surviving Corporation or its subsidiaries (each an "Employee"), so long as he or
she is actively employed by the Surviving Corporation (or as required by law),
and for each former employee of the Company or one of its subsidiaries, to the
extent such person has rights thereto immediately prior to the Effective Time
(collectively, "Company Employees") (i)(A) to continue to participate in the
Company's welfare benefit plans and the Company's compensation plans, employee
incentive programs and bonus plans (including, without limitation,
hospitalization, medical, prescription, dental, disability, salary continuation,
vacation, accidental death, travel accident, and individual or group life or
other insurance) (each, a "Company Plan"),
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<PAGE> 27
as each such Company Plan is in effect on the date of the Merger Agreement
(without modification or amendment) during the period commencing at the
Effective Time through December 31, 1998, and (B) during the period commencing
January 1, 1999 through the first anniversary of the Effective Time, the
Surviving Corporation shall provide the Company Employees with benefits that are
at least as valuable in the aggregate to such Company Employee as the benefits
provided to employees of Parent and its affiliates in comparable positions of
employment, to waive any pre-existing condition clause or waiting period
requirement in such welfare benefit plans or programs and to give credit for
deductible amounts and co-payments paid by a Company employee during the current
deductible year prior to the Effective time; (ii) participation in such
tax-qualified retirement plans of Parent (or an affiliate of Parent), which
shall provide in the aggregate benefits that are at least as valuable as the
benefits provided to employees of Parent and its affiliates in comparable
positions of employment, and to grant each Company Employee credit under such
plans, for eligibility and vesting purposes, for such Company Employee's service
with the Company and its affiliates prior to the Effective Time, except to the
extent it would result in a duplication of benefits with respect to the same
period of service; and (iii) participation in such other benefit plans and
programs of Parent and its affiliates (including without limitation, bonus,
deferred compensation, incentive compensation, stock purchase, stock option,
excess and supplemental retirement, severance or termination pay, and fringe
benefits) which, in the aggregate will provide benefits to Company Employees
which are no less favorable in the aggregate under those provided to employees
of Parent and its affiliates in comparable positions of employment; provided,
however, that except as set forth in clause (i)(A) above nothing herein shall
prevent the amendment or termination of any specific plan, program or amendment
or interfere with the Surviving Corporation's right or obligation to make such
changes as are necessary to conform with applicable law. Notwithstanding
anything in the Merger Agreement to the contrary, Parent shall cause the
Surviving Corporation to honor (without modification) and assume (i) the written
employment agreements, severance agreements, indemnification agreements with
existing directors and officers of the Company and (ii) certain incentive
arrangements and other agreements, all as in effect on the date of the Merger
Agreement. Nothing in this paragraph shall require the continued employment of
any person, or, except as set forth in this paragraph, prevent the Company
and/or the Surviving Corporation and their subsidiaries from taking any action
or refraining from taking any action which the Company and its subsidiaries
prior to the Effective Time could have taken or refrained from taking. The
parties have agreed that the Company severance plans and policies in effect as
of the date of the Merger Agreement shall remain in effect for at least the
one-year period commencing at the Effective Time. During such one-year period,
any Company Employee whose employment is terminated by the Surviving Corporation
or any of its subsidiaries (other than a Company Employee terminated for cause
or a Company Employee who is a "site" Employee terminated upon the cancellation
of an outsourcing agreement, which employees shall only be entitled to severance
benefits, if any, provided to employees of Parent (or an Affiliate of Parent) in
comparable positions of employment under similar circumstances) shall be deemed
to have been terminated as a result of a change of control of the Company (which
results in enhanced benefits under the Company's severance plans and policies).
For purposes of this paragraph a termination for "cause" shall include a
termination for deficient performance or for material violations of any Company
policy. Such provisions of the Merger Agreement are intended for the benefit of,
and shall be enforceable by, current and former employees, officers and
directors of the Company and their respective heirs and legal representatives
and shall be binding on all successors and assigns of Parent.
Disposition of Litigation. The Merger Agreement provides that the Company
agrees that it will not settle any litigation currently pending, or commenced
after the date thereof, against the Company or any of its directors by any
stockholder of the Company relating to the Offer or the Merger Agreement,
without the prior written consent of Parent (which consent shall not
unreasonably be withheld).
The Merger Agreement further provides that the Company will not voluntarily
cooperate with any third party which has sought or may hereafter seek to
restrain or prohibit or otherwise oppose
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the Offer or the Merger and cooperate with Parent and Purchaser to resist any
such effort to restrain or prohibit or otherwise oppose the Offer or the Merger,
unless the Board of Directors of the Company, by a majority vote, determines in
good faith, based on the advice of outside legal counsel, that compliance with
such requirements would constitute a breach of fiduciary duty to the
stockholders of the Company under applicable law.
Representation and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including
representations and warranties by the Company concerning the Company's
capitalization, required filings and consents, Commission filings, absence of
certain changes or events, labor, compliance with law, absence of litigation,
employee benefit plans, environmental matters, tax matters, undisclosed
liabilities and brokers. Some of the representations are qualified by a material
adverse effect clause. "Material Adverse Effect" includes any change or effect
that would have a material adverse effect on the financial condition or
businesses of the Company and its subsidiaries taken as a whole. The
representations and warranties of Purchaser, Parent and the Company terminate on
consummation of the Offer.
Conditions of the Merger. Under the Merger Agreement, the respective
obligations of the Parent, Purchaser, on the one hand, and the Company, on the
other, to consummate the Merger are subject to the fulfillment of the following
conditions: (a) Purchaser shall have purchased the Shares pursuant to the Offer
(provided that the purchase of Shares pursuant to the Offer shall not be a
condition to the obligations of Parent and Purchaser under the Merger Agreement
if Purchaser shall fail to accept for payment and pay for Shares pursuant to the
Offer in violation of the terms of the Offer or of the Merger Agreement); (b) if
necessary to effect the Merger, the Merger Agreement shall have been duly
approved by the holders of Shares in accordance with the DGCL and the
Certificate of Incorporation and By-Laws of the Company (provided that
stockholders approval shall not be a condition to the obligation of Parent and
Purchaser under the Merger Agreement if Parent failed to vote the Shares
beneficially owned by it or its affiliates in favor of the Merger); (c)
consummation of the Merger shall not result in violation of any applicable
United States federal or state law providing for criminal penalties; and (d) no
preliminary or permanent injunction or other order issued by any federal or
state court of competent jurisdiction in the United States prohibiting the
Merger shall be in effect.
Termination Events. The Merger Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (notwithstanding any
approval thereof by the stockholders of the Company), by the mutual consent of
Parent and the Company.
The Merger Agreement may be terminated and the Merger may be abandoned by
either Parent or the Company at any time prior to the Effective Time
(notwithstanding any approval thereof by the stockholders of the Company), if
(a) any court of competent jurisdiction or other governmental body located or
having jurisdiction within the United States or any country in which the
Company, directly or indirectly, has material assets or operations, shall have
issued a final order, injunction, decree, judgment or ruling or taken any other
final action restraining, enjoining or otherwise prohibiting the Offer or the
Merger and such order, injunction, decree, judgment, ruling or other action is
or shall have become final and nonappealable, (b) the Offer shall have expired
or terminated pursuant to the terms of the Merger Agreement without the purchase
of any Shares pursuant thereto; provided that Purchaser shall not have the right
to terminate the Merger Agreement pursuant to this clause if the termination or
expiration of the Offer without the purchase of Shares thereunder is in
violation of the terms of the Offer or of the Merger Agreement, or (c) if
Purchaser has not purchased Shares pursuant to the Offer prior to September 30,
1998; provided that the right to terminate this Agreement pursuant to clauses
(b) or (c) of this paragraph shall not be available to any party whose failure
(or the failure of whose affiliate) to fulfill any obligation under the Merger
Agreement or whose breach of a representation or warranty under the Merger
Agreement has resulted in the Offer not being consummated.
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The Merger Agreement may be terminated and the Offer may be abandoned at
any time prior to consummation of the Offer, by Parent, (i) if the Company shall
have breached any of its representations and warranties or failed to comply with
any of the covenants or agreements contained in the Merger Agreement to be
complied with or performed by the Company at or prior to consummation of the
Offer and such breach or failure shall have resulted in a Material Adverse
Effect that is not curable or, if curable, is not cured within 30 calendar days
after written notice of such breach is given by Parent to the Company or (ii)(x)
if the Company shall have received from a third party a bona fide Acquisition
Proposal, and the Board of Directors of the Company in accordance with the terms
of the Merger Agreement, shall have accepted such a proposal or (y) if the Board
of Directors of the Company shall have withdrawn or modified in a manner adverse
to Parent or Purchaser its approval or recommendation with respect to the Offer
and the Merger, or shall have resolved to effect any of the foregoing or (iii)
the Minimum Condition shall not have been satisfied by the expiration date of
the Offer as it may have been extended pursuant to the Merger Agreement and on
or prior to such date any person other than Parent or Purchaser shall have made
a proposal or communication with respect to a Superior Proposal.
The Merger Agreement may be terminated at any time prior to the
consummation of the Offer, by the Company, (i) if Parent or Purchaser shall have
breached any of its representations and warranties or failed to comply with any
of the covenants in the Merger Agreement (other than the obligation to commence
the Offer and to purchase Shares upon the terms and subject to the conditions
thereof) to be complied with or performed by Parent or Purchaser at or prior to
consummation of the Offer and such breach or failure has a material adverse
effect on Parent's or Purchaser's ability to consummate the Offer and such
breach, if curable, is not cured within 30 calendar days after written notice of
such breach is given by the Company to Parent and Purchaser, or (ii) if the
Company enters into a written agreement concerning a transaction that
constitutes a Superior Proposal, provided that the Company shall have complied
with the provisions specified under "-- No Solicitation of Transactions" above
(including the requirement that the Board of Directors of the Company by
majority vote determines in good faith based on the advice of outside legal
counsel to the Company that failing to accept the Superior Proposal would
constitute a breach of fiduciary duty to the stockholders of the Company under
applicable law and the payment of any amounts payable to Parent specified under
"-- Termination Fees and Expenses" below).
In the event of termination of the Merger Agreement and abandonment or
rejection of the Offer pursuant to the four preceding paragraphs, no party
hereto (or any of its directors, officers, employees, advisers or other
representatives) shall have any liability or further obligation to any other
party to the Merger Agreement, except as provided under "-- Access to
Information; Confidentiality" above and "-- Termination Fees and Expenses"
below, and except that nothing herein shall relieve any party from liability for
its fraud or wilful breach of the Merger Agreement.
Termination Fees and Expenses. The Merger Agreement further provides that
if: (i) Parent terminates the Merger Agreement pursuant to clause (i) of the
third preceding paragraph, and within 12 months thereafter, the Company enters
into an agreement with respect to a Third Party Acquisition (as defined below),
or a Third Party Acquisition occurs, involving any party (or any affiliate or
associate thereof) (x) with whom the Company (or its agents) had any discussions
with respect to a Third Party Acquisition, (y) to whom the Company (or its
agents) furnished information with respect to or with a view to a Third Party
Acquisition or (z) who had submitted a proposal or expressed any interest
publicly or to the Company in a Third Party Acquisition, in the case of each of
clauses (x), (y) and (z) prior to such termination, (ii) Parent terminates the
Agreement pursuant to clause (ii) of the third preceding paragraph or the
Company terminates the Agreement pursuant to clause (ii) of the second preceding
paragraph or (iii) Parent terminates the Agreement pursuant to clause (iii) of
the third preceding paragraph and within 12 months thereafter the Company enters
into an agreement or consummates a transaction with respect to a Third Party
Acquisition that provides for consideration for Shares or value (on a per share
basis) in excess of the Per Share Amount, then the Company shall pay to Parent,
within three business days following
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<PAGE> 30
the execution and delivery of such agreement or such occurrence, as the case may
be, or simultaneously with any termination contemplated by clause (ii) of this
paragraph, a fee, in cash, of $4.0 million (less any amounts previously paid as
described in the next paragraph), provided, however, that the Company in no
event shall be obligated to pay more than one such fee with respect to all such
agreements and occurrences and such termination and that the Company in no event
shall be obligated to pay more than $4.0 million in fees and expenses under the
provisions described in this paragraph and the succeeding paragraph. "Third
Party Acquisition" means the occurrence of any of the following events: (i) the
acquisition of the Company by merger, tender offer or otherwise or similar
business combination by any person other than Parent, Purchaser or any affiliate
thereof (a "Third Party"); (ii) the acquisition by a Third Party of more than
35.0% of the outstanding Shares or 35% or more of the aggregate book or fair
market value of the assets of the Company and its subsidiaries considered as a
whole; or (iii) the adoption by the Company of a plan of liquidation or the
declaration or payment of an extraordinary dividend of cash or assets.
The Merger Agreement also provides that upon the termination of the Merger
Agreement by Parent pursuant to clause (i) of the fourth preceding paragraph,
the Company shall reimburse Parent (not later than three business days after
submission of statements therefor) for all documented out-of-pocket fees and
expenses actually and reasonably incurred by Parent, Purchaser and their
affiliates or on their behalf in connection with the Offer and the Merger and
the consummation of the transactions contemplated by the Merger Agreement
(including, without limitation, fees and disbursements payable to financing
sources, investment bankers, counsel to Purchaser or Parent or any of the
foregoing, and accountants) up to a maximum amount of $2.0 million (subject to
the limitations set forth in the immediately preceding paragraph).
Expenses. Except as otherwise specified under "-- Termination Fees and
Expenses", the Merger Agreement provides that whether or not the Offer shall be
consummated, each party to the Merger Agreement shall pay its own expenses
incident to preparing for, entering into, and carrying out the Merger Agreement
and the consummation of the Offer and the Merger.
Amendment. Subject to applicable law, the Merger Agreement may be amended
by an instrument in writing signed by Parent, the Purchaser and the Company at
any time before or after the purchase of Shares pursuant to the Offer or
approval and adoption of the Merger Agreement and the Merger by the stockholders
of the Company, but after any such purchase of Shares or approval no amendment
may be made that modifies the consideration to be given to the holders of Shares
or in any other way materially adversely affects the rights of such stockholders
(other than a termination of the Merger Agreement pursuant to its terms).
Waiver. Subject to applicable law, at any time prior to the Effective
Time, any party to the Merger Agreement may (a) extend the time for the
performance of any of the obligations or other acts of the other parties
thereto, or (b) waive compliance with any of the agreements or conditions
contained in the Merger Agreement. At any time prior to consummation of the
Offer, any party to the Merger Agreement may waive any inaccuracies in the
representations and warranties contained therein or in any documents delivered
pursuant thereto. Any agreement on the part of a party to the Merger Agreement
to any such extension or waiver will be valid only if set forth in an instrument
in writing signed by such party.
(2) Agreements of the Parent and R.R. Donnelley
Stockholders Agreement. Concurrently with the execution and delivery of
the Merger Agreement, Parent and R.R. Donnelley entered into a Stockholders'
Agreement (the "Stockholders' Agreement").
Pursuant to the Stockholders' Agreement, R.R. Donnelley agreed to grant
Purchaser an irrevocable option (the "Lock-Up Option") to purchase such
stockholder's Shares, together with any additional Shares that may be acquired
by R.R. Donnelley, (the "RRD Shares") at a purchase price of $21 per share (the
"Exercise Price") in cash (subject to certain anti-dilution provisions) for
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each Share. Subject to applicable law (including Rule 10b-13 under the Exchange
Act), the Lock-Up Option may be exercised by Purchaser as to all of the RRD
Shares at any time, commencing upon the Exercise Date (as defined below) and
prior to the Expiration Date (as defined below). The "Exercise Date" means the
first to occur of: (a) the Locked-Up Stockholder fails to perform any agreement
or covenant in the Stockholders' Agreement or (b) the Merger Agreement is
terminated and Purchaser is entitled to the payment of a termination fee
pursuant to the provisions described under the first paragraph of
"-- Termination Fees and Expenses" above or expenses pursuant to the provisions
described under the second paragraph of "-- Termination Fees and Expenses"
above. The "Expiration Date" means the first to occur of: (i) the Effective
Time, (ii) 10 business days after the termination of the Merger Agreement in
accordance with the terms thereof because the Federal Trade Commission, the
Antitrust Division of the Department of Justice or any state, federal or foreign
court or other governmental body of competent jurisdiction shall have issued an
order, decree or ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the Merger and such order, decree, ruling or
other action shall have become final and nonappealable; (iii) the earliest of
(A) the consummation of a third party transaction that triggered the payment of
the termination fee pursuant to clause (b) above of this paragraph and (B) the
first anniversary of the date of the termination of the Merger Agreement, except
as set forth in clause (ii) above; or (iv) written notice of termination of the
Stockholders' Agreement by Purchaser to the Company.
The Stockholders' Agreement also provides that R.R. Donnelley will (i)
validly tender pursuant to the Offer and not withdraw all RRD Shares, except to
the extent that the tender of RRD Shares pursuant to the Offer would subject any
profit realized on the transaction by Seller to recovery by the Company under
Section 16(b) of the Exchange Act; (ii) grant to Purchaser or any designee of
Purchaser an irrevocable proxy to (a) vote the RRD Shares in favor of the
Merger, (b) vote the RRD 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 or agreement of the Company under the Merger
Agreement, and (c) vote the RRD Shares against any action or agreement (other
than the Merger Agreement or the transactions contemplated thereby) that would
impede, interfere with, delay, postpone or attempt to discourage the Merger or
the Offer, including, but not limited to (1) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving the Company and its subsidiaries; (2) a sale or transfer of a material
amount of assets of the Company and its subsidiaries or a reorganization,
recapitalization or liquidation of the Company and its subsidiaries; (3) any
change in the management or Board of Directors of the Company, except as
otherwise agreed to in writing by Parent; (4) any material change in the present
capitalization or dividend policy of the Company, or (5) any other material
change in the corporate structure or business of the Company; (iii) not,
directly or indirectly, solicit, encourage, participate in or initiate any
inquiries or the making of any proposal by any person or entity (other than
Purchaser or any affiliate of Purchaser) which constitutes, or may reasonably be
expected to lead to (a) any sale of the RRD Shares or (b) any acquisition or
purchase of a material portion of the Company's assets or any equity interest
in, or any merger, consolidation or business combination with, the Company or
any of its subsidiaries; provided, however, that the foregoing shall not apply
to any directors of the Company in their capacity as such who are also
employees, officers, representatives or agents of R.R. Donnelley, it being
understood that the terms of the Merger Agreement set forth any and all
limitations on solicitation applicable to such persons in their capacity as
directors of the Company; and (iv) not to (a) sell, transfer, pledge, encumber,
assign or otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to the sale, transfer, pledge,
encumbrance, assignment or other disposition of, any of the RRD Shares or (b)
grant any proxies, deposit any RRD Shares into a voting trust or enter into a
voting agreement with respect to any RRD Shares or (c) take any action that
would make any representation or warranty of Seller contained in the
Stockholders' Agreement untrue or incorrect or have the effect of preventing or
disabling R.R. Donnelley from performing its obligations under the Stockholders'
Agreement. The Stockholders' Agreement provides that R.R. Donnelley will at all
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times use its best efforts to prevent the Company from taking any action in
violation of the Merger Agreement.
Pursuant to the Stockholders' Agreement, Parent agreed that, if pursuant to
the Offer, there is tendered a number of Shares that together with the RRD
Shares tendered pursuant to the Stockholders' Agreement equals 50.1% or more of
the voting power of the Company, and the conditions to the Offer as set forth in
the Merger Agreement are otherwise satisfied, then Parent will purchase all of
the RRD Shares tendered in the Offer immediately upon the purchase of the other
Shares pursuant to the Offer.
The Stockholders' Agreement terminates on the Expiration Date.
12. PURPOSE OF THE OFFER; THE MERGER; PLANS FOR THE COMPANY. The purpose
of the Offer is to acquire control of, and the entire equity interest in, the
Company. The Offer is being made pursuant to the Merger Agreement. As promptly
as practicable following consummation of the Offer and after satisfaction or
waiver of all conditions to the Merger set forth in the Merger Agreement, the
Purchaser intends to acquire the remaining equity interest in the Company not
acquired in the Offer by consummating the Merger.
Vote Required to Approve the Merger. The Board of Directors of the Company
has approved and adopted the Merger and the Merger Agreement in accordance with
the DGCL. The Board of Directors will be required to submit the Merger Agreement
to the Company's stockholders for approval at a stockholders' meeting convened
for that purpose in accordance with the DGCL. If stockholder approval is
required (i.e., Parent fails to acquire 90% or more of the outstanding Shares),
the Merger Agreement must generally be approved by the vote of the holders of a
majority of the outstanding Shares. As a result, if the Minimum Condition is
satisfied, the Purchaser will have the power, which it intends to exercised, to
approve the Merger Agreement without the affirmative vote of any stockholder.
Pursuant to the Merger Agreement, the Company has agreed, if a Company
stockholder vote is required under the DGCL to effect the Merger, that as soon
as practicable after consummation of the Offer the Company shall take all
actions in accordance with the DGCL and its Restated Certificate of
Incorporation and by-laws to duly call, give notice of and hold a meeting of
stockholders of the Company. Subject to the fiduciary duties of the Board of
Directors of the Company, as advised by outside counsel, the Company acting
through its Board of Directors shall (A) include in the proxy statement the
unanimous recommendation of the Board of Directors that stockholders of the
Company vote in favor of adoption and approval of this Agreement, the Merger and
the transactions contemplated hereby and thereby and the written opinion of
William Blair & Company, L.L.C. that the consideration to be received by the
holders of Shares of the Company pursuant to the Offer and the Merger is fair
from a financial point of view to such stockholders and (B) use its best efforts
to obtain the necessary approval of this Agreement and the transactions
contemplated hereby by its stockholders. Notwithstanding the foregoing, in the
event that Purchaser shall acquire at least 90% of the then-outstanding Shares,
the parties thereto agree, at the request of Purchaser, subject to certain
closing conditions, to take all necessary and appropriate action to cause the
Merger to become effective, in accordance with Section 253 of the DGCL, as soon
as reasonably practicable after such acquisition, without a meeting of the
stockholders of the Company.
THIS OFFER TO PURCHASE DOES NOT CONSTITUTE A SOLICITATION OF A PROXY,
CONSENT OR AUTHORIZATION FOR OR WITH RESPECT TO THE ANNUAL MEETING OR ANY
SPECIAL MEETING OF THE COMPANY'S STOCKHOLDERS OR ANY ACTION IN LIEU THEREOF. ANY
SUCH SOLICITATION WHICH THE PURCHASER MAY MAKE WILL BE MADE ONLY PURSUANT TO
SEPARATE PROXY MATERIALS IN COMPLIANCE WITH THE REQUIREMENTS OF SECTION 14(a) OF
THE EXCHANGE ACT.
Stockholder Approval. The DGCL requires that unless otherwise provided by
the Company's Certificate of Incorporation, the Merger be approved by the
affirmative vote of the holders of at least
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a majority of the outstanding Shares. The Minimum Condition requires that at the
expiration of the Offer there shall have been validly tendered and not properly
withdrawn on or prior to the Expiration Date a number of Shares which, together
with the Shares owned by the Parent or Purchaser or any of its affiliates at the
commencement of the Offer, constitutes more than 50% of the voting power
(determined on a fully-diluted basis) on the date of purchase, of all securities
of the Company entitled to vote generally in the election of directors or in a
merger. Upon consummation of the Offer and assuming the Minimum Condition is
satisfied, the Purchaser will own sufficient Shares to enable it to effect
stockholder approval of the Merger with the affirmative vote of the Shares owned
by it.
THE OFFER IS CONDITIONED UPON THE MINIMUM CONDITION BEING SATISFIED.
Appraisal Rights in Connection with the Offer. Stockholders do not have
appraisal rights as a result of the Offer. However, if the Merger is
consummated, stockholders of the Company at the time of the Merger who do not
vote in favor of the Merger will have the right under the DGCL to dissent and
demand appraisal of, and receive payment in cash of the fair value of, their
Shares outstanding immediately prior to the effective date of the Merger in
accordance with Section 262 of the DGCL.
Under the DGCL, dissenting stockholders who comply with the applicable
statutory procedures will be entitled to receive a judicial determination of the
fair value of their Shares (exclusive of any element of value arising from the
accomplishment or expectation of such merger or similar business combination)
and to receive payment of such fair value in cash. Any such judicial
determination of the fair value of such Shares could be based upon
considerations other than or in addition to the price paid in the Offer and the
Merger and the market value of the Shares. In Weinberger v. UOP, Inc., the
Delaware Supreme Court stated, among other things, that "proof of value by any
techniques or methods which are generally considered acceptable in the financial
community and otherwise admissible in court" should be considered in an
appraisal proceeding. Stockholders should recognize that the value so determined
could be higher or lower than the price per Share paid pursuant to the Offer or
the consideration per Share to be paid in the Merger or other similar business
combination.
In addition, several decisions by Delaware courts have held that in certain
circumstances a controlling stockholder of a corporation involved in a merger
has a fiduciary duty to other stockholders that requires that the merger be fair
to other stockholders. In determining whether a merger is fair to minority
stockholders, Delaware courts have considered, among other things, the type and
amount of the consideration to be received by the stockholders and whether there
was fair dealing among the parties. The Delaware Supreme Court stated in
Weinberger and Rabkin v. Philip A. Hunt Chemical Corp. that the remedy
ordinarily available to minority stockholders in a cash-out merger is the right
to appraisal described above. However, a damages remedy or injunctive relief may
be available if a merger is found to be the product of procedural unfairness,
including fraud, misrepresentation or other misconduct.
THE FOREGOING SUMMARY OF THE RIGHTS OF OBJECTING STOCKHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY
STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE APPRAISAL RIGHTS. THE
PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS REQUIRE STRICT ADHERENCE TO THE
APPLICABLE PROVISIONS OF THE DELAWARE LAW.
The foregoing description of the DGCL is not necessarily complete and is
qualified in its entirely by reference to the DGCL.
Rule 13e-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may under
certain circumstances be applicable to the Merger following the purchase of
Shares pursuant to the Offer in which the Purchaser seeks to acquire any
remaining Shares. Rule 13e-3 should not be applicable to the Merger if the
Merger is consummated within one year after the expiration or termination of the
Offer and the price paid in the Merger is not less than the per Share price paid
pursuant to the Offer.
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However, in the event that the Purchaser is deemed to have acquired control of
the Company pursuant to the Offer and if the Merger is consummated more than one
year after completion of the Offer or an alternative acquisition transaction is
effected whereby stockholders of the Company receive consideration less than
that paid pursuant to the Offer, in either case at a time when the Shares are
still registered under the Exchange Act, the Purchaser may be required to comply
with Rule 13e-3 under the Exchange Act (the Merger Agreement does not
contemplate any such alternative transaction). If applicable, Rule 13e-3 would
require, among other things, that certain financial information concerning the
Company and certain information relating to the fairness of the Merger or such
alternative transaction and the consideration offered to minority stockholders
in the Merger or such alternative transaction, be filed with the Commission and
disclosed to stockholders prior to consummation of the Merger or such
alternative transaction. The purchase of a substantial number of Shares pursuant
to the Offer may result in the Company being able to terminate its Exchange Act
registration. See Section 14. If such registration were terminated, Rule 13e-3
would be inapplicable to any such future Merger or such alternative transaction.
Plans for the Company. Subject to certain regulatory requirements, the
Parent does not have any current definitive plans to dispose of any assets of
the Company or to effect any changes in its operations.
Except as described in this Offer to Purchase, none of the Purchaser, the
Parent nor, to the best knowledge of the Purchaser and the Parent, any of the
persons listed on Schedule I have any definitive plans or proposals that would
relate to or result in an extraordinary corporate transaction such as a merger,
reorganization or liquidation involving the Company or any of its subsidiaries
or a sale or other transfer of a material amount of assets of the Company or any
of its subsidiaries, any material change in the capitalization or dividend
policy of the Company or any other material change in the Company's corporate
structure or business or the composition of its Board of Directors or
management.
13. DIVIDENDS AND DISTRIBUTIONS. If the Company should, on or after the
date of the Merger Agreement, split, combine or otherwise change the Shares or
its capitalization, or disclose that it has taken any such action, then without
prejudice to the Purchaser's rights under Section 15, the Purchaser may make
such adjustments to the purchase price and other terms of the Offer as it deems
appropriate to reflect such split, combination or other change.
If on or after the date of the Merger Agreement, the Company should declare
or pay any cash or stock dividend or other distribution on, or issue any rights
with respect to, the Shares that is payable or distributable to stockholders of
record on a date prior to the transfer to the name of the Purchaser or the
nominee or transferee of the Purchaser on the Company's stock transfer records
of such Shares that are purchased pursuant to the Offer, then without prejudice
to the Purchaser's rights under Section 15, (i) the purchase price payable per
Share by the Purchaser pursuant to the Offer will be reduced to the extent any
such dividend or distribution is payable in cash and (ii) any non-cash dividend,
distribution (including additional Shares) or right received and held by a
tendering stockholder shall be required to be promptly remitted and transferred
by the tendering stockholder to the Depositary for the account of the Purchaser,
accompanied by appropriate documentation of transfer. Pending such remittance or
appropriate assurance thereof, the Purchaser will, subject to applicable law, be
entitled to all rights and privileges as owner of any such non-cash dividend,
distribution or right and may withhold the entire purchase price or deduct from
the purchase price the amount or value thereof, as determined by the Purchaser
in its sole discretion.
The Company has agreed in the Merger Agreement not to declare or pay
dividends or Shares or take any other action described in the preceeding
paragraph prior to the consummation of the Merger.
14. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, NASDAQ LISTING AND
EXCHANGE ACT REGISTRATION. The purchase of Shares pursuant to the Offer will
reduce the number of Shares that might otherwise trade publicly and could reduce
the number of holders of Shares which could
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adversely affect the liquidity and market value of the remaining Shares held by
the public. Following completion of the Offer, at least a majority of the
outstanding Shares will be owned by the Purchaser. Depending upon the number of
Shares purchased pursuant to the Offer, the Shares may no longer meet the
requirements of the National Association of Securities Dealers, Inc. (the
"NASD") for continued inclusion in the Nasdaq National Market, which require
that an issuer have at least 200,000 publicly held shares, held by at least 400
stockholders or 300 stockholders of round lots, with a market value of at least
$1,000,000 and have net tangible assets of at least $1,000,000, $2,000,000 or
$4,000,000, depending on profitability levels during the issuer's four most
recent fiscal years. If these standards are not met and the Shares were delisted
from the Nasdaq National Market, the Shares might nevertheless continue to be
included in the NASD's Nasdaq Stock Market (the "Nasdaq Stock Market") with
quotations published in the Nasdaq "additional list" or in one of the "local
lists", but if the number of holders of the Shares were to fall below 300, or if
the number of publicly held Shares were to fall below 100,000 or there were not
at least two registered and active market makers for the Shares, the NASD's
rules provide that the Shares would no longer be "qualified" for Nasdaq Stock
Market reporting and the Nasdaq Stock Market would cease to provide any
quotations. Shares held directly or indirectly by directors, officers or
beneficial owners of more than 10% of the Shares are not considered as being
publicly held for this purpose. According to the 1997 Annual Report, as of March
16, 1998, there were approximately 943 beneficial holders of Shares. According
to the Company's quarterly report on Form 10-Q for the quarter ended March 31,
1998, there were 5,010,277 Shares outstanding. If as a result of the purchase of
Shares pursuant to the Offer or otherwise, the Shares no longer meet the
requirements of the NASD for continued inclusion in the Nasdaq National Market
or in any other tier of the Nasdaq Stock Market and the Shares are no longer
included in the Nasdaq National Market or in any other tier of the Nasdaq Stock
Market, as the case may be, the market for the Shares could be adversely
affected.
In the event that the Shares no longer meet the requirements of the NASD
for continued inclusion in any tier of the Nasdaq Stock Market, it is possible
that such Shares would continue to trade on other securities exchanges or in the
over-the-counter market and that price quotations would be reported by such
exchanges or through other sources. However, the extent of the public market for
the Shares and the availability of such quotations would depend upon such
factors as the number of stockholders and/or the aggregate market value of the
Shares remaining at such time, the interest in maintaining a market in the
Shares on the part of securities firms, the possible termination of registration
under the Exchange Act as described below and other factors. The Purchaser
cannot predict whether the reduction in the number of Shares that might
otherwise trade publicly would have an adverse or beneficial effect on the
market price for or marketability of the Shares.
The Shares are currently registered under the Exchange Act. The purchase of
Shares pursuant to the Offer may result in the Shares becoming eligible for
deregistration under the Exchange Act. Registration of the Shares may be
terminated upon application of the Company to the Commission if the Shares are
not listed on a national securities exchange and there are fewer than 300 record
holders. The termination of the registration of the Shares under the Exchange
Act would substantially reduce the information required to be furnished by the
Company to holders of the Shares and would make certain provisions of the
Exchange Act, such as the short-swing profit recovery provisions of Section
16(b), the requirement of furnishing a proxy statement in connection with
stockholders' meetings and the requirements of Rule 13e-3 under the Exchange Act
with respect to "going private" transactions, no longer applicable to the
Shares. Furthermore, "affiliates" of the Company and persons holding "restricted
securities" of the Company may be deprived of the ability to dispose of the
securities pursuant to Rule 144 under the Securities Act of 1933.
The Shares are currently "margin securities" under the rules of the Board
of Governors of the Federal Reserve System (the "Federal Reserve Board"), which
has the effect, among other things, of allowing brokers to extend credit on the
collateral of such Shares for the purpose of buying, carrying, or trading in
securities ("purpose loans"). Depending upon factors similar to those
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described above with respect to listing and market quotations, it is possible
that, following the Offer, the Shares might no longer constitute "margin
securities" for the purposes of the Federal Reserve Board's margin regulations
and therefore could no longer be used as collateral for purpose loans made by
brokers.
15. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provisions
of the Offer, and in addition to the conditions that (i) at the expiration of
the Offer there shall have been validly tendered and not withdrawn prior to the
expiration of the Offer a number of Shares (including all Shares tendered
pursuant to the Stockholders' Agreement) which constitutes more than 50% of the
voting power (determined on a fully-diluted basis) on the date of purchase, of
all the securities of the Company entitled to vote generally in the election of
directors or in a merger (the "Minimum Condition") (for purposes of determining
at any time whether the Minimum Condition has been met, each outstanding Share
legally or beneficially owned by Parent or Purchaser or any of its affiliates at
the commencement of the Offer shall be deemed validly tendered under the Offer
and not withdrawn), and (ii) any and all applicable waiting periods under the
HSR Act shall have expired or been terminated, Purchaser shall not be required
to accept for payment, or subject to applicable rules and regulations of the
Commission, including Rule 14e-1(c) under the Exchange Act (relating to
Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), purchase or pay for any Shares tendered
pursuant to the Offer, may postpone the acceptance for payment of Shares
tendered, and subject to the terms and conditions of the Merger Agreement may
terminate the Offer if at any time on or after May 27, 1998 and at or before the
time of payment for any such Shares any of the following conditions shall occur
or has occurred:
(a) (x) the representations and warranties of the Company set forth in
the Merger Agreement shall not be true and correct in any material respect,
except (i) those representations and warranties that address matters only
as of a particular date (which shall be true and correct as of such date),
and (ii) where the failure of such representations and warranties to be
true and correct is not likely to result in a Material Adverse Effect, or
(y) the Company shall have breached in any material respect any covenants
contained in the Merger Agreement resulting in or likely to have a Material
Adverse Effect;
(b) there shall have been any statute, rule, regulation, judgment,
injunction or other order promulgated, enacted, entered, enforced or issued
by any federal or state governmental authority or agency or court of
competent jurisdiction in the United States which would have the effect of
(i) making the purchase of, or payment for, some or all of the Shares by
Parent or Purchaser or their affiliates pursuant to the Offer or the Merger
illegal; (ii) otherwise preventing consummation of the Offer or Merger;
(iii) prohibiting the ownership or operation by the Company or any of its
subsidiaries, or Parent or any of its subsidiaries, of all or any material
portion of the business or assets of the Company or any of its
subsidiaries, taken as a whole, or Parent or its subsidiaries, taken as a
whole; (iv) materially limiting the ownership or operation by the Company
or any of its subsidiaries, or Parent or any of its subsidiaries, of all or
any material portion of the business or assets of the Company or any of its
subsidiaries, taken as a whole, or Parent or its subsidiaries, taken as a
whole or compelling Parent or any of its subsidiaries to dispose of or hold
separate all or any material portion of the businesses or assets of the
Company or any of its significant subsidiaries (as defined in Regulation
S-X) or Parent or any of its significant subsidiaries (as defined in
Regulation S-X), as a result of the transactions contemplated by the Offer
or the Merger; (v) imposing limitations on the ability of Parent, Purchaser
or any of Parent's affiliates effectively to acquire or hold or to exercise
full rights of ownership of the Shares, including, without limitation, the
right to vote any Shares acquired or owned by Parent or Purchaser or any of
its affiliates on all matters properly presented to the stockholders of the
Company, including, without limitation, the adoption and approval of the
Merger Agreement and the merger or the right to vote any shares of capital
stock of any significant subsidiary (as defined in Regulation S-X),
directly or indirectly owned
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by the Company; or (vi) requiring divestiture by Parent or Purchaser or any
of their affiliates of any Shares; and, in each case, no such action or
proceeding seeking to do any of the foregoing shall be instituted or
pending by any governmental administrative or regulatory authority;
(c) (i) the Board of Directors of the Company shall have withdrawn,
modified or amended in any manner adverse to Parent or Purchaser its
recommendation or approval of the Offer, the Merger or the Merger
Agreement, or approved or recommended any takeover proposal other than the
Offer and the Merger, (ii) any corporation, partnership, person or entity
shall have entered into a definitive agreement or an agreement in principle
with the Company with respect to an alternative acquisition transaction
involving the Company, or (iii) the Board of Directors of the Company shall
have resolved to do any of the foregoing (except that the foregoing shall
not apply to a change solely in the reasons for such recommendation so long
as the Board of Directors of the Company continues to recommend acceptance
of the Offer by all holders of the Shares);
(d) the Merger Agreement shall have been terminated by the Company,
Parent or Purchaser in accordance with its terms;
(e) there shall be instituted any action, proceeding or counterclaim
by a federal or state governmental authority or agency by or before any
court or governmental, administrative or regulatory agency or authority
which has or is likely to have any of the effects described in clause (b)
above;
(f) there shall have occurred any event that has had, or is likely to
have, a Material Adverse Effect;
which, in the reasonable judgment of Purchaser, makes it inadvisable to proceed
with the Offer or with such acceptance for payment.
The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances giving rise to such
condition or may be waived by Purchaser in whole or in part at any time and from
time to time in its sole discretion. The foregoing conditions (other than the
Minimum Condition and the HSR Condition) may be waived by Purchaser in whole or
in part at any time and from time to time in its sole discretion. The failure by
Purchaser at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right, the waiver of any such right with respect to
particular facts and other circumstances shall not be deemed a waiver with
respect to any other facts and circumstances, and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time.
16. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS. General. Except as
set forth below, based upon its examination of publicly available filings by the
Company with the Commission and other publicly available information concerning
the Company, neither the Purchaser nor the Parent is aware of any licenses or
other regulatory permits that appear to be material to the business of the
Company and its subsidiaries, taken as a whole, that might be adversely affected
by the Purchaser's acquisition of Shares (and the indirect acquisition of the
stock of the Company's subsidiaries) as contemplated herein, or of any filings,
approvals or other actions by or with any domestic (federal or state), foreign
or supranational governmental authority or administrative or regulatory agency
that would be required prior to the acquisition of Shares (or the indirect
acquisition of the stock of the Company's subsidiaries) by the Purchaser
pursuant to the Offer as contemplated herein. Should any such approval or other
action be required, it is the Purchaser's present intention to seek such
approval or action. However, the Purchaser does not presently intend (and under
the Merger Agreement does not have the right) to delay the purchase of Shares
tendered pursuant to the Offer pending the receipt of any such approval or the
taking of any such action (subject to the Purchaser's right to delay or decline
to purchase Shares if any of the conditions in Section 15 shall have occurred).
There can be no assurance that any such approval or other action, if needed,
would be obtained without substantial conditions or that adverse consequences
might not result to the
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business of the Company, the Parent or the Purchaser or that certain parts of
the businesses of the Company, the Parent or the Purchaser might not have to be
disposed of or held separate or other substantial conditions complied with in
order to obtain such approval or other action or in the event that such approval
was not obtained or such other action was not taken, any of which could cause
the Purchaser to elect to terminate the Offer without the purchase of the Shares
thereunder. The Purchaser's obligation under the Offer to accept for payment and
pay for Shares is subject to certain conditions, including conditions relating
to the legal matters discussed in this Section 15.
State Takeover Laws. A number of states have adopted takeover laws and
regulations which purport to varying degrees to be applicable to attempts to
acquire securities of corporations which are incorporated in such states or
which have or whose business operations have substantial economic effects in
such states, or which have substantial assets, security holders, principal
executive offices or principal places of business therein. To the extent that
certain provisions of certain of these state takeover statutes purport to apply
to the Offer, the Purchaser believes that such laws conflict with federal law
and constitute an unconstitutional burden on interstate commerce. In 1982, the
Supreme Court of the United States, in Edgar v. Mite Corp., invalidated on
constitutional grounds the Illinois Business Takeovers Act, which as a matter of
state securities law made takeovers of corporations meeting certain requirements
more difficult, and the reasoning in such decision is likely to apply to certain
other state takeover statutes. However, in 1987, in CTS Corp. v. Dynamics Corp.
of America, the Supreme Court of the United States held that the State of
Indiana could, as a matter of corporate law and in particular those aspects of
corporate law concerning corporate governance, constitutionally disqualify a
potential acquiror from voting on the affairs of a target corporation without
the prior approval of the remaining stockholders, provided that such laws were
applicable only under certain conditions. Subsequently, in TLX Acquisition Corp.
v. Telex Corp., a federal district court in Oklahoma ruled that the Oklahoma
statutes were unconstitutional insofar as they applied to corporations
incorporated outside Oklahoma in that they would subject such corporations to
inconsistent regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a
federal district court in Tennessee ruled that four Tennessee takeover statutes
were unconstitutional as applied to corporations incorporated outside Tennessee.
This decision was affirmed by the United States Court of Appeals for the Sixth
Circuit. In December 1988, a federal district court in Florida held in Grand
Metropolitan PLC v. Butterworth that the provisions of the Florida Affiliated
Transactions Act and the Florida Control Share Acquisition Act were
unconstitutional as applied to corporations incorporated outside of Florida.
Except as described herein, the Purchaser has not attempted to comply with
any state takeover statutes in connection with the Offer. The Purchaser reserves
the right to challenge the validity or applicability of any state law allegedly
applicable to the Offer and nothing in this Offer to Purchase nor any action
taken in connection herewith is intended as a waiver of that right. In the event
that any state takeover statute is found applicable to the Offer, the Purchaser
might be unable to accept for payment or purchase Shares tendered pursuant to
the Offer or be delayed in continuing or consummating the Offer. In such case,
the Purchaser may not be obligated to accept for purchase or pay for, any Shares
tendered. See Section 15.
Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the FTC, certain acquisition transactions may not be consummated
unless certain information has been furnished to the Antitrust Division and the
FTC and certain waiting period requirements have been satisfied. The acquisition
of Shares pursuant to the Offer is subject to such requirements. See Section 2.
The Parent intends to file on the date hereof with the FTC and the
Antitrust Division a Premerger Notification and Report Form in connection with
the purchase of Shares pursuant to the Offer. Under the provisions of the HSR
Act applicable to the Offer, the purchase of Shares pursuant to the Offer may
not be consummated until the expiration of a 15-calendar day waiting period
following the filing by the Parent. Accordingly, the waiting period under the
HSR Act applicable to such purchases of Shares pursuant to the Offer is expected
to expire at 11:59 p.m., New York City time, on June 18,
36
<PAGE> 39
1998, unless such waiting period is extended by a request from the FTC or the
Antitrust Division for additional information or documentary material prior to
the expiration of the waiting period. If either the FTC or the Antitrust
Division were to request additional information or documentary material from the
Parent, the waiting period would expire at 11:59 p.m., New York City time, on
the tenth calendar day after the date of substantial compliance by the Parent
with such request. Thereafter, the waiting period could be extended only by
court order. If the acquisition of Shares is delayed pursuant to a request by
the FTC or the Antitrust Division for additional information or documentary
material pursuant to the HSR Act, the Offer may, but need not, be extended and
in any event the purchase of and payment for Shares will be deferred until ten
days after the request is substantially complied with, unless the waiting period
is sooner terminated by the FTC and the Antitrust Division. See Section 2. Only
one extension of such waiting period pursuant to a request for additional
information is authorized by the HSR Act and the rules promulgated thereunder,
except by court order. Any such extension of the waiting period will not give
rise to any withdrawal rights not otherwise provided for by applicable law. See
Section 4.
The FTC and the Antitrust Division scrutinize the legality under the
antitrust laws of transactions such as the proposed acquisition of Shares by the
Purchaser pursuant to the Offer. At any time before or after the purchase by the
Purchaser of Shares pursuant to the Offer, either of the FTC and the Antitrust
Division could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or seeking the divestiture of Shares purchased by
the Purchaser or the divestiture of substantial assets of the Parent, its
subsidiaries or the Company. Private parties and state attorneys general may
also bring legal action under federal or state antitrust laws under certain
circumstances.
Based upon an examination of publicly available information relating to the
businesses in which the Company and its subsidiaries are engaged, the Purchaser
has determined that the Company and the Parent both service customers in certain
geographic areas. Should the FTC or the Antitrust Division raise antitrust
concerns, the Purchaser may be asked, in order to expedite the Offer or the
Merger, to consider the divestiture of certain assets to deal with those
concerns. There is no guarantee that the Purchaser and the FTC or the Antitrust
Division would reach an agreement with respect to such divestiture. See Section
15 for certain conditions to the Offer, including conditions with respect to
litigation and certain government actions.
Margin Credit Regulations. Federal Reserve Board Regulations G, T, U and X
(the "Margin Credit Regulations") restrict the extension or maintenance of
credit for the purpose of buying or carrying margin stock, including the Shares,
if the credit is secured directly or indirectly thereby. Such secured credit may
not be extended or maintained in an amount that exceeds the maximum loan value
of the margin stock. Under the Margin Credit Regulations, the Shares are
presently margin stock and the maximum loan value thereof is generally 50% of
their current market value. The definition of "indirectly secured" contained in
the Margin Credit Regulations provides that the term does not include an
arrangement with a customer if the lender in good faith has not relied upon
margin stock as collateral in extending or maintaining the particular credit.
17. FEES AND EXPENSES. Goldman Sachs is acting as Dealer Managers in
connection with the Offer and serving as financial advisor to the Parent and the
Purchaser in connection with the proposed acquisition of the Company. The Parent
has agreed to pay to Goldman Sachs a fee of $1,000,000 upon the consummation of
the acquisition, in one or more transactions, of at least 50% of the Shares or
at least 50% of the assets of the Company. Parent has also agreed that in the
event Parent is entitled to payment pursuant to "-- Termination Fees and
Expenses", Parent shall pay Goldman Sachs 20% of any such payment received by
Parent. The Parent and the Purchaser will also reimburse Goldman Sachs for
reasonable out-of-pocket expenses, including reasonable attorneys' fees, and
have also agreed to indemnify Goldman Sachs against certain liabilities and
expenses in connection with the Offer, including certain liabilities under the
federal securities laws.
37
<PAGE> 40
The Purchaser has retained D.F. King & Co., Inc. to act as the Information
Agent and The Bank of New York to act as the Depositary in connection with the
Offer. The Information Agent may contact holders of Shares by mail, telephone,
telex, telegraph and personal interview and may request brokers, dealers and
other nominee stockholders to forward the Offer materials to beneficial owners.
The Information Agent and the Depositary will receive reasonable and customary
compensation for services relating to the Offer and will be reimbursed for
certain out-of-pocket expenses. The Purchaser and the Parent have also agreed to
indemnify the Information Agent and the Depositary against certain liabilities
and expenses in connection with the Offer, including certain liabilities under
the federal securities laws.
The Purchaser will not pay any fees or commissions to any broker or dealer
or any other person for soliciting tenders of Shares pursuant to the Offer
(other than to the Dealer Managers, the Information Agent and the Depositary).
Brokers, dealers, commercial banks and trust companies will, upon request, be
reimbursed by the Purchaser for customary mailing and handling expenses incurred
by them in forwarding offering materials to their customers.
18. MISCELLANEOUS. The Offer is being made solely by this Offer to
Purchase and the related Letter of Transmittal and is being made to all holders
of Shares. The Purchaser is not aware of any state where the making of the Offer
is prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of Shares pursuant thereto, the
Purchaser will make a good faith effort to comply with any such state statute.
If after such good faith effort, the Purchaser cannot comply with such state
statute, the Offer will not be made to nor will tenders be accepted from or on
behalf of the holders of Shares in such state. In any jurisdiction where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by the Dealer Managers or one or more registered brokers or dealers
that are licensed under the laws of such jurisdiction.
The Purchaser and the Parent have filed with the Commission a Schedule
14D-1 (including exhibits) pursuant to Rule 14d-3 under the Exchange Act,
furnishing certain additional information with respect to the Offer. Such
statement and any amendments thereto, including exhibits, may be inspected and
copies may be obtained from the offices of the Commission (except that they will
not be available at the regional offices of the Commission) in the manner set
forth in Section 7 of this Offer to Purchase.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR THE PARENT NOT CONTAINED HEREIN OR
IN THE LETTER OF TRANSMITTAL AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
DESI Acquisition, Inc.
June 3, 1998
38
<PAGE> 41
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE
PURCHASER AND THE PARENT
1. Directors and Executive Officers of the Purchaser. The name and
position with the Purchaser of each director and executive officer of the
Purchaser are set forth below. The other required information with respect to
each such person is set forth under "Directors and Executive Officers of the
Parent" below. All directors and executive officers listed below are citizens of
the United States.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Robert M. Johnson............................ Chief Executive Officer, President and
Director
Denise K. Fletcher........................... Senior Vice President, Chief Financial
Officer and Director
Douglas F. Bauer............................. Secretary
</TABLE>
2. Directors and Executive Officers of the Parent. The name, business
address, present principal occupation or employment and material occupations,
positions, offices or employments during the last five years of each director
and executive officer of the Parent and certain other information are set forth
below. Unless otherwise indicated, the business address of each such director
and executive officer is 345 Hudson Street, New York, New York 10014. Unless
otherwise indicated, each occupation set forth opposite an individual's name
refers to employment with the Parent. All directors and executive officers
listed below are citizens of the United States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES
NAME AND ADDRESS OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS
---------------- ---------------------------------------------
<S> <C>
Robert M. Conway............................. Director since 1994. Limited Partner of
Goldman, Sachs & Co. Mr. Conway also serves
on the supervisory board of Bowne Williams
Lea International, a joint venture in which
the Company participates.
Robert M. Johnson............................ Director since 1996. Chairman of the Board
and Chief Executive Officer of the Parent
since 1996. Mr. Johnson had previously been
President and Chief Executive Officer of the
Parent since January 1996. He was formerly
Publisher, President and Chief Executive
Officer of Newsday, Inc., a subsidiary of
Times Mirror, Inc.
Edward H. Meyer.............................. Director since 1983. Chairman of the Board
and President, Grey Advertising Inc. Mr.
Meyer is also a director of Ethan Allen
Interiors Inc., Harman International
Industries, Inc., The May Department Stores
Company, and several mutual funds advised by
Merrill Lynch Asset Management, Inc. and its
affiliates.
James P. O'Neil.............................. Director since 1996. President and Chief
Operating Officer of the Parent since 1996.
Mr. O'Neil was formerly Executive Vice
President and prior to that Vice President,
Finance of the Parent.
</TABLE>
I-1
<PAGE> 42
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES
NAME AND ADDRESS OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS
---------------- ---------------------------------------------
<S> <C>
H. Marshall Schwarz.......................... Director since 1986. Chairman of the Board
and Chief Executive Officer of U.S. Trust
Corporation. Mr. Schwarz also serves as a
director of Atlantic Mutual Companies.
Judith Shapiro............................... Director since 1997. Senior Vice President,
Management Information Systems, for Joseph E.
Seagram & Sons, Inc. since 1995. Ms. Shapiro
was previously Vice President of Smithkline
Beecham Corp. Since March 1998 she also has a
consulting arrangement with the Company on
information technology.
Wendell M. Smith............................. Director since 1992. President of Polestar
Ltd. Until 1996, Mr. Smith was Chairman of
the Board of Baldwin Technology, Inc.
Lisa A. Stanley.............................. Director since 1998. Financial planning
consultant affiliated with Tax & Financial
Group Advisors of Newport Beach, California.
Vincent Tese................................. Director since 1996. Cable television owner
and operator. Mr. Tese is also a director of
Bear Stearns & Co., Inc., Cablevision, Inc.,
Allied Waste Industries, Inc., Custodial
Trust Company, and MackCali Realty Corp.
Richard R. West.............................. Director since 1994. Dean Emeritus, Stern
School of Business, New York University.
Previously, Mr. West was Dean of the Stern
School of Business and Professor of Finance.
He is also a director of Alexander's Inc.,
Vornado Realty Trust, and several mutual
funds advised by Merrill Lynch Asset
Management, Inc. and its affiliates or by
Hotchkis and Wiley.
Carl J. Crosetto............................. Senior Vice President, since May 1998;
Director of Sales since 1996 and President,
Bowne International since 1989; previously
Vice President, from March 1998.
Denise K. Fletcher........................... Senior Vice President and Chief Financial
Officer, since May 1998; previously Vice
President and Chief Financial Officer, from
July 1996; theretofore principal of Fletcher
Associates, Inc., a management consulting
firm.
Susan W. Cummiskey........................... Senior Vice President, Human Resources, since
May 1998; previously Vice President, Human
Resources, since January 1998; previously
Director, Human Resources from February 1997;
theretofore Vice President, Human Resources
for the Chemical Group of Degussa
Corporation.
</TABLE>
I-2
<PAGE> 43
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES
NAME AND ADDRESS OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS
---------------- ---------------------------------------------
<S> <C>
Bruce Bezpa.................................. Vice President, Strategic Development, since
November 1996; previously Director of Mutual
Funds for the Parent.
Thomas P. Meola.............................. Vice President, Finance and Controller since
November 1996; previously Controller of the
Parent.
Douglas F. Bauer............................. Counsel and Corporate Secretary since 1987.
</TABLE>
3. Ownership of Shares by Directors and Executive Officers.
None.
I-3
<PAGE> 44
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each stockholder
of the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary as follows:
The Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or Overnight Delivery:
(for Eligible Institutions
only)
Tender & Exchange Department Tender & Exchange Department
P.O. Box 11248 (212) 815-6213 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
For Information Telephone:
(800) 507-9357
</TABLE>
Any questions and requests for assistance may be directed to the
Information Agent or the Dealer Managers at their respective telephone numbers
and addresses listed below. Additional copies of this Offer to Purchase, the
Letter of Transmittal and the Notice of Guaranteed Delivery may also be obtained
from the Information Agent. You may also contact your broker, dealer, commercial
bank or trust company for assistance concerning the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, NY 10005
Banks and Brokers Call Collect: (212) 269-5550
ALL OTHERS CALL TOLL-FREE: 1-800-769-5414
The Dealer Managers for the Offer are:
GOLDMAN, SACHS & CO.
85 Broad Street
New York, NY 10004
(212) 902-1000 (Call Collect)
(800) 323-5678 (Toll Free)
<PAGE> 1
EXHIBIT 7.2
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
DONNELLEY ENTERPRISE SOLUTIONS INCORPORATED
PURSUANT TO THE OFFER TO PURCHASE DATED JUNE 3, 1998
BY
DESI ACQUISITION, INC.,
A WHOLLY OWNED SUBSIDIARY
OF
BOWNE & CO., INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:01 A.M., NEW YORK
CITY TIME, ON WEDNESDAY, JULY 1, 1998, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or Overnight Delivery:
(for Eligible Institutions only)
Tender & Exchange Department (212) 815-6213 Tender & Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
</TABLE>
Confirm by Telephone:
(800) 507-9357
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS SET
FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders, either if
certificates for Shares (as defined below) are to be forwarded herewith or,
unless an Agent's Message (as defined in the Offer to Purchase) is utilized, if
tenders of Shares are to be made by book-entry transfer into the account of The
Bank of New York, as Depositary (the "Depositary"), at The Depository Trust
Company ("DTC" or the "Book-Entry Transfer Facility") pursuant to the procedures
set forth in Section 3 of the Offer to Purchase (as defined below). Stockholders
who tender Shares by book-entry transfer are referred to herein as "Book-Entry
Stockholders".
Holders of Shares whose certificates for such Shares (the "Share
Certificates" are not immediately available or who cannot deliver the Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase), or who
cannot compete the procedure for book-entry transfer on a timely basis, must
tender their Shares according to the guaranteed delivery procedure set forth in
Section 3 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO
THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
<PAGE> 2
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) & ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
NAME(S) APPEAR(S) ON CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES
SHARES CERTIFICATE REPRESENTED BY NUMBER OF SHARES
NUMBER(S)* CERTIFICATE(S) TENDERED**
<S> <C> <C> <C>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
Total Shares
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by Book-Entry Stockholders.
** Unless otherwise indicated, all Shares represented by certificates
delivered to the Depositary will be deemed to have been tendered. See
Instruction 4.
================================================================================
[ ] CHECK HERE IF SHARES ARE BEING TENDERED BY BOOK-ENTRY TRANSFER MADE TO AN
ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER FACILITY
AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER
FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution
- --------------------------------------------------------------------------------
Check box of Book-Entry Transfer Facility:
[ ] The Depository Trust Company
Account Number
- --------------------------------------------------------------------------------
Transaction Code Number
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s)
- --------------------------------------------------------------------------------
Window Ticket Number (if any)
- --------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
- --------------------------------------------------------------------------------
Name of Institution that Guaranteed Delivery
- --------------------------------------------------------------------------------
If delivered by Book-Entry Transfer, check the box of Book-Entry Transfer
Facility below:
[ ] The Depository Trust Company
Account Number
- --------------------------------------------------------------------------------
Transaction Code Number
- --------------------------------------------------------------------------------
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to DESI Acquisition, Inc., a Delaware
corporation (the "Purchaser"), a wholly owned subsidiary of Bowne & Co., Inc., a
New York corporation ("Parent"), the above-described shares of Common Stock,
$.01 par value per share (the "Shares"), of Donnelley Enterprise Solutions
Incorporated, a Delaware corporation (the "Company"), at a purchase price of $21
per Share, net to the seller in cash without interest thereon, upon the terms
and subject to the conditions set forth in the Offer to Purchase dated June 3,
1998 (the "Offer to Purchase") and in this Letter of Transmittal (which together
constitute the "Offer"). The undersigned understands that the Purchaser reserves
the right to transfer or assign, in whole or from time to time in part, to one
or more of its affiliates, the right to purchase all or any portion of the
Shares tendered pursuant to the Offer, receipt of which is hereby acknowledged.
Subject to, and effective upon, acceptance for payment for the Shares
tendered herewith in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, the Purchaser all
right, title and interest in and to all of the Shares that are being tendered
hereby and any and all non-cash dividends, distributions (including additional
Shares) or rights declared, paid or issued with respect to the tendered Shares
on or after May 27, 1998 and payable or distributable to the undersigned on a
date prior to the transfer to the name of the Purchaser or nominee or transferee
of the Purchaser on the Company's stock transfer records of the Shares tendered
herewith (collectively, a "Distribution"), and appoints the Depositary the true
and lawful agent and attorney-in-fact of the undersigned with respect to such
Shares (and any Distribution) with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest) to
(a) deliver such Share Certificates (as defined herein) (and any Distribution)
or transfer ownership of such Shares (and any Distribution) on the account books
maintained by the Book-Entry Transfer Facility, together in either case with
appropriate evidences of transfer, to the Depositary for the account of the
Purchaser, (b) present such Shares (and any Distribution) for transfer on the
books of the Company and (c) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares (and any Distribution), all in
accordance with the terms and subject to the conditions of the Offer.
The undersigned irrevocably appoints designees of the Purchaser as such
stockholder's proxy, with full power of substitution, to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder and
accepted for payment by the Purchaser and with respect to any and all other
Shares or other securities issued or issuable in respect of such Shares on or
after May 27, 1998. Such appointment will be effective when, and only to the
extent that, the Purchaser accepts such Shares for payment. Upon such acceptance
for payment, all prior proxies given by such stockholder with respect to such
Shares (and such other shares and securities) will be revoked without further
action, and no subsequent proxies may be given nor any subsequent written
consents executed (and, if given or executed, will not be deemed effective). The
designees of the Purchaser will be empowered to exercise all voting and other
rights of such stockholder as they in their sole discretion may deem proper at
any annual or special meeting of the Company's stockholders or any adjournment
or postponement thereof, by written consent in lieu of any such meeting or
otherwise. The Purchaser reserves the right to require that, in order for Shares
to be deemed validly tendered, immediately upon the Purchaser's payment for such
Shares the Purchaser must be able to exercise full voting rights with respect to
such Shares.
<PAGE> 4
The undersigned hereby represents and warrants that (a) the undersigned has
full power and authority to tender, sell, assign and transfer the Shares (and
any Distribution) tendered hereby and (b) when the Shares are accepted for
payment by the Purchaser, the Purchaser will acquire good, marketable and
unencumbered title to the Shares (and any Distribution), free and clear of all
liens, restrictions, charges and encumbrances, and the same will not be subject
to any adverse claim. The undersigned, upon request, will execute and deliver
any additional documents deemed by the Depositary or the Purchaser to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby (and any Distribution). In addition, the undersigned
shall promptly remit and transfer to the Depositary for the account of the
Purchaser any and all Distributions in respect of the Shares tendered hereby,
accompanied by appropriate documentation of transfer; and pending such
remittance or appropriate assurance thereof, the Purchaser will be, subject to
applicable law, entitled to all rights and privileges as owner of any such
Distribution and may withhold the entire purchase price or deduct from the
purchase price the amount or value thereof, as determined by the Purchaser in
its sole discretion.
All authority herein conferred or agreed to be conferred shall not be
affected by and shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned.
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date (as defined in the Offer to Purchase) and, unless theretofore
accepted for payment by the Purchaser pursuant to the Offer, may also be
withdrawn at any time after August 1, 1998. See Section 4 of the Offer to
Purchase.
The undersigned understands that tenders of Shares pursuant to any of the
procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions set forth in the
Offer, including the undersigned's representation that the undersigned owns the
Shares being tendered.
Unless otherwise indicated herein under "Special Payment Instructions",
please issue the check for the purchase price and/or issue or return any
certificate(s) for Shares not tendered or not accepted for payment in the
name(s) of the registered holder(s) appearing under "Description of Shares
Tendered". Similarly, unless otherwise indicated herein under "Special Delivery
Instructions", please mail the check for the purchase price and/or any
certificate(s) for Shares not tendered or not accepted for payment (and
accompanying documents, as appropriate) to the address(es) of the registered
holder(s) appearing under "Description of Shares Tendered". In the event that
both the Special Delivery Instructions and the Special Payment Instructions are
completed, please issue the check for the purchase price and/or any
certificate(s) for Shares not tendered or accepted for payment in the name of,
and deliver such check and/or such certificates to, the person or persons so
indicated. The undersigned recognizes that the Purchaser has no obligation,
pursuant to the Special Payment Instructions, to transfer any Shares from the
name(s) of the registered holder(s) thereof if the Purchaser does not accept for
payment any of the Shares so tendered.
<PAGE> 5
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) for Shares not tendered or not
accepted for payment and/or the check for the purchase price of Shares
accepted for payment are to be issued in the name of someone other than
the undersigned.
Issue [ ] check [ ] Certificate to:
Name
------------------------------------------------------------
(PLEASE PRINT)
Address
------------------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAX ID. OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 ON THE REVERSE SIDE)
============================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) for Shares not tendered or not
accepted for payment and/or the check for the purchase price of Shares
accepted for payment are to be sent to someone other than the undersigned
or to the undersigned at an address other than that shown above.
Mail [ ] check [ ] Certificate to:
Name
------------------------------------------------------------
(PLEASE PRINT)
Address
------------------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAX ID. OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 ON THE REVERSE SIDE)
------------------------------------------------------------
<PAGE> 6
SIGN HERE
AND COMPLETE SUBSTITUTE FORM W-9 ON REVERSE
SIGN SIGN
HERE HERE
X
- --------------------------------------------------------------------------------
X
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF HOLDER(S))
Dated: , 1998
- ---------------------------
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on
Share Certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, please provide the following information
and see Instruction 5.)
Name(s) ----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title)-----------------------------------------------------------
Address ------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number -----------------------------------------
Tax Identification or
Social Security No. -----------------------------------------------------------
COMPLETE SUBSTITUTE FORM W-9 ON REVERSE
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature
-------------------------------------------------------------
Name ---------------------------------------------------------------------------
Name of Firm--------------------------------------------------------------------
(PLEASE PRINT)
Address ------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number -----------------------------------------
Dated: , 1998
- ---------------------------
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) of Shares tendered herewith, unless such holder(s) has
completed either the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" above, or (b) if such Shares are
tendered for the account of a firm which is a bank, broker, dealer, credit
union, savings association or other entity which is a member in good standing of
the Securities Transfer Agents Medallion Program (each of the foregoing being
referred to as an "Eligible Institution"). In all other cases, all signatures on
this Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instruction 5 of this Letter of Transmittal.
2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed by
stockholders either if certificates are to be forwarded herewith or, unless an
Agent's Message is utilized, if tenders are to be made pursuant to the procedure
for tender by book-entry transfer set forth in Section 3 of the Offer to
Purchase. Share Certificates, or timely confirmation (a "Book-Entry
Confirmation") of a book-entry transfer of such Shares into the Depositary's
account at the Book-Entry Transfer Facility, as well as this Letter of
Transmittal (or a facsimile hereof), properly completed and duly executed, with
any required signature guarantees, or an Agent's Message in connection with a
book-entry transfer, and any other documents required by this Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth herein prior to the Expiration Date (as defined in Section 1 of the Offer
to Purchase). Stockholders whose Share Certificates are not immediately
available or who cannot deliver their Share Certificates and all other required
documents to the Depositary prior to the Expiration Date or who cannot complete
the procedure for delivery by book-entry transfer on a timely basis may tender
their Shares by properly completing and duly executing a Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedure set forth in Section 3 of
the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made
by or through an Eligible Institution; (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form made available
by the Purchaser, must be received by the Depositary prior to the Expiration
Date; and (iii) the Share Certificates (or a Book-Entry Confirmation)
representing all tendered Shares, in proper form for transfer, in each case
together with the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees (or, in the
case of a book-entry delivery, an Agent's Message) and any other documents
required by this Letter of Transmittal, must be received by the Depositary
within three Nasdaq National Market trading days after the date of execution of
such Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal (or a facsimile hereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares and any other required
information should be listed on a separate signed schedule attached hereto.
4. PARTIAL TENDERS. (Not Applicable to Book-Entry Stockholders) If fewer
than all the Shares evidenced by any Share Certificate submitted are to be
tendered, fill in the number of Shares which are to be tendered in the box
entitled "Number of Shares Tendered". In such cases, new Share Certificates for
the Shares that were evidenced by your old Share Certificates, but were not
tendered by you, will be sent to you, unless otherwise provided in the
appropriate box on this Letter of Transmittal, as soon as practicable after the
Expiration Date. All Shares represented by Share Certificates delivered to the
Depositary will be deemed to have been tendered unless otherwise indicated.
<PAGE> 8
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the certificate(s) without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to the Purchaser of their authority so to act must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to or
certificates for Shares not tendered or not purchased are to be issued in the
name of a person other than the registered holder(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the certificate(s) listed, the certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear(s) on the
certificate(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction
6, the Purchaser will pay any stock transfer taxes with respect to the transfer
and sale of Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price is to be made to, or if certificate(s) for Shares
not tendered or accepted for payment are to be registered in the name of, any
person other than the registered holder(s), or if tendered certificate(s) are
registered in the name of any person other than the person(s) signing this
Letter of Transmittal, the amount of any stock transfer taxes (whether imposed
on the registered holder(s) or such person) payable on account of the transfer
to such person will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes or an exemption therefrom, is submitted.
Except as otherwise provided in this Instruction 6, it will not be
necessary for transfer tax stamps to be affixed to the certificate(s) listed in
this Letter of Transmittal.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in
the name of, and/or certificates for Shares not tendered or not accepted for
payment are to be issued or returned to, a person other than the signer of this
Letter of Transmittal or if a check and/or such certificates are to be returned
to a person other than the person(s) signing this Letter of Transmittal or to an
address other than that shown in this Letter of Transmittal, the appropriate
boxes on this Letter of Transmittal must be completed.
8. WAIVER OF CONDITIONS. Subject to the terms and conditions of the Merger
Agreement, the conditions of the Offer (other than the Minimum Condition (as
defined in the Offer to Purchase)) may be waived by the Purchaser in whole or in
part at any time and from time to time in its sole discretion.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a stockholder whose tendered Shares are accepted for payment is
required to provide the Depositary with such stockholder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Depositary is
not provided with the correct TIN, the Internal Revenue Service may subject the
stockholder or other payee to a $50 penalty. In addition, payments that are made
to such stockholder or other payee with respect to Shares purchased pursuant to
the Offer may be subject to 31% backup withholding.
<PAGE> 9
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, the stockholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Depositary. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any such payments made to the stockholder or other payee. Backup withholding
is not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is checked,
the stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Depositary.
The stockholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares or of the last transferee appearing on the transfers attached to, or
endorsed on, the Shares. If the Shares are in more than one name or are not in
the name of the actual owner, consult the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
guidance on which number to report.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests for
assistance may be directed to the Dealer Manager or the Information Agent at
their respective addresses and telephone numbers set forth below. Additional
copies of the Offer to Purchase, this Letter of Transmittal and the Notice of
Guaranteed Delivery may also be obtained from the Information Agent or the
Dealer Manager or from brokers, dealers, commercial banks or trust companies.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate representing
Shares has been lost, destroyed or stolen, the stockholder should promptly
notify the Depositary. The stockholder will then be instructed as to the steps
that must be taken in order to replace the certificate. This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost or destroyed certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), TOGETHER
WITH CERTIFICATES OR CONFIRMATION OF BOOK ENTRY TRANSFER OR THE NOTICE OF
GUARANTEED DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE
DEPOSITARY PRIOR TO THE EXPIRATION DATE.
<PAGE> 10
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
PAYER'S NAME: THE BANK OF NEW YORK
- ----------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN Social Security Number
Form W-9 IN THE BOX AT THE RIGHT AND or
Department of the Treasury CERTIFY BY SIGNING AND DATING Employer Identification Number
Internal Revenue Service BELOW. -------------------------------
----------------------------------------------------------------------
Payer's Request for Taxpayer PART 2--Certification--Under penalties of perjury, I certify that:
Identification Number ("TIN") (1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me) and
(2) I am not subject to backup withholding because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service
(the "IRS") that I am subject to backup withholding as a result of a failure
to report all interest or dividends, or (c) the IRS has notified me that I
am no longer subject to backup withholding.
Certification Instructions--You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because
of under-reporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out such Item (2).
- --------------------------------------------------------------------------------------------------------------------
SIGN HERE Signature---------------------------- PART 3--
Awaiting TIN [ ]
Date--------------------------- , 1998
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE MERGER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all reportable payments made to me will be withheld.
Signature-------------------------------------------- Date---------------, 1998
<PAGE> 11
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
ALL OTHERS CALL TOLL FREE: 1-800-769-5414
The Dealer Managers for the Offer are:
GOLDMAN, SACHS & CO.
85 Broad Street
New York, NY 10004
(212) 902-1000 (Call Collect)
(800) 323-5678 (Toll Free)
June 3, 1998
<PAGE> 1
EXHIBIT 7.3
NOTICE OF GUARANTEED DELIVERY
TO
TENDER SHARES OF COMMON STOCK
OF
DONNELLEY ENTERPRISE SOLUTIONS INCORPORATED
As set forth in Section 3 of the Offer to Purchase described below, this
instrument or one substantially equivalent hereto must be used to accept the
Offer (as defined below) if certificates for Shares (as defined below) are not
immediately available or the certificates for Shares and all other required
documents cannot be delivered to the Depositary prior to the Expiration Date (as
defined in Section 1 of the Offer to Purchase) or if the procedure for delivery
by book-entry transfer cannot be completed on a timely basis. This instrument
may be delivered by hand or transmitted by facsimile transmission or mail to the
Depositary.
The Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or Overnight Delivery:
(for Eligible Institutions only)
Tender & Exchange Department (212) 815-6213 Tender & Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
</TABLE>
Confirm by Telephone:
(800) 507-9357
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box in the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tender(s) to DESI Acquisition, Inc., a Delaware
corporation and a wholly owned subsidiary of Bowne & Co., Inc., a New York
corporation, upon the terms and subject to the conditions set forth in the Offer
to Purchase dated June 3, 1998 (the "Offer to Purchase"), and in the related
Letter of Transmittal (which together constitute the "Offer"), receipt of which
is hereby acknowledged, the number of shares of Common Stock, $.01 par value per
share (the "Shares"), of Donnelley Enterprise Solutions Incorporated, a Delaware
corporation, pursuant to the guaranteed delivery procedure set forth in Section
3 of the Offer to Purchase.
<PAGE> 2
<TABLE>
<S> <C>
Signature(s) Address(es)
- ----------------------------------------- -----------------------------------------
Name(s) of Record Holders -----------------------------------------
ZIP CODE
- -----------------------------------------
PLEASE TYPE OR PRINT Area Code and Tel. No(s)
-----------------------------------------
Number of Shares
- ----------------------------------------- (Check the box below if Shares will be
tendered by book-entry transfer)
Certificate Nos. (If Available)
[ ] The Depository Trust Company
- -----------------------------------------
- ----------------------------------------- Account Number
Dated , 1998 ------------------------------------------
- -----------------------------------
------------------------------------------
</TABLE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a bank, broker, dealer, credit union,
savings association or other entity which is a member in good standing of the
Securities Transfer Agents Medallion Program, (a) represents that the above
named person(s) "own(s)" the Shares tendered hereby within the meaning of Rule
14e-4 under the Securities Exchange Act of 1934, as amended ("Rule 14e-4"), (b)
represents that such tender of Shares complies with Rule 14e-4, and (c)
guarantees to deliver to the Depositary either the certificates evidencing all
tendered Shares, in proper form for transfer, or to deliver Shares pursuant to
the procedure for book-entry transfer into the Depositary's account at The
Depository Trust Company (the "Book-Entry Transfer Facility"), in either case
together with the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees or an
Agent's Message (as defined in the Offer to Purchase) in the case of a
book-entry delivery, and any other required documents, all within three Nasdaq
National Market trading days after the date hereof.
<TABLE>
<S> <C>
- ---------------------------------------------- ----------------------------------------------
NAME OF FIRM AUTHORIZED SIGNATURE
Name
- ---------------------------------------------- ----------------------------------------------
ADDRESS PLEASE TYPE OR PRINT
Title
- ---------------------------------------------- ----------------------------------------------
ZIP CODE
AREA CODE AND TEL. NO. Dated , 1998
- ---------------------------------------------- ----------------------------------------
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES SHOULD
BE SENT WITH YOUR LETTER OF TRANSMITTAL.
2
<PAGE> 1
EXHIBIT 7.4
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
DONNELLEY ENTERPRISE SOLUTIONS INCORPORATED
AT
$21 NET PER SHARE
BY
DESI ACQUISITION, INC.
A WHOLLY OWNED SUBSIDIARY
OF
BOWNE & CO., INC.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:01 A.M. , NEW YORK
CITY TIME, ON WEDNESDAY, JULY 1, 1998, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
June 3, 1998
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by DESI Acquisition, Inc., a Delaware corporation
(the "Purchaser") and a wholly owned subsidiary of Bowne & Co., Inc., a New York
corporation (the "Parent"), to act as Dealer Managers in connection with the
Purchaser's offer to purchase for cash all the outstanding shares of Common
Stock, par value $.01 per share (the "Shares"), of Donnelley Enterprise
Solutions Incorporated, a Delaware corporation (the "Company") at a purchase
price of $21 per Share, net to the seller in cash without interest thereon, upon
the terms and subject to the conditions set forth in the Offer to Purchase,
dated June 3, 1998 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which together constitute the "Offer") enclosed herewith. Holders
of Shares whose certificates for such Shares (the "Share Certificates") are not
immediately available or who cannot deliver their Share Certificates and all
other required documents to the Depositary (as defined below) prior to the
Expiration Date (as defined in the Offer to Purchase), or who cannot complete
the procedures for book-entry transfer on a timely basis, must tender their
Shares according to the guaranteed delivery procedures set forth in Section 3 of
the Offer to Purchase.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares registered in your name or in the name of
your nominee.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase dated, June 3, 1998.
2. The Letter of Transmittal to tender Shares for your use and for the
information of your clients. Facsimile copies of the Letter of Transmittal
may be used to tender Shares.
3. The Notice of Guaranteed Delivery for Shares to be used to accept
the Offer if Share Certificates are not immediately available or if such
certificates and all other required documents cannot be delivered to The
Bank of New York (the "Depositary") by the Expiration Date or if the
procedure for book-entry transfer cannot be completed by the Expiration
Date.
4. The Letter to Stockholders of the Company from the Chairman of the
Board, President and Chief Executive Officer of the Company, accompanied by
the Company's Solicitation/Recommendation Statement on Schedule 14D-9.
<PAGE> 2
5. A printed form of letter which may be sent to your clients for
whose accounts you hold Shares registered in your name or in the name of
your nominee, with space provided for obtaining such clients' instructions
with regard to the Offer.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
7. A return envelope addressed to The Bank of New York, the
Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT
12:01 A.M., NEW YORK CITY TIME, ON WEDNESDAY, JULY 1, 1998 UNLESS THE OFFER IS
EXTENDED.
In order to take advantage of the Offer, (i) a duly executed and properly
completed Letter of Transmittal and any required signature guarantees, or an
Agent's Message (as defined in the Offer to Purchase) in connection with a
book-entry delivery of Shares, and other required documents should be sent to
the Depositary, and (ii) either Share Certificates, representing the tendered
Shares should be delivered to the Depositary, or such Shares should be tendered
by book-entry transfer into the Depositary's account maintained at the
Book-Entry Transfer Facility (as described in the Offer to Purchase), all in
accordance with the instructions set forth in the Letter of Transmittal and the
Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Share Certificates or other required documents on or prior to the
Expiration Date or to comply with the book-entry transfer procedures on a timely
basis, a tender may be effected by following the guaranteed delivery procedures
specified in Section 3 of the Offer to Purchase.
The Purchaser will not pay any commissions or fees to any broker, dealer or
other person (other than the Dealer Managers, the Depositary and D.F. King &
Co., Inc. (the "Information Agent") (as described in the Offer to Purchase)) for
soliciting tenders of Shares pursuant to the Offer. The Purchaser will, however,
upon request, reimburse you for customary clerical and mailing expenses incurred
by you in forwarding any of the enclosed materials to your clients. The
Purchaser will pay or cause to be paid any stock transfer taxes payable on the
transfer of Shares to it, except as otherwise provided in Instruction 6 of the
Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
Goldman, Sachs & Co., the Dealer Managers, or the Information Agent, at their
respective addresses and telephone numbers set forth on the back cover of the
Offer to Purchase. Additional copies of the enclosed materials may be obtained
from the Information Agent.
Very truly yours,
GOLDMAN, SACHS & CO.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, THE PARENT, THE DEALER MANAGERS,
THE COMPANY, THE DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF
THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY
DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
2
<PAGE> 1
EXHIBIT 7.5
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
DONNELLEY ENTERPRISE SOLUTIONS INCORPORATED
AT
$21 NET PER SHARE
BY
DESI ACQUISITION, INC.
A WHOLLY OWNED SUBSIDIARY
OF
BOWNE & CO., INC.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:01 A.M., NEW YORK
CITY TIME, ON WEDNESDAY, JULY 1, 1998, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated June 3, 1998
(the "Offer to Purchase"), and the related Letter of Transmittal relating to an
offer by DESI Acquisition, Inc., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Bowne & Co., Inc., a New York corporation (the
"Parent"), to purchase all of the outstanding shares of Common Stock, $.01 par
value per share (the "Shares"), of Donnelley Enterprise Solutions Incorporated,
a Delaware corporation (the "Company"), at a purchase price of $21 per Share,
net to the seller in cash without interest thereon, upon the terms and subject
to the conditions set forth in the Offer to Purchase and in the related Letter
of Transmittal (which together constitute the "Offer"). We are the holder of
record of Shares held by us for your account. A tender of such Shares can be
made only by us as the holder of record and pursuant to your instructions. The
Letter of Transmittal is furnished to you for your information only and cannot
be used by you to tender Shares held by us for your account.
We request instructions as to whether you wish to have us tender on your
behalf any or all of such Shares held by us for your account, pursuant to the
terms and subject to the conditions set forth in the Offer to Purchase.
Your attention is directed to the following:
1. The tender price is $21 per share, net to the seller in cash
without interest thereon.
2. The Offer is made for all of the outstanding Shares.
3. The Board of Directors of the Company has determined that the
Merger Agreement (as defined below) and the transactions contemplated
thereby, including each of the Offer and the Merger (as defined below), are
advisable and fair to and in the best interests of the stockholders of the
Company and recommends that holders of the Shares accept the Offer and
tender their Shares to the Purchaser.
4. The Offer is being made pursuant to the Agreement and Plan of
Merger, dated as of May 27, 1998 (the "Merger Agreement"), which provides
that subsequent to the consummation of the Offer, the Purchaser will merge
with and into the Company (the "Merger"). At the effective time of the
Merger (the "Effective Time"), each Share issued and outstanding
immediately prior to the Effective Time (other than Shares held in the
treasury of the Company and Shares, if any, owned by the Parent, the
Purchaser or the Company, or by any direct or indirect subsidiary of the
Parent, the Purchaser or the Company and other than Shares, if any, held by
stockholders who shall have properly demanded appraisal of their Shares in
accordance with Section 262 of the Delaware General Corporation Law) shall
be converted into the right to receive $21 in cash, without interest, less
any withholding taxes required under applicable law.
5. The Offer and withdrawal rights will expire at 12:01 a.m., New York
City time, on Wednesday, July 1, 1998 unless the Offer is extended.
6. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares pursuant to the
Offer.
<PAGE> 2
7. The Offer is conditioned upon, among other things, (i) there being
validly tendered and not withdrawn prior to the expiration of the Offer, a
number of Shares which, when combined with the Shares legally or
beneficially owned, by the Parent or Purchaser or any of its affiliates at
the commencement of the Offer, constitute more than 50% of the voting power
(determined on a fully-diluted basis) of all securities of the Company
entitled to vote generally in the election of directors or in a merger and
(ii) the expiration or termination of all applicable waiting periods under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
The Offer is being made solely by the Offer to Purchase and the related
Letter of Transmittal and is being made to all holders of Shares. The Purchaser
is not aware of any State where the making of the Offer is prohibited by
administrative or judicial action pursuant to any valid State statute. If the
Purchaser becomes aware of any valid State statute prohibiting the making of the
Offer or the acceptance of Shares pursuant thereto, the Purchaser will make a
good faith effort to comply with any such State statute. If, after such good
faith effort, the Purchaser cannot comply with such State statute, the Offer
will not be made to nor will tenders be accepted from or on behalf of the
holders of Shares in such State. In any jurisdiction where the securities, "blue
sky" or other laws require the Offer to be made by a licensed broker or dealer,
the Offer shall be deemed to be made on behalf of the Purchaser by the Dealer
Managers or one or more registered brokers or dealers that are licensed under
the laws of such jurisdiction.
If you wish to have us tender any or all of the Shares held by us for your
account, please instruct us by completing, executing and returning to us the
instruction form contained in this letter. If you authorize a tender of your
Shares, all such Shares will be tendered unless otherwise specified in such
instruction form. Your instructions should be forwarded to us in ample time to
permit us to submit a tender on your behalf prior to the expiration of the
Offer.
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
DONNELLEY ENTERPRISE SOLUTIONS INCORPORATED
The undersigned acknowledge(s) receipt of your letter enclosing the Offer
to Purchase dated June 3, 1998 (the "Offer to Purchase"), and the related Letter
of Transmittal pursuant to an offer by DESI Acquisition, Inc., a Delaware
corporation and a wholly owned subsidiary of Bowne & Co., Inc., a New York
corporation, to purchase all outstanding shares of Common Stock, $.01 par value
per share (the "Shares"), of Donnelley Enterprise Solutions Incorporated, a
Delaware corporation.
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares) which are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer to Purchase and in the related Letter of Transmittal
furnished to the undersigned.
Number of Shares to be Tendered*
- --------------------------------------------- Shares
Dated , 1998
- --------------------------------------
SIGN HERE
- ------------------------------------------------------
- ------------------------------------------------------
SIGNATURE(S)
- ------------------------------------------------------
PLEASE PRINT NAME(S)
- ------------------------------------------------------
ADDRESS
- ------------------------------------------------------
AREA CODE AND TELEPHONE NUMBER
- ------------------------------------------------------
TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER
- ---------------
* Unless otherwise indicated, it will be assumed that all of your Shares held by
us for your account are to be tendered.
<PAGE> 1
EXHIBIT 7.6
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<C> <S> <C>
- ---------------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF
- ---------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds the
first individual on
the account(1)
3. Husband and wife (joint account) The actual owner of
the account or, if
joint funds, either
person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the
minor is the only
contributor, the
minor(1)
6. Account in the name of guardian or The ward, minor, or
committee for a designated ward, incompetent person(3)
minor, or incompetent person
7. a. The usual revocable savings The grantor-
trust account (grantor is also trustee(1)
trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust
under State law
8. Sole proprietorship account The owner(4)
===============================================================
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF
- ---------------------------------------------------------------
9. A valid trust, estate, or pension The legal entity (Do
trust not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself is
not designated in the
account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization account
12. Partnership account held in the The partnership
name of the partnership
13. Association, club, or other tax- The organization
exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State or
local government, school district
or prison) that receives
agricultural program payments
- ---------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your social security number or
employer identification number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
Do not furnish the taxpayer identification number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title.
(5) Show your individual name. You may also enter your business name. You may
use either your social security number or your employer identification
number.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
business and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service.
To complete Substitute Form W-9 if you do not have a taxpayer identification
number, write "Applied For" in the space for the taxpayer identification number
in Part I, signed and date the Form, and give it to the requester. Generally,
you will then have 60 days to obtain a taxpayer identification number and
furnish it to the requester. If the requester does not receive your taxpayer
identification number within 60 days, backup withholding, if applicable, will
begin and continue until you furnish your taxpayer identification number to the
requester.
PAYEES EXEMPT FORM BACKUP WITHHOLDING
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For interest and dividends, all listed
payees are exempt except item (9). For broker transactions, payees listed in
items (1) through (13) and a person registered under the Investment Advisers Act
of 1940 who regularly acts as a broker are exempt. Payments subject to reporting
under sections 6041 and 6041A are generally exempt from backup withholding only
if made to payees described in items (1) through (7), except a corporation that
provides medical and health care services or bills and collects payments for
such services is not exempt from backup withholding or information reporting.
Only payees described in items (2) through (6) are exempt from backup
withholding for barter exchange transactions, patronage dividends, and payments
by certain fishing boat operators.
(1) A corporation
(2) An organization exempt from tax under section 501(a), or an IRA, or a
custodial account under section 403(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies, or
instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the United
States or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate
Securities, Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under Section 1441.
- Payments to partnership not engaged in a trade or business in the United
States and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451 of the Code.
- Payments made by certain foreign organizations.
- Mortgage interest paid to a nominee.
Exempt payees described above should file a Substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see Sections 6041, 6041(a), 6042, 6044, 6045, 6049 and
6050A and 6050N of the Code and the regulations promulgated therein.
PRIVACY ACT NOTICE.--Section 6109 requires recipients of dividends, interest, or
other payments to give taxpayer identification numbers to payers who must report
the payments to the IRS. The IRS uses the numbers for identification purposes
and to help verify the accuracy of your tax return. Payers must be given the
numbers whether or not recipients are required to file tax returns. Payers must
generally withhold 31% of taxable interest, dividends, and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish you taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless you failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE
<PAGE> 1
EXHIBIT 7.7
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares (as defined below). The Offer (as defined below) is made solely
by the Offer to Purchase dated June 3, 1998 and the related Letter of
Transmittal (and any amendments thereto) and is being made to all holders of
Shares. The Purchaser (as defined below) is not aware of any state where the
making of the Offer is prohibited by administrative or judicial action pursuant
to a state statute. If the Purchaser becomes aware of any state where the making
of the Offer is prohibited, the Purchaser will make a good faith effort to
comply with any such statute or seek to have such statute declared inapplicable
to the Offer. If, after such good faith effort, the Purchaser cannot comply with
any applicable statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares in such state. In those
jurisdictions where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of the Purchaser by Goldman, Sachs & Co. or one or more registered
brokers or dealers licensed under the laws of such jurisdictions.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
DONNELLEY ENTERPRISE SOLUTIONS INCORPORATED
AT
$21 NET PER SHARE
BY
DESI ACQUISITION, INC.
A WHOLLY OWNED SUBSIDIARY OF
BOWNE & CO., INC.
DESI Acquisition, Inc., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Bowne & Co., Inc., a New York corporation (the
"Parent"), is offering to purchase all of the outstanding shares of Common
Stock, $.01 par value per share (the "Shares"), of Donnelley Enterprise
Solutions Incorporated, a Delaware corporation (the "Company"), at a purchase
price of $21 per Share, net to the seller in cash without interest thereon, upon
the terms and subject to the conditions set forth in the Offer to Purchase dated
June 3, 1998 (the "Offer to Purchase") and in the related Letter of Transmittal
(which, as amended from time to time, together constitute the "Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:01 A.M., NEW YORK CITY TIME,
ON WEDNESDAY, JULY 1, 1998, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A
NUMBER OF SHARES WHICH, TOGETHER WITH ANY SHARES LEGALLY OR BENEFICIALLY OWNED
BY THE PARENT OR THE PURCHASER, CONSTITUTES MORE THAN 50% OF THE VOTING POWER
(DETERMINED ON A FULLY-DILUTED BASIS) OF ALL THE SECURITIES OF THE COMPANY
ENTITLED TO VOTE GENERALLY IN THE ELECTION OF DIRECTORS OR IN A MERGER AND (ii)
THE EXPIRATION OR TERMINATION OF ALL APPLICABLE WAITING PERIODS UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED.
<PAGE> 2
The purpose of the Offer is to acquire control of, and the entire equity
interest in, the Company. Following the consummation of the Offer, the Purchaser
intends to effect the Merger described below. The Offer is being made pursuant
to an Agreement and Plan of Merger, dated as of May 27, 1998 (the "Merger
Agreement"), among the Parent, the Purchaser and the Company. The Merger
Agreement provides, among other things, for the making of the Offer by the
Purchaser, and further provides that, following the completion of the Offer,
upon the terms and subject to the conditions of the Merger Agreement and the
Delaware General Corporation Law ("DGCL"), the Purchaser will be merged with and
into the Company (the "Merger"), and each Share issued and outstanding
immediately prior to the effective time of the Merger (other than Shares held in
the treasury of the Company and each Share owned by the Parent, the Purchaser or
any other direct or indirect subsidiary of the Parent or of the Company, which
shall be cancelled, and other than Shares, if any, held by stockholders who have
not voted in favor of or consented to the Merger and who have delivered a
written demand for appraisal of such Shares in the time and manner provided in
the DGCL) will, by virtue of the Merger and without any action on the part of
the Purchaser, the Company or the holders of the capital stock, be cancelled,
extinguished and converted into the right to receive $21 in cash payable to the
holder thereof, without interest, upon the surrender of the certificate formerly
representing such Share, less any required withholding taxes. The Merger
Agreement is more fully described in Section 11 of the Offer to Purchase. In
connection with the Merger Agreement, Parent entered into a Stockholders'
Agreement with R.R. Donnelley & Sons Company, the beneficial owner of
approximately 43% of the outstanding Shares, pursuant to which such stockholder
agreed, among other things to tender its Shares in the Offer, provide Parent
with an irrevocable proxy and grant Parent an option to acquire such Shares for
$21 per Share.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER
AND THE MERGER, ARE ADVISABLE AND ARE FAIR TO AND IN THE BEST INTERESTS OF THE
HOLDERS OF SHARES AND RECOMMENDS THAT ALL HOLDERS OF SHARES ACCEPT THE OFFER AND
TENDER ALL OF THEIR SHARES TO THE PURCHASER.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when the Purchaser gives oral or written notice to The Bank
of New York (the "Depositary") of the Purchaser's acceptance of such Shares for
payment pursuant to the Offer. Upon the terms and subject to the conditions of
the Offer, payment for Shares accepted for payment pursuant to the Offer will be
made by deposit of the purchase price therefor with the Depositary, which will
act as agent for tendering stockholders for the purpose of receiving payments
from the Purchaser and transmitting such payments to stockholders whose Shares
have been accepted for payment. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE
PURCHASE PRICE FOR SHARES BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION
OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. In all cases, payment for
Shares tendered and accepted for payment pursuant to the Offer will be made only
after timely receipt by the Depositary of (i) certificates representing Shares
(the "Share Certificates") or timely confirmation of a book-entry transfer of
such Shares into the Depositary's account at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in Section
3 of the Offer to Purchase, (ii) the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message (as defined in Section 2 of the Offer to
Purchase) in connection with a book-entry transfer, and (iii) any other
documents required by the Letter of Transmittal.
Subject to the applicable rules and regulations of the Securities and
Exchange Commission and the terms of the Merger Agreement, the Purchaser
expressly reserves the right, at any time and from time to time, to (i) extend
the period of time during which the Offer is open and thereby delay acceptance
for payment of, and the payment for, any Shares, by giving oral or written
notice of such extension to the Depositary and (ii) amend the Offer in any
respect by giving oral or written notice of such amendment to the Depositary.
Any extension, delay, termination, waiver or amendment will be followed as
promptly as practicable by public announcement to be made no later than 9:00
a.m.,
<PAGE> 3
New York City time, on the next business day after the previously scheduled
Expiration Date. During any such extension all Shares previously tendered and
not properly withdrawn will remain subject to the Offer, subject to the rights
of a tendering stockholder to withdraw such stockholder's Shares.
The term "Expiration Date" means 12:01 a.m., New York City time, on
Wednesday, July 1, 1998, unless and until the Purchaser, in its sole discretion
(but subject to the terms and conditions of the Merger Agreement), shall have
extended the period during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by the Purchaser, shall expire.
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time on or prior
to the Expiration Date and, unless theretofore accepted for payment by the
Purchaser pursuant to the Offer, may also be withdrawn at any time after August
1, 1998. For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of the Offer to
Purchase. Any notice of withdrawal must specify the name of the person who
tendered such Shares to be withdrawn, the number of Shares to be withdrawn and
the name of the registered holder, if different from that of the person who
tendered such Shares. If Share Certificates to be withdrawn have been delivered
or otherwise identified to the Depositary, then prior to the physical release of
such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary and the signature(s) on the notice of withdrawal
must be guaranteed by an Eligible Institution (as defined in Section 3 of the
Offer to Purchase) unless such Shares have been tendered for the account of an
Eligible Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth in Section 3 of the Offer to Purchase, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares, in which
case a notice of withdrawal will be effective if delivered to the Depositary by
any method of delivery described in the second sentence of this paragraph. All
questions as to the form and validity (including time of receipt) of any notice
of withdrawal will be determined by the Purchaser, in its sole discretion, whose
determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided the Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase and the related Letter of Transmittal
and other relevant materials will be mailed by the Purchaser to record holders
of Shares and furnished to brokers, dealers, commercial banks, trust companies
and similar persons whose names, or the names of whose nominees, appear on the
stockholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing for subsequent transmittal to beneficial
owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to the Dealer
Managers or the Information Agent as set forth below. Requests for copies of the
Offer to Purchase and the related Letter of Transmittal and all other tender
offer materials may be directed to the Information Agent or the Dealer Managers,
and copies will be furnished promptly at the Purchaser's expense. The Purchaser
will not pay any fees or commissions to any broker or dealer or any other person
(other than the Dealer Managers and the Information Agent) for soliciting
tenders of Shares pursuant to the Offer.
<PAGE> 4
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect (212) 269-5550
ALL OTHERS CALL TOLL FREE 1-800-769-5414
The Dealer Managers for the Offer are:
GOLDMAN, SACHS & CO.
85 Broad Street
New York, New York 10004
(212) 902-1000 (Call Collect)
or
(800) 323-5678 (Toll Free)
June 3, 1998
<PAGE> 1
EXHIBIT 7.8
(THE FOLLOWING IS A REFORMATTED VERSION OF A PRESS RELEASE
ISSUED BY DONNELLEY ENTERPRISE SOLUTIONS.)
BOWNE TO ACQUIRE DONNELLEY ENTERPRISE SOLUTIONS
FOR APPROXIMATELY $105 MILLION
STRATEGIC ACQUISITION REPRESENTS SIGNIFICANT STEP IN ACHIEVING BOWNE'S VISION BY
QUADRUPLING ITS OUTSOURCING SOLUTIONS OFFERING
NEW YORK AND CHICAGO (MAY 28, 1998) -- Bowne & Co., Inc. [ASE: BNE] and
Donnelley Enterprise Solutions Incorporated ("DESI") [NASDAQ: DEZI] today
announced that their boards of directors have approved a definitive agreement
pursuant to which Bowne will acquire all outstanding shares of DESI for $21.00
per share in cash. DESI is a leading provider of outsourcing services with
locations throughout the United States and Asia, including several on-site
locations at client facilities. Based on the number of outstanding shares of
DESI as of May 27, 1998, the transaction has a total value of approximately $105
million.
The addition of DESI substantially increases Bowne's existing outsourcing
solution offerings and, coupled with Bowne's joint venture with Williams Lea in
Europe, solidifies Bowne's position as the global market leader in providing
outsourcing solutions to major financial service organizations, law firms and
multi-national corporations. DESI's capabilities will add to Bowne's unique
ability to provide a comprehensive array of information management services that
includes document creation, printing and distribution, Internet publishing,
intranet development and content management, outsourcing and localization
services.
Pursuant to the terms of the definitive merger agreement, Bowne shall
commence a cash tender offer for DESI's stock no later than June 3, 1998. As
part of the transaction, R.R. Donnelley & Sons Company, which currently owns
2,140,000 shares of DESI, or approximately 43%, has agreed to tender its shares
and has granted to Bowne an irrevocable option to buy its shares for $21.00 per
share. The tender offer is conditioned upon the tendering of shares representing
a majority of DESI's voting power, satisfaction of the requirements of the U.S.
antitrust regulations and certain other customary conditions. Any shares not
purchased in the tender offer will be acquired in a second-step merger for
$21.00 per share in cash.
The combination will be accounted for as a purchase and Bowne anticipates
that it will be accretive to Bowne's earnings per share starting in the second
year after the close of the transaction as a result of revenue and cost
synergies. The company expects that the cost of the transaction in 1998 will be
approximately $0.25 per share.
Robert M. Johnson, Chairman and Chief Executive Officer of Bowne said,
"This is exciting news for Bowne. The acquisition of DESI represents an
important step in our stated long-term strategy of becoming the leader in the
emerging information empowerment industry. The acquisition of DESI, which we
view as a perfect strategic fit with our existing outsourcing operations and our
joint venture with Williams Lea, ensures Bowne's position as the premier company
in document management and dissemination. One of the most attractive aspects of
the transaction is the synergies we expect this combination to yield. The
addition of DESI significantly increases our non-cyclical, recurring and
multi-year contractual revenue base and brings the proportion of our business
that is not derived from transactional printing to 55%."
<PAGE> 2
Mr. Johnson added, "In addition, this acquisition complements Bowne's
Internet, intranet, localization and digital services offerings, as well as our
financial print operations. We believe that significant cross-selling
opportunities will increase revenues and market share across all Bowne solution
offerings."
Rhonda Kochlefl, Chairman and Chief Executive Officer of DESI, said, "Bowne
is a preeminent provider of financial print services to DESI's core client base
of the leading legal and financial institutions. It has a long record of high
performance and has demonstrated its commitment to the same customer service
values that have been a hallmark of DESI for the past ten years. This agreement
aligns us with a corporate parent whose vision, values and commitment to the
business closely match our own."
DESI provides three major solutions to its clients: document management,
help desk and on-site information services, and systems integration. The core of
DESI's business is its document management services, consisting of desk-top
publishing, imaging, word processing and reprographics. DESI's strong client
list and considerable market share will enhance Bowne's position in the growing
document management industry. DESI's growing help desk service offering provides
custom on-site information services and network support. Approximately 30% of
DESI's total revenues are derived from its systems integration business.
Goldman, Sachs & Co. acted as financial advisor and provided a fairness
opinion to Bowne's Board of Directors. William Blair acted as financial advisor
and provided a fairness opinion to DESI's Board of Directors.
DESI is a single-source provider of integrated information management
solutions to professional service organizations, primarily large law firms,
investment banks, and accounting firms. It offers its clients the opportunity to
focus on their core businesses by outsourcing a variety of functions, including
business services and information technology services. The Company has
operations in major cities across the United States and two locations
internationally in Singapore and Hong Kong. In November 1996, DESI completed its
initial public offering of approximately 57% of its common stock. DESI was
previously a wholly owned subsidiary of R.R. Donnelley. DESI is headquartered in
Chicago, employs 1,200 people and generated revenues in 1997 of $110 million.
Bowne & Co., Inc., established 1775, is the global market leader in the
field of empowering information by combining superior customer service with
appropriate new technologies to manage, repurpose and distribute a client's
information to any audience, through any medium, in any language, anywhere in
the world. The world's largest financial printer, Bowne is also the leading
provider of localization services to the software industry. Localization is the
adaptation and translation of information technology products for use in
specific local markets. Bowne is among the leading Internet development
companies, offering business solutions, consulting and development services. By
providing outsourcing services, Bowne offers its customers an integrated way to
design and manage their information flows to take advantage of the latest
technologies for creating, storing, moving, presenting and utilizing information
in any combination of paper and electronic forms.
The company noted that forward-looking statements for future performance
like those given above are, of course, subject to factors which could cause
actual results to differ materially from those suggested here, including demand
for and acceptance of the company's services, new technological developments,
competition, and general economic conditions.
<PAGE> 3
Note to Editors: Today's news release, along with other news about Bowne
and DESI, is available on the Internet at http://www.bowne.com and
http://www.desi.net.
Bowne Contacts:
Media: David Rosenstein
(212) 229-7224
Investors:
William J. Coote
(212) 886-0614
Chuck Burgess
Abernathy MacGregor Frank
(212) 371-5999
DESI Contacts:
Media: Dave Shea
(212) 351-9100
Investors:
Tom Munro
(312) 419-7636
<PAGE> 1
EXHIBIT 7.9
CREDIT AGREEMENT
by and among
BOWNE & CO., INC.,
THE SUBSIDIARY BORROWERS PARTY HERETO,
THE LENDERS PARTY HERETO,
BANK OF MONTREAL, AS DOCUMENTATION AGENT
AND
FLEET BANK, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT
----------------
$200,000,000
----------------
Dated as of July 7, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION ............................................................ 1
1.1. Definitions .................................................................................... 1
1.2. Principles of Construction .................................................................... 24
2. AMOUNT AND TERMS OF LOANS ............................................................................ 25
2.1. Revolving Credit Loans ........................................................................ 25
2.2. Minimum Amount of Each Borrowing .............................................................. 26
2.3. Borrowing Request - Revolving Credit Loans .................................................... 27
2.4. Bid Loans; Procedure .......................................................................... 27
2.5. Disbursement of Funds ......................................................................... 31
2.6. Payments ...................................................................................... 32
2.7. Termination or Reduction of Commitments ....................................................... 34
2.8. Prepayments of the Loans ...................................................................... 34
2.9. Use of Proceeds ............................................................................... 35
2.10. Addition and Removal of Subsidiary Borrowers;
Addition of Non-Core Currencies .............................................................. 35
2.11. Extension of Commitment Termination Date ..................................................... 36
2.12. Records ...................................................................................... 38
3. INTEREST, FEES, CONVERSIONS AND YIELD PROTECTIONS .................................................... 39
3.1. Interest Rates and Payment Dates .............................................................. 39
3.2. Fees .......................................................................................... 40
3.3. Conversions ................................................................................... 41
3.4. Indemnification for Loss ...................................................................... 43
3.5. Capital Adequacy .............................................................................. 43
3.6. Reimbursement for Increased Costs ............................................................. 44
3.7. Illegality of Funding ......................................................................... 44
3.8. Substituted Interest Rate ..................................................................... 45
3.9. Taxes ......................................................................................... 46
3.10. Option to Fund ............................................................................... 49
3.11. Replacement of Lenders ....................................................................... 50
3.12. Changes of Lending Offices ................................................................... 50
4. REPRESENTATIONS AND WARRANTIES ....................................................................... 51
4.1. Subsidiaries; Jurisdictions ................................................................... 51
4.2. Existence and Power ........................................................................... 51
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C> <C>
4.3. Authority and Execution ....................................................................... 51
4.4. Binding Agreement ............................................................................. 52
4.5. Litigation .................................................................................... 52
4.6. Required Consents ............................................................................. 52
4.7. Absence of Defaults; No Conflicting Agreements ................................................ 53
4.8. Compliance with Applicable Laws ............................................................... 53
4.9. Taxes ......................................................................................... 53
4.10. Governmental Regulations ..................................................................... 54
4.11. Federal Reserve Regulations; Use of Loan
Proceeds ..................................................................................... 54
4.12. Plans ........................................................................................ 54
4.13. Financial Statements ......................................................................... 54
4.14. Property ..................................................................................... 55
4.15. Authorizations ............................................................................... 55
4.16. Environmental Matters ........................................................................ 55
5. CONDITIONS TO FIRST LOANS ............................................................................ 56
5.1. Evidence of Action ............................................................................ 56
5.2. Absence of Litigation ......................................................................... 57
5.3. Approvals and Consents ........................................................................ 57
5.4. Opinion of Counsel to the Parent Borrower ..................................................... 57
5.5. Opinion of Special Counsel .................................................................... 57
5.6. Fees of Agents and the Lenders ................................................................ 58
5.7. Fees and Expenses of Special Counsel .......................................................... 58
6. CONDITIONS OF LENDING - ALL LOANS .................................................................... 58
6.1. Compliance .................................................................................... 58
6.2. Borrowing Request ............................................................................. 58
7. AFFIRMATIVE COVENANTS ................................................................................ 59
7.1. Financial Statements and Information .......................................................... 59
7.2. Certificates; Other Information ............................................................... 60
7.3. Legal Existence ............................................................................... 61
7.4. Taxes ......................................................................................... 62
7.5. Insurance ..................................................................................... 62
7.6. Condition of Property ......................................................................... 62
7.7. Observance of Legal Requirements .............................................................. 62
7.8. Inspection of Property; Books and Records;
Discussions ................................................................................... 63
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C> <C>
7.9. Authorizations ................................................................................ 63
7.10. Capitalization Ratio ......................................................................... 63
7.11. Subsidiaries ................................................................................. 63
8. NEGATIVE COVENANTS ................................................................................... 63
8.1. Indebtedness .................................................................................. 64
8.2. Liens ......................................................................................... 64
8.3. Consolidations and Mergers .................................................................... 65
8.4. Acquisitions .................................................................................. 66
8.5. Dispositions .................................................................................. 66
8.6. Investments ................................................................................... 67
9. DEFAULT .............................................................................................. 67
9.1. Events of Default ............................................................................. 67
9.2. Contract Remedies ............................................................................. 70
10. THE AGENTS .......................................................................................... 71
10.1. Appointment .................................................................................. 71
10.2. Delegation of Duties ......................................................................... 72
10.3. Exculpatory Provisions ....................................................................... 72
10.4. Reliance by the Agents ....................................................................... 73
10.5. Notice of Default ............................................................................ 73
10.6. Non-Reliance on the Agents and Other Lenders ................................................. 74
10.7. Indemnification .............................................................................. 74
10.8. Lenders in Their Respective Individual
Capacities ................................................................................... 75
10.9. Successor Agents ............................................................................. 76
11. GUARANTY OF THE PARENT BORROWER ..................................................................... 77
11.1. Guaranty ..................................................................................... 77
11.2. Absolute Obligation .......................................................................... 78
11.3. Repayment in Bankruptcy ...................................................................... 79
11.4. No Subrogation ............................................................................... 79
12. OTHER PROVISIONS .................................................................................... 80
12.1. Amendments and Waivers ....................................................................... 80
12.2. Notices ...................................................................................... 81
12.3. No Waiver; Cumulative Remedies ............................................................... 82
12.4. Survival of Representations and Warranties
and Certain Obligations ...................................................................... 82
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C> <C> <C>
12.5. Expenses ..................................................................................... 82
12.6. Assignments and Participations ............................................................... 83
12.7. Indemnity .................................................................................... 85
12.8. Limitation of Liability ...................................................................... 86
12.9. Counterparts ................................................................................. 86
12.10. Adjustments; Set-off ........................................................................ 86
12.11. Construction ................................................................................ 88
12.12. Governing Law ............................................................................... 88
12.13. Judgment Currency ........................................................................... 88
12.14. International Banking Facilities ............................................................ 89
12.15. Incorporation by Reference .................................................................. 89
12.16. Headings Descriptive ........................................................................ 89
12.17. Severability ................................................................................ 89
12.18. Integration ................................................................................. 90
12.19. Consent to Jurisdiction ..................................................................... 90
12.20. Service of Process .......................................................................... 90
12.21. No Limitation on Service or Suit ............................................................ 90
12.22. WAIVER OF TRIAL BY JURY ..................................................................... 91
12.23. Parent Borrower as Agent for Subsidiary
Borrowers ................................................................................... 91
12.24. Effective Date .............................................................................. 91
12.25. Treatment of Certain Information ............................................................ 92
EXHIBITS
Exhibit A List of Commitment Amounts
Exhibit B-1 Form of Borrower Addendum
Exhibit B-2 Form of Currency Addendum
Exhibit C Form of Borrowing Request
Exhibit D Form of Notice of Conversion
Exhibit E Form of Compliance Certificate
Exhibit F Form of Opinion of Counsel to the Parent Borrower
Exhibit G Form of Opinion of Special Counsel
Exhibit H Form of Assignment and Acceptance Agreement
Exhibit I Form of Bid Request
Exhibit J Form of Invitation to Bid
Exhibit K Form of Bid
Exhibit L Form of Bid Accept/Reject Letter
</TABLE>
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<PAGE> 6
<TABLE>
<S> <C>
Exhibit M List of Administrative Agent's Address for Notices and Agent Payment Offices
Exhibit N List of Lenders' Addresses for Notices
Exhibit O List of Borrowers' Addresses for Notices
Exhibit P List of Borrowers' Payment Accounts
Exhibit Q-1 Form of Revolving Credit Note
Exhibit Q-2 Form of Bid Note
SCHEDULES
Schedule 4.1 List of Subsidiaries; Jurisdictions
Schedule 4.5 List of Litigation
Schedule 8.1 List of Existing Indebtedness
Schedule 8.2 List of Existing Liens
</TABLE>
-v-
<PAGE> 7
CREDIT AGREEMENT, dated as of July 7, 1997, by and among BOWNE & CO.,
INC., a New York corporation (the "Parent Borrower"), the Subsidiaries party
hereto or which from time to time become party hereto (each a "Subsidiary
Borrower" and, collectively, the "Subsidiary Borrowers"), the lenders party
hereto (each a "Lender" and, collectively, the "Lenders"), BANK OF MONTREAL, as
documentation agent for the Lenders (in such capacity, the "Documentation
Agent") and FLEET BANK, NATIONAL ASSOCIATION, as administrative agent for the
Lenders (in such capacity, the "Administrative Agent").
1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION
1.1. Definitions
As used in this Agreement, terms defined in the preamble have
the meanings therein indicated, and the following terms have the following
meanings:
"ABR Advances": the Revolving Credit Loans (or any portions
thereof), at such time as they (or such portions) are made and/or being
maintained at a rate of interest based upon the Alternate Base Rate.
"Accountants": Ernst & Young (or any successor thereto), or
such other firm of certified public accountants of recognized national standing
selected by the Parent Borrower.
"Accumulated Funding Deficiency": as defined in Section 302
of ERISA.
"Acquisition": with respect to any Person, the purchase or
other acquisition by such Person, by any means whatsoever (including through a
merger, dividend or otherwise and whether in a single transaction or in a
series of related transactions), of (i) any Capital Stock of any other Person
if, immediately thereafter, such other Person would be either a Subsidiary of
such Person or otherwise under the control of such Person, (ii) any business,
going concern or divisions or segment of any other Person, or (iii) any
Property of any other Person other than in the ordinary course of business,
provided, however, that no acquisition of all or substantially all of the
assets of such other Person shall be deemed to be in the ordinary course of
business.
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<PAGE> 8
"Advance": an ABR Advance, a Eurodollar Advance, or a Core
Currency Euro Advance, as the case may be.
"Adjusted Consolidated Net Worth": as of any date, the total
stockholders' equity of the Parent Borrower and its Subsidiaries, determined on
a Consolidated basis in accordance with GAAP, set forth in, (i) during the
period commencing on the Effective Date and ending on the date of delivery
thereafter of the first annual financial statements pursuant to Section 7.1(b),
the Parent Borrower's Form 10Q for the fiscal quarter thereof ended April 30,
1997, and (ii) at all other times, the most recent annual financial statements
delivered pursuant to Section 7.1(b).
"Adjusted Eurodollar Rate": for any date, a rate of interest
per annum, as determined by the Administrative Agent, equal to the rate per
annum for deposits in Dollars having a one month maturity which appears on page
3750 of the Dow Jones Telerate Screen (or any successor page) as of 11:00 a.m.
London time on such date.
"Affected Advance": as defined in Section 3.8.
"Agent Payment Office": (i) with respect to all amounts owing
under the Loan Documents (other than in respect of Alternate Currency Loans),
initially, the office, branch, affiliate, or correspondent bank of the
Administrative Agent designated as its "Domestic Payment Office" in Exhibit M
and, thereafter, such other office, branch, affiliate, or correspondent bank
thereof as it may from time to time designate in writing as such to the Parent
Borrower and each Lender, and (ii) with respect to all amounts owing in respect
of each Alternate Currency Loan, initially, the office, branch, affiliate, or
correspondent bank of the Administrative Agent designated as its payment office
for the applicable Alternate Currency in Exhibit M and, thereafter, such other
office, branch, affiliate, or correspondent bank thereof as it may from time to
time designate in writing as such to the Parent Borrower and each Lender.
"Aggregate Commitment Amount": at any time, the sum at such
time of the Commitment Amounts of all Lenders.
"Aggregate Credit Exposure": as of any date of determination,
the sum as of such date of the outstanding principal amount of the Loans of all
Lenders (determined, in the case of each Alternate Currency Loan, on the basis
of the Dollar Equivalent thereof).
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<PAGE> 9
"Agreement": this Credit Agreement, as the same may be
amended, supplemented or otherwise modified from time to time.
"Alternate Base Rate": on any date, a rate of interest per
annum equal to the greater of (i) the Federal Funds Rate in effect on such date
plus 1/2 of 1% and (ii) the Adjusted Eurodollar Rate in effect on such date
plus the Applicable Margin in effect on such date.
"Alternate Currency": any Currency (other than Dollars).
"Alternate Currency Bid Loan": each Bid Loan denominated in
an Alternate Currency.
"Alternate Currency Equivalent": on any date of determination
thereof, the amount, as determined by the Administrative Agent, of the relevant
Alternate Currency which could be purchased with the amount of Dollars involved
in such computation at the spot rate at which such Alternate Currency may be
exchanged into Dollars as set forth on such date on Dow Jones Telerate pages
262, 264, 265, 266 or 9993 (or any successor pages) or, if such rate does not
appear on such pages, at the arithmetic average of the respective spot exchange
rates therefor notified to the Administrative Agent by the Reference Lenders as
of 11:00 a.m. (London time) on such date for delivery (i) in the case of an
exchange of Canadian Dollars into Dollars, one Core Currency Business Day later
and (ii) in all other cases, two Core Currency Business Days later.
"Alternate Currency Loan": an Alternate Currency Revolving
Credit Loan or an Alternate Currency Bid Loan, as the case may be.
"Alternate Currency Revolving Credit Loan": each Revolving
Credit Loan denominated in Alternate Currency.
"Applicable Fee Percentage": with respect to the Facility
Fee, at all times during which the applicable Pricing Level set forth below is
in effect, the percentage set forth below next to such Pricing Level:
<TABLE>
<CAPTION>
Pricing Level Applicable Fee Percentage
------------- -------------------------
<S> <C>
Pricing Level I .100%
Pricing Level II .125%
Pricing Level III .150%
Pricing Level IV .175%
</TABLE>
-3-
<PAGE> 10
Changes in the Applicable Fee Percentage resulting from a
change in a Pricing Level shall be based upon the Compliance Certificate most
recently delivered pursuant to Section 7.1(a) and shall become effective on the
date such Compliance Certificate is delivered to the Administrative Agent and
the Lenders. Notwithstanding anything to the contrary contained in this
definition, (i) if, at any time and from time to time, the Parent Borrower
shall be in Default of its obligations under Section 7.1(a), Pricing Level IV
shall apply until such Default is cured, and (ii) during the period commencing
on the Effective Date and ending on the date of delivery thereafter of the
first Compliance Certificate pursuant to Section 7.1(a), Pricing Level I shall
apply.
"Applicable Margin": with respect to Eurodollar Advances,
Core Currency Euro Advances and ABR Advances to the extent based on the
Adjusted Eurodollar Rate, in each case at all times during which the applicable
Pricing Level set forth below is in effect, the percentage set forth below next
to such Pricing Level:
<TABLE>
<CAPTION>
Pricing Level Applicable Margin
------------- -----------------
<S> <C>
Pricing Level I .150%
Pricing Level II .175%
Pricing Level III .225%
Pricing Level IV .325%
</TABLE>
Changes in the Applicable Margin resulting from a change in a
Pricing Level shall be based upon the Compliance Certificate most recently
delivered pursuant to Section 7.1(a) and shall become effective on the date
such Compliance Certificate is delivered to the Administrative Agent and the
Lenders. Notwithstanding anything to the contrary contained in this definition,
(i) if, at any time and from time to time, the Parent Borrower shall be in
Default of its obligations under Section 7.1(a), Pricing Level IV shall apply
until such Default is cured, and (ii) during the period commencing on the
Effective Date and ending on the date of delivery thereafter of the first
Compliance Certificate pursuant to Section 7.1(a), Pricing Level I shall apply.
"Assignment": as defined in Section 12.6(b).
"Assignment and Acceptance Agreement": an assignment and
acceptance agreement executed by an assignor and an assignee, substantially in
the form of Exhibit H.
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<PAGE> 11
"Benefited Lender": as defined in Section 12.10(a).
"Bid": an offer by a Lender to make a Bid Loan, substantially
in the form of Exhibit K.
"Bid Accept/Reject Letter": a notification made by a Borrower
or, if such Borrower is a Subsidiary Borrower, the Parent Borrower, on behalf
of such Borrower, pursuant to Section 2.4(d), substantially in the form of
Exhibit L.
"Bid Interest Period": as to any Bid Loan, the period
commencing on the Borrowing Date with respect to such Bid Loan and ending on
the date requested in the Bid Request with respect to such Bid Loan, which
ending date (i) shall be one, two, three, six, nine or twelve months after such
Borrowing Date, in the case of Core Currency Index Rate Bid Loans, and (ii)
shall not be earlier than seven days after such Borrowing Date or later than
360 days after such Borrowing Date, in all other cases; provided, however, that
(a) if any Bid Interest Period would otherwise end on a day which is not a
Business Day or a Core Currency Business Day, as the case may be, such Bid
Interest Period shall be extended to the next succeeding Business Day or Core
Currency Business Day, as the case may be, unless (A) such next succeeding
Business Day or Core Currency Business Day, as the case may be, would be a date
on or after the Commitment Termination Date or such earlier date upon which the
Commitments shall have been voluntarily terminated by the Parent Borrower in
accordance with Section 2.7, in which event such Bid Interest Period shall end
on the next preceding Business Day or Core Currency Business Day, as the case
may be, and (B) in the case of Core Currency Index Rate Bid Loans, the result
of such extension would be to carry such Bid Interest Period into another
calendar month, in which event such Bid Interest Period shall end on the next
preceding Core Currency Business Day, (b) in the case of Core Currency Index
Rate Bid Loans, any Bid Interest Period that begins on the last Core Currency
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Bid Interest Period)
shall end on the last Core Currency Business Day of a calendar month, and (c)
no Bid Interest Period shall end after the Commitment Termination Date or such
earlier date upon which the Commitments shall have been voluntarily terminated
by the Parent Borrower in accordance with Section 2.7. Interest shall accrue
from and including the first day of a Bid Interest Period to, but excluding,
the last day of such Bid Interest Period.
"Bid Loan": each Loan from a Lender to a Borrower made
pursuant to Section 2.4.
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<PAGE> 12
"Bid Rate": as to any Bid made by a Lender pursuant to
Section 2.4(b), (i) with respect to each Core Currency Index Rate Bid Loan, the
applicable Eurodollar Rate or Core Currency Euro Rate, as the case may be,
therefor, plus the fixed margin or spread offered by such Lender with respect
thereto as set forth in such Bid, and (ii) with respect to each other Bid Loan,
the fixed rate of interest offered by such Lender with respect thereto as set
forth in such Bid.
"Bid Request": a request by a Borrower or, if such Borrower
is a Subsidiary Borrower, the Parent Borrower, on behalf of such Borrower, for
Bids, substantially in the form of Exhibit I.
"Borrower Addendum": an Addendum, duly completed and executed
by each of the Parent Borrower and the relevant Subsidiary thereof,
substantially in the form of Exhibit B-1.
"Borrowers": collectively, the Parent Borrower and the
Subsidiary Borrowers.
"Borrowing Date": (i) any Business Day on which (a) the
Lenders make ABR Advances in accordance with a Borrowing Request, or (b) one or
more Lenders make Bid Loans (other than Core Currency Index Rate Bid Loans)
pursuant to Bids which have been accepted by a Borrower, as the case may be, or
(ii) any Core Currency Business Day on which (a) the Lenders make Eurodollar
Advances or Core Currency Euro Advances, as the case may be, in accordance with
a Borrowing Request, or (b) one or more Lenders make Core Currency Index Rate
Bid Loans pursuant to Bids which have been accepted by a Borrower, as the case
may be.
"Borrower Obligations": as defined in Section 11.1.
"Borrowing Request": a request for Revolving Credit Loans,
substantially in the form of Exhibit C.
"Business Day": any day except Saturday, Sunday or a day
which in New York City or New Jersey is a legal holiday or a day on which
banking institutions are authorized or required by law or other government
action to close.
"Canadian Dollars": freely transferable lawful money of
Canada.
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<PAGE> 13
"Capital Lease Obligations": with respect to any Person,
obligations of such Person with respect to leases which are required to be
capitalized for financial reporting purposes in accordance with GAAP.
"Capital Stock": as to any Person, all shares, interests,
partnership interests, limited liability company interests, participations and
other rights in, or other equivalents (however designated) of, such Person's
equity (however designated), and any rights, warrants or options exchangeable
for, or convertible into, such shares, interests, participations, rights or
other equivalents.
"Capitalization Ratio": as of the last day of any fiscal
quarter of the Parent Borrower, the ratio of (i) Funded Debt on such date to
(ii) Consolidated Capitalization on such date.
"Change of Control": one or both of the following events:
(i) any person or group (other than any one or
more permitted investors) shall have become the beneficial owner of
voting shares entitled to exercise more than 30% of the total power of
all outstanding voting shares of the Parent Borrower (including any
voting shares which are not then outstanding of which such person or
group is deemed the beneficial owner), and, in addition, a change in
the composition of the Managing Person of the Parent Borrower shall
have occurred in which the individuals who constituted the Managing
Person of the Parent Borrower at the beginning of the two year period
immediately preceding such change (together with any other director
whose election by the Managing Person of the Parent Borrower or whose
nomination for election by the shareholders of the Parent Borrower was
approved by a vote of at least two-thirds of the members of such
Managing Person then in office who either were members of such Managing
Person at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to
constitute a majority of the members of such Managing Person then in
office; and
(ii) any person or group (other than any one or
more permitted investors) shall have become the beneficial owner of
voting shares entitled to exercise more than 50% of the total power of
all outstanding voting shares of the Parent Borrower (including any
voting shares which are not then outstanding of which such person or
group is deemed the beneficial owner).
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<PAGE> 14
For purposes of this definition, (a) the terms "person" and
"group" shall have the respective meanings ascribed thereto in Sections 13(d)
and 14(d)(2) of the Exchange Act, (b) the term "beneficial owner" shall have
the meaning ascribed thereto in Rule 13d-3 under the Exchange Act, (c) the term
"permitted investors" shall mean Edmund A. Stanley, Jr., Thomas O. Stanley
and/or any one or more of their respective family members, and (d) the term
"voting shares" shall mean all outstanding shares of any class or classes
(however designated) of Capital Stock of the Parent Borrower entitled to vote
generally in the election of members of the Managing Person thereof.
"Code": the Internal Revenue Code of 1986, as the same may be
amended from time to time, or any successor thereto, and the rules and
regulations issued thereunder, as from time to time in effect.
"Commitment": in respect of any Lender, such Lender's
undertaking during the Commitment Period to make Revolving Credit Loans,
subject to the terms and conditions hereof, in an aggregate outstanding
principal amount not exceeding the Commitment Amount of such Lender.
"Commitment Amount": as of any date and with respect to any
Lender, the amount set forth adjacent to its name under the heading "Commitment
Amount" in Exhibit A on such date or, in the event that such Lender is not
listed in Exhibit A, the "Commitment Amount" which such Lender shall have
assumed from another Lender in accordance with Section 12.6 on or prior to such
date, in each case as the same may be adjusted from time to time pursuant to
Sections 2.7 and 12.6.
"Commitment Percentage": as to any Lender in respect of such
Lender's Commitment, the percentage equal to such Lender's Commitment Amount
divided by the Aggregate Commitment Amount (or, if no Commitments then exist,
the percentage equal to such Lender's Commitment Amount on the last day upon
which Commitments did exist divided by the Aggregate Commitment Amount on such
day).
"Commitment Period": the period commencing on the Effective
Date and ending on the Commitment Termination Date, or such earlier date upon
which the Commitments shall have been terminated in accordance herewith.
"Commitment Termination Date": July 5, 2002, as the same may
be extended from time to time in accordance with Section 2.11.
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<PAGE> 15
"Compliance Certificate": a certificate substantially in the
form of Exhibit E.
"Consolidated": the Parent Borrower and its Subsidiaries on a
consolidated basis in accordance with GAAP.
"Consolidated Capitalization": as of the last day of any
fiscal quarter of the Parent Borrower, total stockholder's equity of the Parent
Borrower and its Subsidiaries, determined on a Consolidated basis in accordance
with GAAP, on such date plus Funded Debt on such date.
"Consolidated EBITDA": for any period, net income of the
Parent Borrower and its Subsidiaries, determined on a Consolidated basis in
accordance with GAAP, for such period, plus the sum of, without duplication, of
each of the following with respect to the Parent Borrower and its Subsidiaries,
to the extent utilized in determining such net income: (i) all interest
expense, (ii) provision for income taxes, and (iii) depreciation, amortization
and other non-cash charges, provided, however, that, for purposes of this
definition, extraordinary gains and losses from sales, exchanges and other
dispositions of Property not in the ordinary course of business, and other
non-recurring items, shall be excluded to the extent utilized in determining
such net income.
"Contingent Obligation": as to any Person ( a "secondary
obligor"), any obligation of such secondary obligor (i) guaranteeing or in
effect guaranteeing any return on any investment made by another Person, or
(ii) guaranteeing or in effect guaranteeing any Indebtedness, lease, dividend
or other obligation (a "primary obligation") of any other Person (a "primary
obligor") in any manner, whether directly or indirectly, including any
obligation of such secondary obligor, whether contingent, (a) to purchase any
primary obligation or any Property constituting direct or indirect security
therefor, (b) to advance or supply funds (A) for the purchase or payment of any
primary obligation or (B) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of a primary
obligor, (c) to purchase Property, securities or services primarily for the
purpose of assuring the beneficiary of any primary obligation of the ability of
a primary obligor to make payment of a primary obligation, (d) otherwise to
assure or hold harmless the beneficiary of a primary obligation against loss in
respect thereof, and (e) in respect of the liabilities of any partnership in
which a secondary obligor is a general partner, except to the extent that such
liabilities of such partnership are nonrecourse to such secondary obligor and
its separate Property, provided, however, that the term "Contingent Obligation"
shall not include the indorsement of instruments for deposit
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<PAGE> 16
or collection in the ordinary course of business. The amount of any Contingent
Obligation of a Person shall be deemed to be an amount equal to the stated or
determinable amount of a primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith.
"Continuing Lenders": as defined in Section 2.11.
"Control Person": as defined in Section 3.5.
"Conversion Date": any date on which (i) a Eurodollar Advance
is converted to an ABR Advance or a new Eurodollar Advance, as the case may be,
(ii) an ABR Advance is converted to a Eurodollar Advance, or (iii) a Core
Currency Euro Advance is converted to a new Core Currency Euro Advance, as the
case may be.
"Core Currency": any Currency other than a Non-Core Currency.
"Core Currency Business Day": with respect to any Currency,
any Business Day which is a day on which dealings in foreign currencies and
exchange between banks may be carried on in London, England and which is not a
legal holiday or a day on which banking institutions are authorized or required
by law or other government action to close in the national jurisdiction in
which the Agent Payment Office with respect to such Currency is located or, if
there is no such Agent Payment Office, the national jurisdiction of which such
Currency is the freely transferable lawful money.
"Core Currency Euro Advances": the Revolving Credit Loans (or
any portions thereof) at such time as they (or such portions) are made and/or
being maintained in a Core Currency (other than Dollars) at a rate of interest
based upon the applicable Core Currency Euro Rate.
"Core Currency Euro Rate": with respect to each Core Currency
Euro Advance and each Core Currency Index Rate Bid Loan not denominated in
Dollars, a rate of interest per annum, as determined by the Administrative
Agent, obtained by dividing (and then rounding to the nearest 1/16 of 1% or, if
there is no nearest 1/16 of 1%, then to the next higher 1/16 of 1%):
(a)(i) the rate per annum for deposits having a
maturity most nearly comparable to the Euro Interest Period in respect of such
Core Currency Euro Advance or the Bid Interest Period in respect of such Core
Currency Index Rate Bid Loan, as the case
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<PAGE> 17
may be, in the applicable Core Currency which appears on page 3750 of the Dow
Jones Telerate Screen (or any successor page) as of 11:00 a.m. London time on
the date which is two Core Currency Business Days prior to the first day of
such Euro Interest Period or such Bid Interest Period, as the case may be, (ii)
if such rate does not appear on page 3750 of the Dow Jones Telerate Screen (or
any successor page), the rate per annum equal to the arithmetic average (and
then rounding to the nearest 1/16 of 1% or, if there is no nearest 1/16 of 1%,
then to the next higher 1/16 of 1%) of the respective offered quotations
notified to the Administrative Agent by the Reference Lenders, in each case as
quoted by such Reference Lender at approximately 11:00 a.m. London time (or as
soon thereafter as practicable) on the date which is two Core Currency Business
Days prior to the first day of such Euro Interest Period or such Bid Interest
Period, as the case may be, to leading banks in the interbank eurocurrency
market as the rate at which such Reference Lender is offering deposits in such
Core Currency in an amount approximately equal to its Commitment Percentage of
such Core Currency Euro Advance or the principal amount of such Core Currency
Index Rate Bid Loan, as the case may be, and having a period to maturity
approximately equal to such Euro Interest Period or such Bid Interest Period,
as the case may be, or (iii) to the extent required by Section 3.8, the rate
per annum equal to the arithmetic average of the respective rates reported to
the Administrative Agent by the Reference Lenders, in each case as the rate
determined by such Reference Lender to be reflective of the all-in cost of
funds of such Reference Lender to fund such Core Currency Euro Advance in an
amount approximately equal to its Commitment Percentage of such Core Currency
Euro Advance and having a period to maturity approximately equal to such Euro
Interest Period, by
(b) a number equal to 1.00 minus the aggregate
of the then stated maximum rates during such Euro Interest Period or such Bid
Interest Period, as the case may be, of all reserve requirements (including
marginal, emergency, supplemental and special reserves), expressed as a decimal,
established by the Board of Governors of the Federal Reserve System and any
other United States banking authority to which Fleet and other major United
States money center banks are subject in respect of eurocurrency funding
(currently referred to as "Eurocurrency Liabilities" in Regulation D), without
benefit of credits for proration, exceptions or offsets which may be available
from time to time to Fleet.
"Core Currency Index Rate Bid Loan": any Bid Loan denominated
in a Core Currency which is designated as a "Core Currency Index Rate Bid Loan"
in the Bid applicable thereto.
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<PAGE> 18
"Credit Party": each Borrower and each other party (other
than the Agents and the Lenders) to a Loan Document.
"Currencies": collectively, Dollars, French Francs, German
Marks, Sterling Pounds, and the Non-Core Currencies.
"Currency Addendum": an Addendum, duly completed and executed
by the Parent Borrower, substantially in the form of Exhibit B-2.
"Default": any event or condition which constitutes an Event
of Default or which, with the giving of notice, the lapse of time, or any other
condition, would, unless cured or waived, become an Event of Default.
"Disposition": with respect to any Person, any sale,
assignment, transfer or other disposition by such Person, by any means, of (i)
the Capital Stock of any other Person, (ii) any business, going concern or
division or segment thereof, or (iii) any other Property of such Person other
than in the ordinary course of business, provided, however, that no such sale,
assignment, transfer or other disposition of Property (other than inventory,
except to the extent subject to a bulk sale) shall be deemed to be in the
ordinary course of business if it is the sale, assignment, transfer or
disposition of (a) all or substantially all of the Property of such Person, or
(b) any Operating Entity.
"Dollar Bid Loan": each Bid Loan denominated in Dollars.
"Dollar Equivalent": on any date of determination thereof,
the amount, as determined by the Administrative Agent, of Dollars which could
be purchased with the amount of the relevant Alternate Currency involved in
such computation at the spot rate at which Dollars may be exchanged into such
Alternate Currency as set forth on such date on Dow Jones Telerate pages 262,
264, 265, 266 or 9993 (or any successor pages) or, if such rate does not appear
on such pages, at the arithmetic average of the respective spot exchange rates
therefor notified to the Administrative Agent by the Reference Lenders as of
11:00 a.m. (London time) on such date for delivery (i) in the case of an
exchange of Dollars into Canadian Dollars, one Core Currency Business Day later
and (ii) in all other cases, two Core Currency Business Days later.
"Dollar Revolving Credit Loan": as defined in Section
2.1(a)(ii).
"Dollars" and "$": lawful currency of the United States.
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<PAGE> 19
"Domestic Borrower": any Borrower which is organized under
the laws of the United States or any State thereof and which has its principal
place of business in the United States.
"Domestic Subsidiary": any Subsidiary of the Parent Borrower
which is organized under the laws of the United States or any State thereof.
"Dutch Guilders": freely transferable lawful money of the
Netherlands.
"Effective Date": as defined in Section 12.24.
"Eligible Assignee": as defined in Section 12.6(b).
"Employee Benefit Plan": an employee benefit plan within the
meaning of Section 3(3) of ERISA maintained, sponsored or contributed to by the
Parent Borrower, any of its Subsidiaries or any ERISA Affiliate.
"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the rules and regulations issued thereunder,
as from time to time in effect.
"ERISA Affiliate": when used with respect to an Employee
Benefit Plan, ERISA, the PBGC or a provision of the Code pertaining to employee
benefit plans, any Person which is a member of any group of organizations
within the meaning of Sections 414(b) or (c) of the Code (or, solely for
purposes of potential liability under Section 302(c)(11) of ERISA and Section
412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and
Section 412(n) of the Code, Sections 414(m) or (o) of the Code) of which the
Parent Borrower or any of its Subsidiaries is a member.
"Euro Interest Period": with respect to any Eurodollar
Advance or Core Currency Euro Advance requested by any Borrower or, if such
Borrower is a Subsidiary Borrower, the Parent Borrower, on behalf of such
Borrower, the period commencing on the Borrowing Date or Conversion Date, as
the case may be, with respect to such Advance and ending one, two, three, six
or, if made available by all of the Lenders, nine or twelve months thereafter,
as selected by such Borrower or, if such Borrower is a Subsidiary Borrower, the
Parent Borrower, on behalf of such Borrower, in the applicable Borrowing
Request or Notice of Conversion, as the case may be, therefor, provided,
however, that (i) if any Euro Interest Period would otherwise end on a day
which is not a Core Currency Business Day, such Euro Interest Period shall be
extended to the next succeeding Core
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<PAGE> 20
Currency Business Day unless (A) such next succeeding Core Currency Business
Day would be a date on or after the Commitment Termination Date or such earlier
date upon which the Commitments shall have been voluntarily terminated by the
Parent Borrower in accordance with Section 2.7, in which event such Euro
Interest Period shall end on the next preceding Core Currency Business Day, or
(B) the result of such extension would be to carry such Euro Interest Period
into another calendar month, in which event such Euro Interest Period shall end
on the immediately preceding Core Currency Business Day, (ii) any Euro Interest
Period that begins on the last Core Currency Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Euro Interest Period) shall end on the last
Core Currency Business Day of a calendar month and (iii) no Euro Interest
Period shall end after the Commitment Termination Date or such earlier date
upon which the Commitments shall have been voluntarily terminated by the Parent
Borrower in accordance with Section 2.7. Interest shall accrue from and
including the first day of a Euro Interest Period to, but excluding, the last
day of such Euro Interest Period.
"Eurodollar Advances": the Revolving Credit Loans (or any
portions thereof), at such time as they (or such portions) are made and/or being
maintained at a rate of interest based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each Eurodollar Advance and
each Core Currency Index Rate Bid Loan denominated in Dollars, a rate of
interest per annum, as determined by the Administrative Agent, obtained by
dividing (and then rounding to the nearest 1/16 of 1% or, if there is no nearest
1/16 of 1%, then to the next higher 1/16 of 1%):
(a)(i) the rate per annum for deposits having a
maturity most nearly comparable to the Euro Interest Period in respect of such
Eurodollar Advance or the Bid Interest Period in respect of such Core Currency
Index Rate Bid Loan, as the case may be, in Dollars which appears on page 3750
of the Dow Jones Telerate Screen (or any successor page) as of 11:00 a.m. London
time on the date that is two Core Currency Business Days prior to the first day
of such Euro Interest Period or such Bid Interest Period, as the case may be, or
(ii) if such rate does not appear on page 3750 of the Dow Jones Telerate Screen
(or any successor page), the rate per annum equal to the arithmetic average (and
then rounding to the nearest 1/16 of 1% or, if there is no nearest 1/16 of 1%,
then to the next higher 1/16 of 1%) of the respective offered quotations
notified to the Administrative Agent by the Reference Lenders, in each case as
quoted by such Reference Lender at approximately 11:00 a.m. London time (or as
soon thereafter as practicable) two Core Currency Business Days prior to the
first day of such Euro Interest Period or such
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<PAGE> 21
Bid Interest Period, as the case may be, to leading banks in the interbank
eurodollar market as the rate at which such Reference Lender is offering Dollar
deposits in an amount approximately equal to its Commitment Percentage of such
Eurodollar Advance or the principal amount of such Core Currency Index Rate
Loan, as the case may be, and having a period to maturity approximately equal
to such Euro Interest Period or such Bid Interest Period, as the case may be,
by
(b) a number equal to 1.00 minus the aggregate
of the then stated maximum rates during such Euro Interest Period or such Bid
Interest Period, as the case may be, of all reserve requirements (including
marginal, emergency, supplemental and special reserves), expressed as a decimal,
established by the Board of Governors of the Federal Reserve System and any
other banking authority to which Fleet and other major United States money
center banks are subject in respect of eurocurrency funding (currently referred
to as "Eurocurrency Liabilities" in Regulation D), without benefit of credits
for proration, exceptions or offsets which may be available from time to time to
Fleet.
"Event of Default": as defined in Section 9.1.
"Exchange Act": the Securities Exchange Act of 1934, as
amended.
"Existing Indebtedness": all Indebtedness under the Existing
Promissory Note and all accrued and unpaid monetary obligations of the Parent
Borrower and its Subsidiaries under the Existing Promissory Note and all
documents, instruments and other agreements executed and delivered in
connection therewith.
"Existing Promissory Note": the Promissory Note, dated March
31, 1997, made by the Parent Borrower to Fleet, as amended.
"Expiration Date": as defined in Section 2.11.
"Extending Lender": with respect to any assignment by a
Non-Extending Lender of its rights and obligations under the Loans Documents
pursuant to Section 2.11(b), any other Lender selected by the Parent Borrower
which is willing to assume such rights and obligations in accordance with such
Section or, to the extent no other Lender shall be so willing, any Eligible
Assignee selected by the Parent Borrower which is so willing.
"Extension Request": as defined in Section 2.11.
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<PAGE> 22
"Facility Fee": as defined in Section 3.2(a).
"Federal Funds Rate": for any day, a rate per annum (expressed
as a decimal, rounded upwards, if necessary, to the next higher 1/100 of 1%)
equal to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day, provided that (i) if the day for
which such rate is to be determined is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (ii) if
such rate is not so published for any day, the Federal Funds Rate for such day
shall be the average of the quotations for such day on such transactions
received by the Administrative Agent.
"Financial Officer": as to any Person, the chief financial
officer or the treasurer thereof, or any other financial officer thereof
designated by such chief financial officer.
"Financial Statements": as defined in Section 4.13.
"Fixed Rate Loan": any Eurodollar Advance, any Core Currency
Euro Advance or any Bid Loan, as the case may be.
"Fleet": Fleet Bank, National Association.
"French Borrower": any Borrower which is organized under the
laws of, and has its principal office in, France.
"French Francs": freely transferable lawful money of France.
"Funded Debt": at any date of determination, an amount equal
to the sum, without duplication, of each of the following: (i) the aggregate
funded indebtedness for borrowed money on such date of the Parent Borrower and
its Subsidiaries, determined on a Consolidated basis in accordance with GAAP,
plus (ii) the aggregate Capital Lease Obligations on such date of the Parent
Borrower and its Subsidiaries, determined on a Consolidated basis in accordance
with GAAP, plus (iii) the aggregate guaranty obligations on such date of the
Parent Borrower and its Subsidiaries, determined on a Consolidated basis in
accordance with GAAP, solely in respect of any funded indebtedness for borrowed
money or any Capital Lease Obligations.
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<PAGE> 23
"GAAP": generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and in the statements and
pronouncements of the Financial Accounting Standards Board or in such other
statement by such other entity as may be approved by a significant segment of
the accounting profession, which are applicable to the circumstances as of the
date of determination, consistently applied.
"German Borrower": any Borrower which is organized under the
laws of, and has its principal office in, Germany.
"German Marks": freely transferable lawful money of Germany.
"Governmental Authority": any foreign, federal, state,
municipal or other government, or any department, commission, board, bureau,
agency, public authority or instrumentality thereof, or any court or arbitrator.
"Guarantor Obligations": as defined in Section 11.1(a).
"Indebtedness": as to any Person, at a particular time, all
items which constitute, without duplication, (i) indebtedness for borrowed
money, (ii) indebtedness in respect of the deferred purchase price of Property
(other than trade payables incurred in the ordinary course of business), (iii)
indebtedness evidenced by notes, bonds, debentures or similar instruments, (iv)
obligations with respect to any conditional sale or title retention agreement,
(v) indebtedness arising under acceptance facilities and the amount available to
be drawn under all letters of credit issued for the account of such Person and,
without duplication, all drafts drawn thereunder to the extent such Person shall
not have reimbursed the issuer in respect of the issuer's payment thereof, (vi)
all liabilities secured by any Lien on any Property owned by such Person even
though such Person has not assumed or otherwise become liable for the payment
thereof (other than carriers', warehousemen's, mechanics', repairmen's or other
like non-consensual statutory Liens arising in the ordinary course of business),
(vii) Capital Lease Obligations, and (viii) all Contingent Obligations of such
Person in respect of any of the foregoing.
"Indemnified Liabilities": as defined in Section 12.5.
"Indemnified Person": as defined in Section 12.7.
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<PAGE> 24
"Indemnified Tax": as to any Person, any Tax imposed on such
Person, including any interest, fees or penalties for late payment of such Tax,
provided, however, that, for purposes of this definition, "Indemnified Tax"
shall not include any Tax on the Income imposed on such Person, including any
interest, fees or penalties for late payment of such Tax on the Income.
"Indemnified Tax Person": either Agent or any Lender, as the
case may be.
"Intercompany Disposition": a Disposition by the Parent
Borrower or any of its Subsidiaries to the Parent Borrower or any of its
Subsidiaries.
"Intercompany Indebtedness": loans or advances which are made
by the Parent Borrower or any of its direct or indirect Subsidiaries to the
Parent Borrower or any of its direct or indirect Subsidiaries.
"Interest Payment Date": (i) as to each ABR Advance, the last
day of each March, June, September and December commencing on the first of such
days to occur after such ABR Advance is made or any Eurodollar Advance is
converted to an ABR Advance, (ii) as to each Eurodollar Advance, each Core
Currency Euro Advance and each Bid Loan, the last day of the Euro Interest
Period or the Bid Interest Period, as the case may be, applicable thereto, and,
without duplication, (iii) as to each Eurodollar Advance, each Core Currency
Euro Advance and each Bid Loan in respect of which the Euro Interest Period or
the Bid Interest Period, as the case may be, applicable thereto is greater than
three months or 90 days, as the case may be, the last day of each three month or
90-day, as the case may be, interval occurring during such Euro Interest Period
or Bid Interest Period, as the case may be.
"Investments": as defined in Section 8.6.
"Invitation to Bid": an invitation to make Bids in the form
of Exhibit J.
"Japanese Yen": freely transferable lawful money of Japan.
"Judgment Currency": as defined in Section 12.13.
"Judgment Currency Conversion Date": as defined in Section
12.13.
"Leverage Ratio": at any date of determination, the ratio of
(i) Funded Debt on such date to (ii) Consolidated EBITDA for the period of the
four fiscal quarters of the
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<PAGE> 25
Parent Borrower ending on such date or, if such date is not the last day of a
fiscal quarter of the Parent Borrower, for the period of the immediately
preceding four fiscal quarters of the Parent Borrower.
"Lien": any mortgage, pledge, hypothecation, assignment,
deposit or preferential arrangement, encumbrance, lien (statutory or other), or
other security agreement or security interest of any kind or nature whatsoever,
including any conditional sale or other title retention agreement and any
capital or financing lease having substantially the same economic effect as any
of the foregoing.
"Loan": a Revolving Credit Loan or a Bid Loan, as the case may
be.
"Loan Documents": collectively, this Agreement and all
agreements, instruments and other documents executed or delivered in connection
with any of the foregoing, including any promissory notes executed and delivered
pursuant to Section 2.12, in each case as amended, supplemented or otherwise
modified from time to time.
"Loans": the Revolving Credit Loans and/or the Bid Loans, as
the case may be.
"Managing Person": with respect to any Person that is (i) a
corporation, its board of directors, (ii) a limited liability company, its board
of control, managing member or members, (iii) a limited partnership, its general
partner, (iv) a general partnership or a limited liability partnership, its
managing partner or executive committee or (v) any other Person, the managing
body thereof or other Person analogous to the foregoing.
"Margin Stock": any "margin stock", as defined in Regulation U
of the Board of Governors of the Federal Reserve System, as amended,
supplemented or otherwise modified from time to time.
"Material Adverse Change": a material adverse change in (i)
the condition (financial or otherwise), operations, business or Property of the
Parent Borrower and its Subsidiaries, taken as a whole, (ii) the ability of the
Credit Parties, taken as a whole, to perform their obligations under the Loan
Documents or (iii) the ability of either Agent or any Lender to enforce any Loan
Document.
"Material Adverse Effect": a material adverse effect on (i)
the condition (financial or otherwise), operations, business or Property of the
Parent Borrower and its Subsidiaries, taken as a whole, (ii) the ability of the
Credit Parties, taken as a whole, to
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<PAGE> 26
perform their obligations under the Loan Documents or (iii) the ability of
either Agent or any Lender to enforce any Loan Document.
"Multiemployer Plan": a Pension Plan which is a multiemployer
plan as defined in Section 4001(a)(3) of ERISA.
"Non-Affiliate": any Person other than (i) the Parent Borrower
or any direct or indirect Subsidiary thereof, (ii) Bowne Williams Lea
International, Inc., (iii) any bank or other financial institution, and (iv) any
Governmental Authority.
"Non-Core Currencies": collectively, Canadian Dollars, Dutch
Guilders, Japanese Yen, Spanish Pesetas, and such other currencies as shall
become Non-Core Currencies in accordance with Section 2.10(b).
"Non-Extending Lender": as defined in Section 2.11.
"Notice of Conversion": a notice substantially in the form of
Exhibit D.
"Obligation Currency": as defined in Section 12.13.
"Operating Entity": any Person or any business or operating
unit of a Person which is, or could be, operated separate and apart from (i) the
other businesses and operations of such Person, or (ii) any other line of
business or business segment.
"Organizational Documents": as to any Person which is (i) a
corporation, the certificate or articles of incorporation and by-laws of such
Person, (ii) a limited liability company, the limited liability company
agreement or similar agreement of such Person, (iii) a partnership, the
partnership agreement or similar agreement of such Person, or (iv) any other
form of entity or organization, the organizational documents analogous to the
foregoing.
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA, or any Governmental Authority
succeeding to the functions thereof.
"Pension Plan": at any date of determination, any Employee
Benefit Plan (including a Multiemployer Plan) subject to Section 302 of ERISA
or Section 412 of the Code, the funding requirements of which (under such
Section 302 or such Section 412) are, or at any time within the six years
immediately preceding such date, were in whole or
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<PAGE> 27
in part, the responsibility of the Parent Borrower, any of its Subsidiaries or
any ERISA Affiliate.
"Permitted Lien": a Lien permitted to exist under Section 8.2.
"Person": any individual, firm, partnership, limited liability
company, joint venture, corporation, association, business enterprise, joint
stock company, unincorporated association, trust, Governmental Authority or any
other entity, whether acting in an individual, fiduciary or other capacity, and
for the purpose of the definition of "ERISA Affiliate", a trade or business.
"Pricing Level": Pricing Level I, Pricing Level II, Pricing
Level III, or Pricing Level IV, as applicable.
"Pricing Level I": any time when the Leverage Ratio is less
than or equal to 1.50:1.00.
"Pricing Level II": any time when the Leverage Ratio is
greater than 1.50:1.00 but less than or equal to 2.00:1.00.
"Pricing Level III": any time when the Leverage Ratio is
greater than 2.00:1.00 but less than or equal to 2.50:1.00.
"Pricing Level IV": any time when the Leverage Ratio is
greater than 2.50:1.00.
"Prohibited Transaction": a transaction which is prohibited
under Section 4975 of the Code or Section 406 of ERISA and not exempt under
Section 4975 of the Code or Section 408 of ERISA.
"Property": all types of real, personal, tangible, intangible
or mixed property.
"Proposed Lender": as defined in Section 3.11.
"Reference Lenders": collectively, Fleet and Bank of Montreal.
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<PAGE> 28
"Regulation D": Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing reserve requirements.
"Regulatory Change": (i) the introduction of any law, rule or
regulation after the Relevant Date, (ii) the issuance or promulgation after the
Relevant Date of any directive, guideline or request from any Governmental
Authority (whether or not having the force of law), or (iii) any change after
the Relevant Date in the interpretation of any existing law, rule, regulation,
directive, guideline or request by any Governmental Authority charged with the
administration thereof.
"Relevant Date": (i) in the case of each Lender listed on the
signature pages hereof, the Effective Date and (ii) in the case of each other
Lender, the effective date of the Assignment and Acceptance Agreement or other
document pursuant to which it became a Lender.
"Reportable Event": with respect to any Pension Plan, any
event set forth in Section 4043(b) of ERISA or the regulations thereunder (other
than a Reportable Event as to which the 30 day notice requirement is waived by
the PBGC under applicable regulations).
"Required Lenders": at any time prior to the Commitment
Termination Date, Lenders having Commitment Amounts greater than or equal to 51%
of the Aggregate Commitment Amount and, at all other times, Lenders having Loans
outstanding greater than or equal to 51% of the Aggregate Credit Exposure.
"Required Payment": as defined in Section 3.9.
"Revolving Credit Exposure": with respect to any Lender, as of
any date of determination, the sum as of such date of the outstanding principal
amount of such Lender's Loans (determined, in the case of each Alternate
Currency Loan, on the basis of the Dollar Equivalent thereof).
"Revolving Credit Loan" and "Revolving Credit Loans": as
defined in Section 2.1.
"SEC": the Securities and Exchange Commission or any
Governmental Authority succeeding to the functions thereof.
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<PAGE> 29
"Spanish Pesetas": freely transferable lawful money of Spain.
"Special Counsel": Emmet, Marvin & Martin, LLP, special
counsel to the Documentation Agent.
"Sterling Borrower": any Borrower which is organized under
the laws of, and has its principal office in, the United Kingdom.
"Sterling Pounds": freely transferable lawful money of the
United Kingdom.
"Subsidiary": as to any Person, any corporation, association,
partnership, limited liability company, joint venture or other business entity
of which such Person or any Subsidiary of such Person, directly or indirectly,
either (i) in respect of a corporation, owns or controls more than 50% of the
outstanding Capital Stock having ordinary voting power to elect a majority of
the managing Person thereof, irrespective of whether a class or classes shall or
might have voting power by reason of the happening of any contingency, or (ii)
in respect of an association, partnership, limited liability company, joint
venture or other business entity, is entitled to share in more than 50% of the
profits and losses thereof, however determined.
"Subsidiary Borrower Obligations": at any time and with
respect to any Subsidiary Borrower, the principal amount outstanding at such
time of the Loans made to such Subsidiary Borrower, together with all accrued
interest thereon and all other sums due and owing at such time from such
Subsidiary Borrower under the Loan Documents.
"Super-majority Lenders": at any time prior to the Commitment
Termination Date, Lenders having Commitment Amounts greater than 85% of the
Aggregate Commitment Amount and, at all other times, Lenders having Loans
outstanding greater than 85% of the Aggregate Credit Exposure.
"Tax": any present or future tax, levy, impost, duty, charge,
fee, deduction or withholding of any nature and whatever called, by a
Governmental Authority, on whomsoever and wherever imposed, levied, collected,
withheld or assessed.
"Tax on the Income": as to any Person, a Tax constituting an
income tax or franchise tax on all or part of the net income or net profits of
such Person, or representing interest, fees or penalties for late payment of
such an income tax or such a franchise tax, in each case imposed by one of the
following jurisdictions or by any political subdivision
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or taxing authority thereof: (i) the United States, (ii) the jurisdiction in
which such Person is organized, (iii) the jurisdiction in which such Person's
principal office is located, or (iv) in the case of each Lender, any
jurisdiction in which such Person is deemed to be doing business.
"Termination Event": with respect to any Pension Plan, (i) a
Reportable Event, (ii) the termination of a Pension Plan, or the filing of a
notice of intent to terminate a Pension Plan, or the treatment of a Pension Plan
amendment as a termination under Section 4041(c) of ERISA, (iii) the institution
of proceedings to terminate a Pension Plan under Section 4042 of ERISA, or (iv)
the appointment of a trustee to administer any Pension Plan under Section 4042
of ERISA.
"Unfunded Pension Liabilities": with respect to any Pension
Plan, at any date of determination, the amount determined by taking the
accumulated benefit obligation, as disclosed in accordance with Statement of
Accounting Standards No. 87, "Employers' Accounting for Pensions", over the fair
market value of Pension Plan assets.
"United States": the United States of America (including the
States thereof and the District of Columbia).
"Unrecognized Retiree Welfare Liability": with respect to any
Employee Benefit Plan that provides postretirement benefits other than pension
benefits, the amount of the transition obligation, as determined in accordance
with Statement of Financial Accounting Standards No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," as of the most recent
valuation date, that has not been recognized as an expense in an income
statement of the Parent Borrower and its Consolidated subsidiaries, provided
that prior to the date such Statement is applicable to the Parent Borrower, such
amount shall be based on an estimate made in good faith of such transition
obligation.
1.2. Principles of Construction
(a) All terms defined in a Loan Document shall have the
meanings given such terms therein when used in the other Loan Documents or any
certificate, opinion or other document made or delivered pursuant thereto,
unless otherwise defined therein.
(b) As used in the Loan Documents and in any certificate,
opinion or other document made or delivered pursuant thereto, accounting terms
not defined in Section 1.1, and accounting terms partly defined in Section 1.1,
to the extent not defined, shall have the respective meanings given to them
under GAAP. If at any time any change
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in GAAP would affect the computation of any financial ratio or requirement set
forth in this Agreement, the Administrative Agent, the Lenders and the Parent
Borrower shall negotiate in good faith to amend such ratio or requirement to
reflect such change in GAAP (subject to the approval of the Required Lenders),
provided that, until so amended, (i) such ratio or requirement shall continue to
be computed in accordance with GAAP prior to such change therein and (ii) the
Parent Borrower shall provide to the Administrative Agent and the Lenders
financial statements and other documents required under this Agreement or as
reasonably requested hereunder setting forth a reconciliation between
calculations of such ratio or requirement made before and after giving effect to
such change in GAAP.
(c) The words "hereof", "herein", "hereto" and
"hereunder" and similar words when used in a Loan Document shall refer to such
Loan Document as a whole and not to any particular provision thereof, and
Section, schedule and exhibit references contained therein shall refer to
Sections thereof or schedules or exhibits thereto unless otherwise expressly
provided therein.
(d) The phrase "may not" is prohibitive and not
permissive.
(e) Unless the context otherwise requires, words in the
singular number include the plural, and words in the plural include the
singular.
(f) Unless specifically provided in a Loan Document to
the contrary, any reference to a time shall refer to such time in New York.
(g) Unless specifically provided in a Loan Document to
the contrary, in the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including" and the words
"to" and "until" each means "to but excluding".
(h) The words "include" and "including", when used in
each Loan Document, shall mean that the same shall be included "without
limitation", unless otherwise expressly provided therein.
2. AMOUNT AND TERMS OF LOANS
2.1. Revolving Credit Loans
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(a) Subject to the terms and conditions hereof, each
Lender severally agrees from time to time during the Commitment Period to make
revolving credit loans to one or more of the Borrowers in the Core Currencies
(each a "Revolving Credit Loan" and, as the context may require, collectively
with all other Revolving Credit Loans of such Lender and with the Revolving
Credit Loans of all other Lenders, the "Revolving Credit Loans"), provided,
however, that:
(i) immediately after giving effect thereto, (A)
the Aggregate Credit Exposure shall not exceed the Aggregate
Commitment Amount, and (B) with respect to each Lender, such
Lender's Revolving Credit Exposure shall not exceed such
Lender's Commitment Amount, and
(ii) such Revolving Credit Loan, (A) if to be
made in Dollars (each a "Dollar Revolving Credit Loan"), shall
be made to any Borrower, (B) if to be made in French Francs,
shall be made to a French Borrower or any Domestic Borrower,
(C) if to be made in German Marks, shall be made to a German
Borrower or any Domestic Borrower, and (D) if to be made in
Sterling Pounds, shall be made to a Sterling Borrower or any
Domestic Borrower.
During the Commitment Period, the Borrowers may borrow, prepay in whole or in
part and reborrow Revolving Credit Loans under the Commitments, all in
accordance with the terms and conditions of this Agreement.
(b) Subject to the provisions of Sections 2.3 and 3.3,
Dollar Revolving Credit Loans may be made as (i) one or more ABR Advances, (ii)
one or more Eurodollar Advances, or (iii) a combination thereof. Each Revolving
Credit Loan, together with all accrued and unpaid interest thereon, shall mature
and be due and payable on the Commitment Termination Date or such earlier date
upon which the Commitments shall have been terminated in accordance herewith.
2.2. Minimum Amount of Each Borrowing
(a) Notwithstanding anything to the contrary contained
herein, (i) each ABR Advance made on a Borrowing Date shall not be less than
$1,000,000 or such amount plus a whole multiple of $1,000,000 in excess thereof,
(ii) each Eurodollar Advance made on a Borrowing Date, when aggregated with all
amounts to be converted to a Eurodollar Advance on such date and having the same
Euro Interest Period as such first Eurodollar Advance shall not be less than
$5,000,000 or such amount plus a whole mul-
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tiple of $1,000,000 in excess thereof, and (iii) each Core Currency Euro Advance
made on a Borrowing Date, when aggregated with all amounts to be converted to a
Core Currency Euro Advance on such date and having the same Euro Interest
Period, and being denominated in the same Currency, as such first Core Currency
Euro Advance shall not be less than an amount in such Currency having a Dollar
Equivalent of approximately $5,000,000 or such amount plus an amount in such
Currency having a Dollar Equivalent of a whole multiple of approximately
$1,000,000 in excess thereof.
(b) At no time shall the aggregate outstanding number
(whether as a result of borrowings or conversions), of (i) all Eurodollar
Advances exceed ten and (ii) all Core Currency Euro Advances exceed ten, in each
case unless otherwise agreed to by the Administrative Agent.
2.3. Borrowing Request - Revolving Credit Loans
(a) Whenever a Borrower desires to borrow Revolving
Credit Loans hereunder, such Borrower or, if such Borrower is a Subsidiary
Borrower, the Parent Borrower, on behalf of such Borrower, shall notify the
Administrative Agent, which notice shall be irrevocable, no later than (i) 10:00
a.m. on the proposed Borrowing Date, in the case of ABR Advances, and (ii) 11:00
a.m. three Core Currency Business Days prior to the proposed Borrowing Date, in
the case of Eurodollar Advances and Core Currency Euro Advances, specifying (A)
the proposed Borrowing Date, (B) whether the borrowing is to be of one or more
ABR Advances, one or more Eurodollar Advances, one or more Core Currency Euro
Advances, or a combination thereof, and the amount of each thereof (stated in
the applicable Currency), and (C) the Euro Interest Period for each Eurodollar
Advance and each Core Currency Euro Advance, which notice shall be promptly
confirmed by delivery to the Administrative Agent of a Borrowing Request. The
Administrative Agent shall promptly notify each Lender (by telephone or
otherwise, such notice to be confirmed by facsimile or other writing) of such
borrowing request.
2.4. Bid Loans; Procedure
(a) Each Borrower may, provided that no Default shall
have occurred and be continuing, request Bids for one or more Bid Loans
denominated in any Currency during the Commitment Period by delivering, or, if
such Borrower is a Subsidiary Borrower, causing the Parent Borrower to deliver,
on behalf of such Borrower, by hand or facsimile to the Administrative Agent a
duly completed Bid Request not later than 12:00 noon, (i) four Core Currency
Business Days, in the case of Core Currency Index Rate Bid Loans, and (ii) two
Business Days, in all other cases, before the proposed Borrowing Date
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therefor. A request for Bids that does not conform substantially to the format
of Exhibit I may be rejected in the Administrative Agent's sole discretion, and
the Administrative Agent shall promptly notify the applicable Borrower and, if
such Borrower is a Subsidiary Borrower, the Parent Borrower of such rejection by
facsimile. Each Bid Request shall specify (A) the amount of each Bid Loan
(stated in the applicable Currency) and, if applicable, its nature as a Core
Currency Index Rate Bid Loan, (B) the proposed Borrowing Date therefor, and (C)
the Bid Interest Period or Bid Interest Periods (which shall not exceed three
different Bid Interest Periods in a single Bid Request), with respect thereto.
Promptly after its receipt of each Bid Request that is not rejected as
aforesaid, the Administrative Agent shall send to each Lender an Invitation to
Bid, appropriately completed by the Administrative Agent with reference to such
Bid Request.
(b) Each Lender may, in its sole and absolute discretion,
make one or more Bids in response to an Invitation to Bid. Each Bid by a Lender
must be received by the Administrative Agent not later than 9:30 a.m., (i) three
Core Currency Business Days, in the case of Core Currency Index Rate Bid Loans,
and (ii) one Business Day, in all other cases, before the proposed Borrowing
Date for a proposed Bid Loan. Bids to make Bid Loans that do not conform
substantially to the format of Exhibit K may be rejected by the Administrative
Agent after conferring with, and upon the instruction of, the applicable
Borrower or, if such Borrower is a Subsidiary Borrower, the Parent Borrower, and
the Administrative Agent shall notify the Lender making such nonconforming bid
of such rejection as soon as practicable. Each Bid shall be irrevocable and
shall specify (A) whether the Bid Loan that the Lender is willing to make to the
applicable Borrower is to be a Core Currency Index Rate Bid Loan, (B) the amount
(stated in the applicable Currency and which (1) shall be in a minimum principal
amount of $1,000,000 or such amount plus a whole multiple of $100,000 in excess
thereof (or, in the case of Alternate Currency Bid Loans, an amount in the
applicable Alternate Currency having a Dollar Equivalent of approximately
$1,000,000 or such amount plus an amount in the applicable Alternate Currency
having a Dollar Equivalent of a whole multiple of approximately $100,000 in
excess thereof), and (2) may equal the entire principal amount requested by such
Borrower) of such Bid Loan, (C) the Bid Rate with respect to such Bid Loan, and
(D) the Bid Interest Period with respect to such Bid Loan and the last day
thereof. If any Lender shall elect not to make a Bid, such Lender shall so
notify the Administrative Agent by facsimile not later than not later than 9:30
a.m., (I) three Core Currency Business Days, in the case of Core Currency Index
Rate Bid Loans, and (II) one Business Day, in all other cases, before the
proposed Borrowing Date therefor, provided, however, that the failure by any
Lender to give any such notice shall not obligate such Lender to make any Bid
Loan in connection with the relevant Bid Request.
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(c) With respect to each Invitation to Bid sent to the
Lenders, the Administrative Agent shall (i) promptly notify the applicable
Borrower and, if such Borrower is a Subsidiary Borrower, the Parent Borrower by
facsimile of each Bid made, the amount (stated in the applicable Currency) of
the Bid Loan offered thereby and its nature, if applicable, as a Core Currency
Index Rate Loan, the Bid Rate applicable thereto, and the identity of the Lender
that made such Bid, and (ii) send a list of all Bids to such Borrower and, if
such Borrower is a Subsidiary Borrower, the Parent Borrower for their respective
records as soon as practicable after completion of the bidding process. Each
notice and list sent by the Administrative Agent pursuant to this Section 2.4(c)
shall list the Bids in ascending yield order.
(d) The applicable Borrower may in its sole and absolute
discretion, subject only to the provisions of this Section 2.4(d), accept or
reject any Bid made in accordance with the procedures set forth in this Section
2.4, and such Borrower or, if such Borrower is a Subsidiary Borrower, the Parent
Borrower, on behalf of such Borrower, shall notify the Administrative Agent by
telephone, confirmed by facsimile in the form of a Bid Accept/Reject Letter,
whether and to what extent it has decided to accept or reject any or all of such
Bids, not later than 10:30 a.m., (i) three Core Currency Business Days, in the
case of Core Currency Index Rate Loans, and (ii) one Business Day, in all other
cases, before the proposed Borrowing Date therefor, provided, however, that the
failure by such Borrower or the Parent Borrower, on behalf of such Borrower, as
the case may be, to give such notice shall be deemed to be a rejection of all
such Bids. In connection with each acceptance of one or more Bids by such
Borrower:
(A) such Borrower shall not accept a Bid made at a
particular Bid Rate if it has decided to reject any other Bid made at a
lower Bid Rate and having the same Bid Interest Period as such Bid,
(B) the aggregate amount of the Bids accepted by such
Borrower shall not exceed the principal amount specified in the Bid
Request therefor (determined, in the case of each Alternate Currency
Bid Loan, on the basis of the Dollar Equivalent thereof),
(C) if such Borrower shall desire to accept a Bid made at
a particular Bid Rate and having a particular Bid Interest Period, it
must accept all other Bids made at such Bid Rate and having such Bid
Interest Period, provided, however, that if the acceptance of all such
other Bids would cause the aggregate amount of all such accepted Bids
to exceed the amount requested (determined, in the case of each
Alternate Currency Bid Loan, on the basis of the Dollar Equivalent
thereof),
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then such acceptance shall be made pro rata in accordance with the
amount of each such Bid at such Bid Rate and having such Bid Interest
Period, and
(D) except pursuant to Section 2.4(d)(C), no Bid shall be
accepted unless the Bid Loan with respect thereto shall be in (1) a
minimum principal amount of $1,000,000, or such amount plus a whole
multiple of $100,000 in excess thereof (or, in the case of Alternate
Currency Bid Loans, an amount in the applicable Alternate Currency
having a Dollar Equivalent of approximately $1,000,000, or such amount
plus an amount in the applicable Alternate Currency having a Dollar
Equivalent of a whole multiple of approximately $100,000 in excess
thereof), or (2) if less, an aggregate principal amount equal to the
excess of the Aggregate Commitment Amount over the outstanding
principal amount of all Loans (determined, in the case of each
Alternate Currency Bid Loan, on the basis of the Dollar Equivalent
thereof).
(e) The Administrative Agent shall promptly notify each
bidding Lender whether or not each Bid of such Lender has been accepted (and, if
so, in what amount) by facsimile sent by the Administrative Agent, and, if such
Bid has been accepted by the applicable Borrower, in whole or in part, such
bidding Lender shall, after its receipt of such notice, make funds available in
respect of such Bid in accordance with Section 2.5(b). Notwithstanding anything
to the contrary contained herein, no Lender shall be obligated to make a Bid
Loan if, immediately after making such Bid Loan, the Aggregate Credit Exposure
would exceed the Aggregate Commitment Amount.
(f) A Bid Request in respect of any Currency shall not be
made within five Business Days or five Core Currency Business Days, as the case
may be, after the date of any previous Bid Request in respect of such Currency,
unless the applicable Borrower has accepted one or more Bids pursuant to a Bid
Request in respect of such Currency made within such five Business Days or five
Core Currency Business Days, as the case may be.
(g) If the Administrative Agent shall elect to submit a
Bid in its capacity as a Lender, it shall submit such bid directly to the
applicable Borrower and, if such Borrower is a Subsidiary Borrower, the Parent
Borrower fifteen minutes earlier than the latest time at which the other Lenders
are required to submit their bids to the Administrative Agent pursuant to
Section 2.4(b).
(h) All notices required by this Section 2.4 shall be
given in accordance with Section 12.2.
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(i) Each Bid Loan shall be due and payable on the last
day of the Bid Interest Period applicable thereto.
2.5. Disbursement of Funds
(a) Revolving Credit Loans. No later than 12:00 noon
(local time in the city in which the proceeds thereof are to be made available
in accordance with the terms hereof, in the case of an Alternate Currency
Revolving Credit Loan, and New York City time, in the case of a Dollar Revolving
Credit Loan) on the Borrowing Date specified in the Borrowing Request therefor,
each Lender will make available its Commitment Percentage of the Revolving
Credit Loans requested to be made on such Borrowing Date in the applicable
Currencies. All such Revolving Credit Loans shall be made available in
immediately available funds at the applicable Agent Payment Office, and the
Administrative Agent will make available to the applicable Borrower at such
Agent Payment Office, in the applicable Currencies, and in immediately available
funds, the aggregate of the amounts so made available by the Lenders prior to
2:00 p.m. (local time in the city in which the proceeds thereof are to be made
available in accordance with the terms hereof, in the case of an Alternate
Currency Revolving Credit Loan, and New York City time, in the case of a Dollar
Revolving Credit Loan) on such Borrowing Date and to the extent of funds
actually received by the Administrative Agent.
(b) Bid Loans. Subject to Section 2.4(e), with respect to
any Bid of any Lender, if such Lender shall have received notice from the
Administrative Agent in accordance with such Section that such Bid has been
accepted by the applicable Borrower, and if such Bid has been accepted by such
Borrower, in whole or in part, then such Lender shall make immediately available
funds in the applicable Currency and in the amount in which such Bid was so
accepted available, (i) in the case of Dollar Bid Loans, to the Administrative
Agent at the applicable Agent Payment Office, and (ii) in the case of Alternate
Currency Bid Loans, (A) directly to such Borrower, or (B) upon the occurrence
and during the continuance of an Event of Default, if directed by the Required
Lenders and with the consent of the Administrative Agent, to the Administrative
Agent at the applicable Agent Payment Office, in each case no later than 12:00
noon (local time in the city in which such funds are to be made available in
accordance with the terms hereof) on the proposed Borrowing Date. The
Administrative Agent will make available to such Borrower at the applicable
Agent Payment Office, in the applicable Currency, and in immediately available
funds, the aggregate of the amount so made available by such Lender prior to
2:00 p.m. (such local time) on such Borrowing Date and to the extent of funds
actually received by the Administrative Agent.
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(c) Failure to Fund. Unless the Administrative Agent
shall have received prior notice from a Lender (by telephone or otherwise, such
notice to be confirmed by facsimile or other writing) that such Lender will not
make available to the Administrative Agent the amount of (i) such Lender's
Commitment Percentage of the Revolving Credit Loans to be made on a Borrowing
Date or (ii) to the extent required by Section 2.5(b), any Bid Loan to be made
on a Borrowing Date, as the case may be, the Administrative Agent may assume
that such Lender has made such amount available to the Administrative Agent on
such Borrowing Date, provided that such Lender received notice thereof from the
Administrative Agent in accordance with the terms hereof, and the Administrative
Agent may, in reliance upon such assumption, make available to the applicable
Borrower on such Borrowing Date a corresponding amount. If and to the extent
such Lender shall not have so made such amount available to the Administrative
Agent, such Lender and such Borrower severally agree to pay to the
Administrative Agent, forthwith on demand, such corresponding amount (to the
extent not previously paid by the other), together with interest thereon for
each day from the date such amount is made available to such Borrower until the
date such amount is paid to the Administrative Agent, at a rate per annum equal
to, in the case of such Borrower, the applicable interest rate set forth in
Section 3.1 and, in the case of such Lender, the Federal Funds Rate (or, in the
case of each Alternate Currency Loan, a rate determined by the Administrative
Agent to be reflective of the all- in cost of funds of the Administrative Agent
to fund such Alternate Currency Loan). Any such payment by such Borrower shall
be without prejudice to its rights against such Lender. If such Lender shall pay
to the Administrative Agent such corresponding amount, such amount so paid shall
constitute such Lender's Revolving Credit Loan as part of such Revolving Credit
Loans, or such Lender's Bid Loan, as the case may be, for purposes of this
Agreement, which Revolving Credit Loan or Bid Loan, as the case may be, shall be
deemed to have been made by such Lender on the applicable Borrowing Date.
(d) Borrower Accounts. Each Loan made to a Borrower shall
be made to its applicable payment account specified on Exhibit P or the Borrower
Addendum, if any, executed and delivered with respect to such Borrower pursuant
to Section 2.10, as the case may be, or such other account which it may from
time to time specify by written notice to the Administrative Agent and the
Lenders.
2.6. Payments
(a) Loans and Fees. Except as otherwise specifically
provided herein, each payment, including each prepayment, of principal and
interest on the Loans and the
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Facility Fee shall be made by the Borrowers to the Administrative Agent at the
applicable Agent Payment Office in funds immediately available to the
Administrative Agent at such office by 12:00 noon (local time in the city in
which such Agent Payment Office is located) on the due date for such payment,
provided, however, that unless an Event of Default has occurred and is
continuing and the Required Lenders have directed the Administrative Agent and
the Borrowers to the contrary, and the Administrative Agent shall have consented
thereto, each payment, including each prepayment, of principal and interest on
the Alternate Currency Bid Loans shall be made directly by the applicable
Borrower to the applicable Lender by 12:00 noon (local time in the city in which
such payment is to be made in accordance with the terms hereof), and such Lender
and such Borrower or, if such Borrower is a Subsidiary Borrower, the Parent
Borrower, on behalf of such Borrower, shall promptly notify the Administrative
Agent of the date and amount of such payment. Subject to Section 9.2(b),
promptly upon receipt by the Administrative Agent of each payment, including
each prepayment, pursuant to this Section, the Administrative Agent shall remit
such payment in like funds as received as follows: (i) in the case of the
Facility Fee, to each Lender according to its Commitment Percentage, and (ii) in
the case of principal and interest on the Loans, to each Lender pro rata
according to the amount of principal or interest, as the case may be, which is
then due and payable.
(b) Late Payments. The failure of the applicable Borrower
to make any such payment by such time shall not constitute a default hereunder,
provided that such payment is made on such due date, but any such payment made
after 2:00 p.m. (local time in the city in which such payment is to be made in
accordance with the terms hereof) on such due date shall be deemed to have been
made on the next Business Day or Core Currency Business Day, as the case may be,
for the purpose of calculating interest on amounts outstanding on the applicable
Loans.
(c) Alternate Currencies. Notwithstanding anything to the
contrary contained in any Loan Document, each payment (including each
prepayment) of principal and interest on each Alternate Currency Loan shall be
made solely in the Currency in which such Alternate Currency Loan is
denominated.
(d) Extension of Due Dates. If any payment hereunder or
under the Loans shall be due and payable on a day which is not a Business Day or
a Core Currency Business Day, as the case may be, the due date thereof (except
as otherwise provided herein) shall be extended to the next Business Day or Core
Currency Business Day, as the case may be, and (except with respect to payments
in respect of the Facility Fee) interest shall be payable at the applicable rate
specified herein during such extension.
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2.7. Termination or Reduction of Commitments
(a) Voluntary Reductions. Except as otherwise provided in
Section 2.11(b), the Parent Borrower shall have the right, upon at least three
Business Days' prior written notice to the Administrative Agent, (i) at any time
when there shall be no Loans outstanding, to terminate the Commitments of all
Lenders, or (ii) at any time and from time to time when the Aggregate Commitment
Amount shall exceed the aggregate outstanding principal amount of all Loans
(determined, in the case of each Alternate Currency Loan, on the basis of the
Dollar Equivalent thereof), to reduce permanently the Aggregate Commitment
Amount by a sum not greater than the amount of such excess, provided, however,
that each partial reduction shall be in an amount equal to $5,000,000 or such
amount plus a whole multiple of $1,000,000 in excess thereof.
(b) In General. Except as otherwise provided in Section
2.11(b), each reduction of the Aggregate Commitment Amount shall be made by
reducing each Lender's Commitment Amount by a sum equal to such Lender's
Commitment Percentage of the amount of such reduction.
2.8. Prepayments of the Loans
(a) Voluntary Prepayments. Each Borrower may, at its
option, prepay the Revolving Credit Loans made to such Borrower, without premium
or penalty (but subject to Section 3.4), in full at any time or in part from
time to time, in each case by notifying, or, if such Borrower is a Subsidiary
Borrower, causing the Parent Borrower, on behalf of such Borrower, to notify,
the Administrative Agent in writing at least one Business Day, in the case of a
prepayment of an ABR Advance, and three Core Currency Business Days, in the case
of a prepayment of a Eurodollar Advance or a Core Currency Euro Advance, in each
case prior to the proposed prepayment date, specifying, with respect to each
Advance to be prepaid, the amount to be prepaid (stated in the applicable
Currency) and the date of prepayment. Each such notice given by a Borrower or
the Parent Borrower, on behalf of such Borrower, as the case may be, pursuant to
this Section 2.8(a) shall be irrevocable. Upon receipt of each such notice, the
Administrative Agent shall promptly notify each Lender thereof. Each partial
prepayment pursuant to this Section 2.8(a) shall be (i) in the case of ABR
Advances, in a minimum amount of $1,000,000 or such amount plus a whole multiple
of $1,000,000 in excess thereof, and (ii) in the case of Eurodollar Advances, in
a minimum amount of $5,000,000 or such amount plus a whole multiple of
$1,000,000 in excess thereof, and (iii) in the case of Core Currency Euro
Advances, in a minimum amount in the applicable Currency having an Alternate
Currency Equivalent of approximately $ 5,000,000 or such amount plus an amount
in the applicable
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Currency having an Alternate Currency Equivalent of a whole multiple of
approximately $1,000,000 in excess thereof. Except as otherwise permitted by
Sections 2.8(b) or 3.7, no Borrower shall, or shall be permitted to, prepay any
Bid Loan without the prior consent of the applicable Lender.
(b) Aggregate Credit Exposure Prepayments. If, on the
last day of any calendar quarter, the Aggregate Credit Exposure shall exceed an
amount equal to 105% of the Aggregate Commitment Amount, then the Borrowers
shall prepay the Loans on such day such that, immediately after giving effect
thereto, the Aggregate Credit Exposure shall not exceed an amount equal to 105%
of the Aggregate Commitment Amount.
(c) In General. Simultaneously with each prepayment
hereunder, the Borrowers shall prepay all accrued and unpaid interest on the
amount prepaid through the date of prepayment.
2.9. Use of Proceeds
Each Borrower agrees that the proceeds of the Loans shall be
used solely, directly or indirectly, (i) to repay the Existing Indebtedness, and
(ii) for the general corporate purposes of the Parent Borrower and its
Subsidiaries, including acquisitions and transaction fees and expenses
(including the Facility Fee). Notwithstanding anything to the contrary contained
in any Loan Document, each Borrower agrees that no part of the proceeds of any
Loan will be used, directly or indirectly, for a purpose which violates any law,
rule or regulation of any Governmental Authority, including the provisions of
Regulations G, T, U or X of the Board of Governors of the Federal Reserve
System, as amended.
2.10. Addition and Removal of Subsidiary Borrowers; Addition of
Non-Core Currencies
(a) Addition and Removal of Subsidiary Borrowers
(i) Addition of Subsidiary Borrowers. Provided
that no Default has occurred and is then continuing, the Parent Borrower may
from time to time direct that any of its Subsidiaries which is not then a
Subsidiary Borrower become a Subsidiary Borrower by submitting a Borrower
Addendum to the Administrative Agent with respect to such Subsidiary, together
with (A) a certificate, dated the date of such Borrower Addendum, of the
Secretary or Assistant Secretary of such Subsidiary and substantially in the
form of, and with substantially the same attachments as, the certificate which
would
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have been required under Section 5.1 if such Subsidiary had become a party
hereto on the Effective Date, and (B) an opinion of counsel (including, in the
case of a foreign Subsidiary, an opinion of foreign local counsel) to such
Subsidiary in all respects reasonably satisfactory to the Administrative Agent,
provided that, to the extent that any such certificate, attachment or opinion is
not in English, it shall be accompanied by a certified English translation
thereof. Upon receipt of such Borrower Addendum and all of the supporting items
referred to in clauses (A) and (B) of this Section 2.10(a)(i), the
Administrative Agent shall confirm such Borrower Addendum by signing a copy
thereof and shall deliver a copy thereof to the Parent Borrower and each Lender,
at which time such Subsidiary shall become a "Subsidiary Borrower" hereunder.
(ii) Removal of Subsidiary Borrowers. The Parent
Borrower may from time to time direct that any Subsidiary Borrower cease to be a
Subsidiary Borrower by submitting written notice thereof to the Administrative
Agent. Upon receipt of such notice, the Administrative Agent shall confirm such
notice by signing a copy thereof and shall deliver a copy thereof to the Parent
Borrower and each Lender, at which time such Subsidiary Borrower shall cease to
be a "Subsidiary Borrower" hereunder, provided that, immediately after giving
effect thereto, the Subsidiary Borrower Obligations of such Subsidiary Borrower
shall have been paid in full.
(b) Addition of Non-Core Currencies. Provided that no
Default has occurred and is then continuing, the Parent Borrower may from time
to time request that any currency which is not then a Non-Core Currency become a
Non-Core Currency by submitting a Currency Addendum with respect to such
currency to the Administrative Agent. Upon receipt of such Currency Addendum,
the Administrative Agent shall confirm such Currency Addendum by signing a copy
thereof and shall deliver a copy thereof to the Parent Borrower, each Lender and
each Reference Lender. In the event that both Reference Lenders consent (which
consent shall not be unreasonably withheld) to such currency becoming a Non-Core
Currency in a writing delivered to the Administrative Agent and the Parent
Borrower, then such currency shall become a "Non-Core Currency".
2.11. Extension of Commitment Termination Date
(a) Provided that no Default shall exist, the Parent
Borrower may request that the Commitment Termination Date be extended for
additional years (but in no event by more than one year per request) by giving
written notice thereof (each an "Extension Request") to the Administrative Agent
at any time (but in no event more than 120 days but not less than 90 days prior
to the then current Commitment Termination Date)
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and, upon receipt of each such notice, the Administrative Agent shall promptly
notify each Lender thereof. Subject to Section 2.11(b), the then current
Commitment Termination Date shall not be extended unless and until each Lender,
in its sole and absolute discretion, shall have consented in writing to such
request, in which event such then current Commitment Termination Date shall be
extended to the day which is one year after the then current Commitment
Termination Date, provided that if such day is not a Business Day, then such
then current Commitment Termination Date shall be extended to the immediately
preceding Business Day. Subject to Section 2.11(b), in the event that any Lender
shall not have granted its consent to an Extension Request, the then current
Commitment Termination Date shall remain in effect. Each Lender shall respond to
each Extension Request by no later than the 30th day following the date of the
relevant Extension Request (each an "Expiration Date"), provided that each
Lender which shall have failed so to respond by such time shall be deemed not to
have consented thereto. In the event that any Lender declines to grant an
Extension Request, the Administrative Agent shall notify the Parent Borrower of
the name of each such Lender.
(b) Notwithstanding any provision of Section 2.11(a) to
the contrary, in the event that Lenders having Commitment Amounts equal to or
more than 51% of the Aggregate Commitment Amount desire to extend the Commitment
Termination Date pursuant to Section 2.11(a) (collectively, the "Continuing
Lenders"), the Parent Borrower shall have the right, provided that no Default
shall have occurred and be continuing, to replace or remove any Lender that does
not desire to extend the Commitment Termination Date (each a "Non-Extending
Lender") by giving the Administrative Agent notice, no later than 20 days after
the relevant Expiration Date, of its intent to extend the Commitment Termination
Date. On or prior to the then current Commitment Termination Date, the Parent
Borrower shall, with respect to each Non-Extending Lender, either (i) reduce the
Aggregate Commitment Amount to an amount equal to the aggregate Commitment
Amounts of the Continuing Lenders and pay or cause to be paid to the
Administrative Agent for the account of such Non-Extending Lender all principal,
interest, fees and other amounts accrued or owing to such Non-Extending Lender
under the Loan Documents (in which case, the Commitment of such Non-Extending
Lender shall automatically terminate), or (ii) replace such Non-Extending
Lender. In the event of a replacement of a Non-Extending Lender, such
Non-Extending Lender agrees to assign, without recourse, representation or
warranty, all of its rights and obligations under the Loan Documents, with the
prior consent of the Administrative Agent (which consent shall not be
unreasonably withheld), to one or more Extending Lenders in such percentages as
shall be determined by the Parent Borrower, upon payment by such Extending
Lender(s) to such Non-Extending Lender of all principal, interest, fees and
other amounts accrued or owing to such Non-Extending Lender under the Loan
Documents. In the event that the Parent Borrower shall
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have elected to replace or remove a Lender pursuant to this Section 2.11(b),
then, on the date, if any, upon which all of the Parent Borrower's obligations
under this Section 2.11(b) shall have been satisfied, the then current
Commitment Termination Date shall be extended to the day which is one year
thereafter, provided, however, that (A) if such day is not a Business Day, then
such then current Commitment Termination Date shall be extended to the
immediately preceding Business Day, and (B) if the Parent Borrower shall not
have satisfied such obligations on or prior to the then current Commitment
Termination Date, then such Commitment Termination Date shall not be extended.
2.12. Records
(a) Lender's Records. Each Lender will note on its
internal records with respect to each Loan made by it: (i) the date of such Loan
and the identity of the Borrower to whom such Loan was made, (ii) whether such
Loan is a Revolving Credit Loan or a Bid Loan, (iii) in the case of a Revolving
Credit Loan, (A) whether such Loan is comprised of one or more ABR Advances, one
or more Eurodollar Advances, one or more Core Currency Euro Advances, or a
combination thereof, and the amount of each thereof (stated in the applicable
Currency), and (B) the interest rate (without regard to the Applicable Margin)
and the Euro Interest Period applicable to each Eurodollar Advance and each Core
Currency Euro Advance, (iv) in the case of a Bid Loan, (A) whether such Loan is
a Core Currency Index Rate Bid Loan, (B) the amount thereof (stated in the
applicable Currency), and (C) the interest rate and the Bid Interest Period
applicable thereto, and (v) each payment and prepayment of the principal of such
Loan.
(b) Administrative Agent's Records. The Administrative
Agent shall keep records regarding the Loans and the Loan Documents in
accordance with its customary procedures for agented credits.
(c) Prima Facie Evidence. The entries made in the records
maintained pursuant to Sections 2.12(a) and (b) shall, to the extent not
prohibited by applicable law, be prima facie evidence of the existence and
amount of the obligations of the Borrowers recorded therein; provided that the
failure of the Administrative Agent or any Lender, as the case may be, to make
any notation on its records shall not affect the respective obligations of the
Credit Parties in respect of the Loan Documents.
(d) Notes. Upon the request of any Lender to the
Administrative Agent and the Parent Borrower, with respect to any Loan made by
such Lender, the Parent Borrower agrees to execute and deliver (or cause the
applicable Subsidiary Borrower to execute and deliver), at such Lender's own
cost and expense, to the Administrative Agent
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(for delivery to such Lender) a promissory note of the applicable Borrower
evidencing such Loan, substantially in the form of Exhibits Q-1 or Q-2, as the
case may be, payable to the order of such Lender and dated the Effective Date.
3. INTEREST, FEES, CONVERSIONS AND YIELD PROTECTIONS
3.1. Interest Rates and Payment Dates
(a) Prior to Maturity. Except as otherwise provided in
Section 3.1(b), prior to maturity, the Loans shall bear interest on the
outstanding principal amount thereof at the applicable interest rate or rates
per annum set forth below:
<TABLE>
<CAPTION>
ADVANCES/LOANS RATE
-------------- ----
<S> <C>
Each ABR Advance Alternate Base Rate.
Each Eurodollar Advance Eurodollar Rate applicable thereto plus
the Applicable Margin.
Each Core Currency Euro Advance Core Currency Euro Rate applicable
thereto plus the Applicable Margin.
Each Bid Loan Bid Rate applicable thereto.
</TABLE>
(b) Default Rate. Upon the occurrence and during the
continuance of an Event of Default under Section 9.1(a) or (b), the unpaid
principal amount of any overdue Loans shall bear interest payable on demand at a
rate per annum (whether before or after the entry of a judgment thereon) equal
to (i) in the case of each Dollar Bid Loan, 2% plus the Alternate Base Rate,
(ii) in the case of each Alternate Currency Bid Loan, 2% plus the rate
determined by the applicable Lender to be reflective of the all-in cost of funds
to such Lender with respect thereto, and (iii) in all other cases, 2% plus the
rate which would otherwise be applicable under Section 3.1(a), and any overdue
interest or other overdue amount payable under the Loan Documents shall bear
interest (whether before or after the entry of a judgment thereon) payable on
demand at a rate per annum equal to 2% plus the Alternate Base Rate.
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(c) In General. Interest on all Loans shall be calculated
on the basis of a 360-day year, except that interest on Core Currency Euro
Advances denominated in Sterling Pounds and Bid Loans denominated in Canadian
Dollars shall be calculated on the basis of a 365 or 366-day year (as the case
may be), in each case for the actual number of days elapsed. Except as otherwise
provided in Section 3.1(b), interest shall be payable in arrears on each
Interest Payment Date and upon each payment (including prepayment) of the Loans.
Any change in the interest rate on the Loans resulting from a change in the
Alternate Base Rate or reserve requirements shall become effective as of the
opening of business on the day on which such change shall become effective. Each
determination of a rate of interest by the Administrative Agent, Fleet or any
Reference Lender, as the case may be, pursuant to the Loan Documents shall be
conclusive and binding on all parties hereto absent manifest error.
(d) If at any time either Reference Lender shall for any
reason cease to be a Lender, such Reference Lender shall thereupon cease to be a
Reference Lender, and the Parent Borrower shall promptly appoint from among the
Lenders a successor Reference Lender reasonably acceptable to the Administrative
Agent. Upon the acceptance of any appointment as Reference Lender by a successor
Reference Lender, such successor Reference Lender shall automatically become a
"Reference Lender", and the Parent Borrower shall promptly notify the other
Borrowers and the Lenders thereof. Each Reference Lender shall use its best
efforts to furnish all quotations and other information, and to make all
determinations, in each case as contemplated to be furnished or made by it under
the Loan Documents, on a timely basis. To the extent that, for any reason, such
information shall not have been furnished, and such determinations shall not
have been made, by any Reference Lender, then the other Reference Lender (or, in
the event that there is no other Reference Lender, the Administrative Agent)
shall furnish such information and make such determinations, and the
Administrative Agent shall promptly notify the Borrowers and the Lenders
thereof.
3.2. Fees
(a) Facility Fee. The Parent Borrower agrees to pay to
the Administrative Agent, for the account of the Lenders in accordance with each
Lender's Commitment Percentage, a fee (the "Facility Fee"), during the
Commitment Period, at a rate per annum equal to the Applicable Fee Percentage on
the average daily Aggregate Commitment Amount, regardless of usage. The Facility
Fee shall be payable (i) quarterly in arrears on the last day of each March,
June, September and December during the Commitment Period, commencing on the
first such day following the Effective Date, (ii) on the
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date of any reduction in the Aggregate Commitment Amount (to the extent of the
amount which shall have accrued on the amount of such reduction), and (iii) on
the Commitment Termination Date. The Facility Fee shall be calculated on the
basis of a 360-day year for the actual number of days elapsed.
(b) Agents' Fees. The Parent Borrower agrees to pay to
each Agent, for its own account, such other fees, if any, as have been agreed to
in writing by the Parent Borrower and such Agent.
3.3. Conversions
(a) Each applicable Borrower may elect from time to time
to convert one or more Eurodollar Advances to ABR Advances by giving, or, if
such Borrower is a Subsidiary Borrower, by causing the Parent Borrower, on
behalf of such Borrower, to give, the Administrative Agent at least two Business
Day's prior irrevocable notice of such election, specifying the amount to be
converted, provided, that any such conversion of Eurodollar Advances shall only
be made on the last day of the Interest Period applicable thereto, except as
otherwise provided in Section 3.7. In addition, each applicable Borrower may
elect from time to time to convert (i) ABR Advances to Eurodollar Advances, (ii)
Eurodollar Advances to new Eurodollar Advances by selecting a new Euro Interest
Period therefor, and (iii) Core Currency Euro Advances to new Core Currency Euro
Advances in the same applicable Currency by selecting a new Euro Interest Period
therefor, in each case by giving, or, if such Borrower is a Subsidiary Borrower,
by causing the Parent Borrower, on behalf of the Borrower, to give, the
Administrative Agent at least three Core Currency Business Days' prior
irrevocable notice of such election, specifying the amount to be so converted
and the initial Euro Interest Period relating thereto, provided that any such
conversion of ABR Advances to Eurodollar Advances shall only be made on a Core
Currency Business Day and, except as otherwise provided in Section 3.7, any such
conversion of Eurodollar Advances to new Eurodollar Advances or Core Currency
Euro Advances to new Core Currency Euro Advances, as the case may be, shall only
be made on the last day of the Euro Interest Period applicable to the Eurodollar
Advances or Core Currency Euro Advances, as the case may be, which are to be
converted to such new Eurodollar Advances or such new Core Currency Euro
Advances, as the case may be. Each such notice shall be irrevocable and shall be
promptly confirmed by delivery to the Administrative Agent of a Notice of
Conversion. The Administrative Agent shall promptly notify each Lender (by
telephone or otherwise, such notice to be confirmed by facsimile or other
writing) of each such election. Advances may be converted pursuant to this
Section in whole or in part, provided that (A) the amount to be converted to
each Eurodollar Advance, when aggregated with any Eurodollar Advance to
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be made on such date in accordance with Section 2.3 and having the same Euro
Interest Period as such first Eurodollar Advance, shall equal no less than
$5,000,000 or such amount plus a whole multiple of $1,000,000 in excess thereof,
and (B) the amount to be converted to each Core Currency Euro Advance, when
aggregated with any Core Currency Euro Advance to be made on such date in
accordance with Section 2.3 and having the same Euro Interest Period, and being
denominated in the same applicable Currency, as such first Core Currency Euro
Advance, shall equal no less than an amount in such Currency having a Dollar
Equivalent of approximately $5,000,000 or such amount plus an amount in such
Currency having a Dollar Equivalent of a whole multiple of approximately
$1,000,000 in excess thereof.
(b) Notwithstanding anything in this Agreement to the
contrary, upon the occurrence and during the continuance of an Event of Default,
no Borrower shall have the right to elect to convert any existing ABR Advance to
a new Eurodollar Advance or to convert any existing Eurodollar Advance to a new
Eurodollar Advance, provided that the Required Lenders shall have notified the
Parent Borrower that such right to elect shall not then be permitted. In such
event, except as otherwise provided in Section 3.7, (i) each ABR Advance shall
be automatically continued as an ABR Advance, (ii) each Eurodollar Advance shall
be automatically converted to an ABR Advance on the last day of the Euro
Interest Period applicable thereto, and (iii) each Core Currency Euro Advance
shall, on the last day of the Euro Interest Period applicable thereto, be
automatically converted to a new Core Currency Euro Advance in the same
applicable Currency with a one month Euro Interest Period.
(c) Each conversion shall be effected by each Lender by
applying the proceeds of its new ABR Advance, new Eurodollar Advance or new Core
Currency Euro Advance, as the case may be, to its Advances (or portion thereof)
being converted (it being understood that any such conversion shall not
constitute a borrowing for purposes of Sections 4, 5 or 6).
(d) Notwithstanding anything to the contrary contained in
any Loan Document, if the applicable Borrower and, if such Borrower is a
Subsidiary Borrower, the Parent Borrower, on behalf of such Borrower, shall have
failed, for any reason, to elect a Eurodollar Advance or Core Currency Euro
Advance, as the case may be, under Sections 2.3 or 3.3, as the case may be, in
connection with any borrowing of new Loans or expiration of a Euro Interest
Period with respect to any existing Eurodollar Advance or Core Currency Euro
Advance, as the case may be, the amount of the Loans subject to such borrowing
or such existing Eurodollar Advance or Core Currency Euro Advance, as the case
may be, shall, except as otherwise provided in Section 3.7, thereafter be (i) in
the
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<PAGE> 49
case of a Eurodollar Advance, an ABR Advance, and (ii) in the case of a Core
Currency Euro Advance, a new Core Currency Euro Advance in the same applicable
Currency with a one month Euro Interest Period, in each case until such time, if
any, as such Borrower shall elect a new Eurodollar Advance or Core Currency Euro
Advance, as the case may be, pursuant to Section 3.3.
3.4. Indemnification for Loss
Notwithstanding anything contained herein to the contrary, (i)
if any Borrower shall fail for any reason to borrow or convert from or into any
Fixed Rate Loan on the date specified therefor in the applicable Borrowing
Request, Notice of Conversion, or Bid, as the case may be, or (ii) if any Fixed
Rate Loan to such Borrower shall terminate for any reason prior to the last day
of the Euro Interest Period or Bid Interest Period, as the case may be,
applicable thereto, or (iii) if such Fixed Rate Loan is repaid or prepaid, in
whole or in part, for any reason prior to the last day of the Euro Interest
Period or Bid Interest Period, as the case may be, applicable thereto, such
Borrower agrees to indemnify each applicable Lender against, and to pay on
demand directly to such Lender the amount (which demand shall be accompanied by
a statement setting forth the calculations of such amount in reasonable detail
which statement shall be conclusive absent manifest error) equal to any
reasonable loss or out-of-pocket expense (excluding loss of margin) suffered by
such Lender as a result of such failure to borrow or convert or such
termination, repayment or prepayment, including any loss, cost or expense
suffered by such Lender in liquidating or employing deposits acquired to fund or
maintain the funding of its Fixed Rate Loans to such Borrower, or redeploying
funds prepaid or repaid, in amounts which correspond to such Fixed Rate Loans,
and any internal processing charge customarily charged by such Lender in
connection therewith.
3.5. Capital Adequacy
If the amount of capital required to be maintained by any
Lender or any Person directly or indirectly owning or controlling such Lender
(each a "Control Person"), shall be affected by the occurrence of a Regulatory
Change and such Lender shall have determined that such Regulatory Change shall
have had or will thereafter have the effect of reducing (i) the rate of return
on such Lender's or such Control Person's capital, or (ii) the asset value to
such Lender or such Control Person of the Loans or Commitments made or
maintained by such Lender to a level below that which such Lender or such
Control Person could have achieved or would thereafter be able to achieve but
for such Regulatory Change (after taking into account such Lender's or such
Control Person's policies regarding capital adequacy) by an amount deemed by
such Lender to be material to such Lender
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<PAGE> 50
or Control Person, then the Parent Borrower agrees to pay to such Lender or such
Control Person, as the case may be, within ten days after demand by such Lender,
such additional amount or amounts as shall be sufficient to compensate such
Lender or such Control Person, as the case may be, for such reduction (which
demand shall be accompanied by a statement setting forth the calculations of
such additional amount or amounts in reasonable detail which statement shall be
conclusive absent manifest error). Notwithstanding anything to the contrary
herein, no amount shall be required to be paid pursuant to this Section to the
extent that such amount shall have been incurred by the applicable Lender or
applicable Control Person, as the case may be, or shall otherwise relate to any
reduction which shall have become effective, more than 180 days prior to the
date on which such Lender shall have made demand therefor pursuant to this
Section.
3.6. Reimbursement for Increased Costs
If any Lender shall determine that a Regulatory Change shall,
or the Bank of England does now or shall, impose, modify or make applicable any
reserve, special deposit, compulsory loan, assessment, increased cost or similar
requirement against assets held by, or deposits of, or advances or loans by, or
other credit extended by, or any other acquisition of funds by, any office of
such Lender in respect of its Fixed Rate Loans which is not otherwise included
in the determination of a Eurodollar Rate, Core Currency Euro Rate or Bid Rate,
as the case may be, and the result of any of the foregoing is to increase the
cost to such Lender of making, renewing, converting or maintaining its Fixed
Rate Loans or its commitment to make such Fixed Rate Loans, or to reduce any
amount receivable under the Loan Documents in respect of its Fixed Rate Loans,
then, in any such case, the Parent Borrower agrees to pay such Lender, within
ten days after demand therefor, such additional amounts as is sufficient to
compensate such Lender for such additional cost or reduction in such amount
receivable which such Lender deems to be material as determined by such Lender
(which demand shall be accompanied by a statement setting forth the calculations
of such additional amounts in reasonable detail which statement shall be
conclusive absent manifest error). Notwithstanding anything to the contrary
herein, no amount shall be required to be paid pursuant to this Section to the
extent that such amount shall have been incurred by the applicable Lender more
than 90 days prior to the date on which such Lender shall have made demand
therefor pursuant to this Section.
3.7. Illegality of Funding
Notwithstanding any other provision hereof, if any Lender
shall reasonably determine that any law, regulation, treaty or directive, or any
change therein or in the
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interpretation or application thereof, shall make it unlawful for such Lender to
make or maintain any Fixed Rate Loan as contemplated by this Agreement, such
Lender shall promptly notify the Parent Borrower and the Administrative Agent
thereof, and (i) the commitment or other obligation of such Lender to make such
Fixed Rate Loans or convert ABR Advances to Eurodollar Advances or Core Currency
Euro Advances to new Core Currency Euro Advances, as the case may be, shall
forthwith be suspended, (ii) such Lender shall fund its portion of each
requested Eurodollar Advance as an ABR Advance, (iii) such Lender's Loans then
outstanding as such Eurodollar Advances, if any, shall be converted
automatically to an ABR Advance on the last day of the then current Euro
Interest Period applicable thereto or at such earlier time as may be required,
and (iv) in the case of each Core Currency Euro Advance and each Bid Loan, the
applicable Borrower shall take such action as such Lender may reasonably request
with a view to minimizing the obligations of such Borrower under Section 3.4. If
the commitment of any Lender with respect to Eurodollar Advances or Core
Currency Euro Advances, as the case may be, is suspended pursuant to this
Section and such Lender shall have obtained actual knowledge that it is once
again legal for such Lender to make or maintain Eurodollar Advances or Core
Currency Euro Advances, as the case may be, such Lender shall promptly notify
the Administrative Agent and the Parent Borrower thereof and, upon receipt of
such notice by each of the Administrative Agent and the Parent Borrower, such
Lender's commitment to make or maintain Eurodollar Advances or Core Currency
Euro Advances, as the case may be, shall be reinstated.
3.8. Substituted Interest Rate
In the event that (i) the Administrative Agent or any
Reference Lender shall have determined (which determination shall be conclusive
and binding upon the Borrowers) that by reason of circumstances affecting the
interbank market either adequate or reasonable means do not exist for
ascertaining the Eurodollar Rate or Core Currency Euro Rate, as the case may be,
applicable pursuant to Section 3.1 or (ii) the Required Lenders shall have
notified the Administrative Agent that they have determined (which determination
shall be conclusive and binding on the Borrowers) that the applicable Eurodollar
Rate or Core Currency Euro Rate, as the case may be, will not adequately and
fairly reflect the cost to such Lenders of maintaining or funding loans bearing
interest based on such Eurodollar Rate or Core Currency Euro Rate, as the case
may be, with respect to any portion of the Loans that any Borrower has requested
be made as Eurodollar Advances or Core Currency Euro Advances, as the case may
be, or Eurodollar Advances or Core Currency Euro Advances, as the case may be,
that will result from the requested conversion of any portion of the Advances
into or of Eurodollar Advances or Core Currency Euro Advances, as the case may
be (each an "Affected Advance"), the Administrative Agent shall promptly
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notify the Parent Borrower and the Lenders (by telephone or otherwise, to be
promptly confirmed in writing) of such determination, on or, to the extent
practicable, prior to the requested Borrowing Date or Conversion Date for such
Affected Advances. If the Administrative Agent shall give such notice, (e) in
the case of Eurodollar Advances, (A) such Affected Advances shall be made as ABR
Advances, (B) the Advances (or any portion thereof) that were to have been
converted to Affected Advances shall be converted to ABR Advances, and (C) any
outstanding Affected Advances shall be converted, on the last day of the then
current Euro Interest Period with respect thereto, to ABR Advances, and (f) in
the case of Core Currency Euro Advances, the interest rate for such Affected
Advances shall be determined pursuant to clause (a)(iii) of the definition of
Core Currency Euro Rate. Until any notice under clause (i) or (ii), as the case
may be, of this Section has been withdrawn by the Administrative Agent (by
notice to the Parent Borrower promptly upon either (1) the Administrative Agent
having determined that such circumstances affecting the interbank market no
longer exist and that adequate and reasonable means do exist for determining the
Eurodollar Rate or Core Currency Euro Rate, as the case may be, pursuant to
Section 3.1 or (2) the Administrative Agent having been notified by such
Required Lenders that circumstances no longer render the Advances (or any
portion thereof) Affected Advances, (x) no further Eurodollar Advances shall be
required to be made by the Lenders, (y) no Borrower shall have the right to
convert all or any portion of the Loans to or as Eurodollar Advances, and (z)
the interest rate for Core Currency Euro Advances shall be determined pursuant
to clause (a)(iii) of the definition of Core Currency Euro Rate.
3.9. Taxes
(a) Payments to Be Free and Clear. All payments by each
Credit Party under the Loan Documents shall be made free and clear of, and
without any deduction or withholding for, any Indemnified Tax. If any Credit
Party or any other Person is required by any law, rule, regulation, order,
directive, treaty or guideline to make any deduction or withholding (which
deduction or withholding would constitute an Indemnified Tax) from any amount
required to be paid by any Credit Party to or on behalf of any Indemnified Tax
Person under any Loan Document (each a "Required Payment"), then:
(i) such Credit Party shall notify the
Administrative Agent and such Indemnified Tax Person of any such requirement or
any change in any such requirement as soon as such Credit Party becomes aware
thereof;
(ii) such Credit Party shall pay such Indemnified
Tax prior to the date on which penalties attach thereto, such payment to be made
(to the extent that the
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liability to pay is imposed on such Credit Party) for its own account or (to the
extent that the liability to pay is imposed on such Indemnified Tax Person) on
behalf and in the name of such Indemnified Tax Person;
(iii) such Credit Party shall pay to such
Indemnified Tax Person an additional amount such that such Indemnified Tax
Person shall receive on the due date therefor an amount equal to the Required
Payment had no such deduction or withholding been required; and
(iv) such Credit Party shall, within 30 days
after paying such Indemnified Tax, deliver to the Administrative Agent and such
Indemnified Tax Person satisfactory evidence of such payment to the relevant
Governmental Authority.
(b) Other Indemnified Taxes. If any Indemnified Tax
Person or any affiliate thereof is required by any law, rule, regulation, order,
directive, treaty or guideline to pay any Indemnified Tax (excluding an
Indemnified Tax which is subject to Section 3.9(a)) with respect to any sum paid
or payable by any Credit Party to such Indemnified Tax Person under the Loan
Documents, then, within five days after such Indemnified Tax Person shall have
notified such Credit Party thereof, such Credit Party shall pay to such
Indemnified Tax Person the amount of such Indemnified Tax.
(c) Exception for Existing Taxes. No amount shall be
required to be paid to any Indemnified Tax Person under Section 3.9(a) or (b)
with respect to any Indemnified Tax to the extent that (i) such Indemnified Tax
shall not be attributable to any sum paid or payable by any Credit Party under
the Loan Documents in respect of any Revolving Credit Loan which shall be
denominated in a Currency other than the Currency of the jurisdiction under the
laws of which the applicable Borrower shall have been organized and in which it
has its principal office, and (ii) such Indemnified Tax would have been required
to have been paid under any law, rule, regulation, order, directive, treaty or
guideline in effect on the Relevant Date or, to the extent that such amount
relates to any Bid Loan, the date of the applicable Bid therefor.
(d) U.S. Tax Certificates. Each Lender that is organized
under the laws of any jurisdiction other than the United States or any political
subdivision thereof shall deliver to the Administrative Agent for transmission
to the Parent Borrower, on or prior to the Relevant Date, and at such other
times, as may be necessary in the determination of the Parent Borrower, any
other Credit Party or the Administrative Agent (each in the reasonable exercise
of its discretion), such certificates, documents or other evidence, properly
completed and duly executed by such Lender (including Internal Revenue Service
Form
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1001 or Form 4224) to establish that such Lender is not subject to deduction or
withholding of United States federal income tax under Section 1441 or 1442 of
the Code or otherwise (or under any comparable provisions of any successor
statute) with respect to any payments to such Lender of principal, interest,
fees or other amounts payable under the Loan Documents. No Credit Party shall be
required to pay any additional amount to any such Lender under Section
3.9(a)(iii) if such Lender shall have failed to satisfy the requirements of the
immediately preceding sentence; provided that if such Lender shall have
satisfied such requirements on the Relevant Date, nothing in this Section 3.9(d)
shall relieve any Credit Party of its obligation to pay any additional amounts
pursuant to Section 3.9(a)(iii) in the event that, as a result of any change in
applicable law (including any change in the interpretation thereof), such Lender
is no longer properly entitled to deliver certificates, documents or other
evidence at a subsequent date establishing the fact that such Lender is not
subject to withholding as described in the immediately preceding sentence.
(e) Other Tax Certificates. Each Indemnified Tax Person
agrees to use reasonable efforts to deliver to any Credit Party, promptly upon
any reasonable request therefor from time to time by such Credit Party, such
forms, documents and information as may be required by applicable law,
regulation or treaty from time to time and to file all appropriate forms to
obtain a certificate or other appropriate documents from the appropriate
Governmental Authorities to establish that payments made in respect of any
Alternate Currency Loan by such Credit Party can be made without (or at a
reduced rate of) withholding of Taxes, provided, however, that if such
Indemnified Tax Person is or becomes unable by virtue of any applicable law,
regulation or treaty, to establish such exemption or reduction, such Credit
Party shall nonetheless remain obligated under Section 3.9(a) to pay the amounts
described therein, and provided further that no Indemnified Tax Person shall be
required to take any action under this Section 3.9(e) which, in the sole
discretion of such Indemnified Tax Person, would cause such Indemnified Tax
Person or any affiliate thereof to suffer a material economic, legal or
regulatory disadvantage.
(f) Refunds. If any Lender or the Administrative Agent,
on behalf of such Lender, receives a refund which, in the good faith judgment of
such Lender, constitutes a refund of any Indemnified Tax paid by any Credit
Party from the applicable Governmental Authority which shall have imposed such
Indemnified Tax, such Lender or the Administrative Agent, on behalf of such
Lender, as the case may be, shall promptly pay to such Credit Party an amount
equal to (i) the amount of such refund, plus (ii) all other amounts, if any,
paid by such Credit Party in connection with such Indemnified Tax, minus (iii)
the amount of all out-of-pocket expenses, if any, incurred by such Lender or the
Administrative Agent, on behalf of such Lender, as the case may be, in obtaining
such
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refund; provided, however, that, notwithstanding anything to the contrary
contained herein, such Credit Party shall promptly return such refund to such
Lender or the Administrative Agent, for the benefit of such Lender, as the case
may be, if such Credit Party shall have received notice from such Lender or the
Administrative Agent, on behalf of such Lender, to the effect that such Lender
or the Administrative Agent, on behalf of such Lender, as the case may be, is
required to repay such refund.
(g) Other Taxes. Each Credit Party agrees to pay any
current or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies that arise from any payment made hereunder or
from the execution, delivery or registration of, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, the Loan
Documents or otherwise with respect to, the Loan Documents.
3.10. Option to Fund
Each Lender has indicated that, if any Borrower requests a
Eurodollar Advance or a Core Currency Euro Advance, or such Lender makes a Bid
Loan to any Borrower, as the case may be, such Lender may wish to purchase one
or more deposits in order to fund or maintain its funding of its Commitment
Percentage of such Eurodollar Advance or Core Currency Euro Advance or its Bid
Loan, as the case may be, during the Euro Interest Period or Bid Interest
Period, as the case may be, applicable thereto; it being understood that the
provisions of this Agreement relating to such funding are included only for the
purpose of determining the rate of interest to be paid in respect of such
Eurodollar Advance, Core Currency Euro Advance or Bid Loan, as the case may be,
and any amounts owing under Sections 3.4 and 3.6. Each Lender shall be entitled
to fund and maintain its funding of all or any part of each Eurodollar Advance,
each Core Currency Euro Advance and each Bid Loan, as the case may be, in any
manner it sees fit, but all such determinations under Sections 3.4 and 3.6 shall
be made as if each Lender had actually funded and maintained its Commitment
Percentage of each such Eurodollar Advance or such Core Currency Euro Advance,
or the amount of its Bid Loan, as the case may be, during the applicable Euro
Interest Period or Bid Interest Period, as the case may be, through the purchase
of deposits in an amount equal to the amount of its Commitment Percentage of
such Eurodollar Advance or such Core Currency Euro Advance, or the amount of its
Bid Loan, as the case may be, having a maturity corresponding to such Euro
Interest Period or Bid Interest Period, as the case may be. Any Lender may fund
its Commitment Percentage of each Eurodollar Advance or Core Currency Euro
Advance, or each Bid Loan, as the case may be, from or for the account of any
branch, office, affiliate, or correspondent bank of such Lender as such Lender
may choose from time to time.
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3.11. Replacement of Lenders
Notwithstanding the foregoing, if (i) any Lender shall request
compensation pursuant to Section 3.5 or 3.6, (ii) any Lender shall give any
notice to the Parent Borrower or the Administrative Agent pursuant to Section
3.7, or (iii) any Borrower shall be required to pay any additional amounts
pursuant to Section 3.9 in respect of any Lender, then, in each such case, the
Parent Borrower may require that such Lender transfer all of its right, title
and interest under the Loan Documents to any lender identified by the Parent
Borrower (a "Proposed Lender") if such Proposed Lender agrees to assume all of
the obligations of such Lender for consideration equal to the outstanding
principal amount of such Lender's Loans, together with interest thereon to the
date of such transfer and all other amounts payable under the Loan Documents to
such Lender on or prior to the date of such transfer (including any fees accrued
hereunder and any amounts which would be payable under Section 3.4 as if all of
such Lender's Loans were being prepaid in full on such date). Subject to the
execution and delivery of an instrument of assignment and assumption, and such
other documents as such Lender may reasonably require, such Proposed Lender
shall be a "Lender" for all purposes hereunder. Without prejudice to the
survival of any other agreement of the Borrowers under the Loans Documents, the
agreements of the Borrowers contained in Sections 3.4, 3.5, 3.6, 12.5 and 12.7
(without duplication of any payments made to such Lender by any Borrower or the
Proposed Lender) shall survive for the benefit of any Lender replaced under this
Section 3.11 with respect to the time prior to such replacement.
3.12. Changes of Lending Offices
(a) With respect to any Loan of any Lender, such Lender
agrees that upon the occurrence of any event giving rise to the operation of
Section 3.4, 3.5, 3.6, 3.7 or 3.9 with respect to such Loan, it will, if
requested by the applicable Borrower or, if such Borrower is a Subsidiary
Borrower, the Parent Borrower, on behalf of such Borrower, use reasonable
efforts (subject to overall policy considerations of such Lender) to designate
another office of such Lender for such Loan affected by such event, provided
that such designation is made on such terms that such Lender suffers no
economic, legal or regulatory disadvantage, with the object of avoiding the
consequence of the event giving rise to the operation of such Section. Nothing
in this Section shall affect or postpone any of the obligations of any Borrower
or the right of any Lender provided in Sections 3.4, 3.5, 3.6, 3.7 and 3.9.
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(b) Each Lender shall have the right at any time and from
time to time to transfer any of its Loans to a different office thereof,
provided that such Lender shall promptly notify the Administrative Agent and the
Parent Borrower of any such change of office, provided, however, that such
Lender shall not be entitled to receive any greater amount under Sections 3.4,
3.5, 3.6, 3.7 or 3.9 as a result of such transfer than it would be entitled to
immediately prior thereto unless such claim would have arisen even if such
transfer had not occurred.
4. REPRESENTATIONS AND WARRANTIES
In order to induce the Agents and the Lenders to enter into
this Agreement, and the Lenders to make the Loans, the Parent Borrower makes the
following representations and warranties to the Agents and each Lender:
4.1. Subsidiaries; Jurisdictions
As of the Effective Date, the Parent Borrower has only the
Subsidiaries set forth on, and the jurisdiction of formation of each such
Subsidiary is as set forth on, Schedule 4.1.
4.2. Existence and Power
Each Credit Party is duly organized or formed and validly
existing in good standing under the laws of the jurisdiction of its
incorporation or formation, has all requisite power and authority to own its
Property and to carry on its business as now conducted, and is in good standing
and authorized to do business in each jurisdiction in which the nature of the
business conducted therein or the Property owned by it therein makes such
qualification necessary, in each case except where such failure to qualify could
not reasonably be expected to have a Material Adverse Effect.
4.3. Authority and Execution
Each of the Parent Borrower and each of its Subsidiaries has
full legal power and authority to enter into, execute, deliver and perform the
terms of the Loan Documents to which it is a party all of which have been duly
authorized by all proper and necessary corporate, partnership or other
applicable action and are in full compliance with its Organizational Documents.
The Parent Borrower and each of its Subsidiaries has duly executed and delivered
the Loan Documents to which it is a party.
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4.4. Binding Agreement
The Loan Documents constitute the valid and legally binding
obligations of each of the Parent Borrower and its Subsidiaries, in each case,
to the extent it is a party thereto, enforceable in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally.
4.5. Litigation
Except as set forth on Schedule 4.5, there are no actions,
suits or proceedings at law or in equity or by or before any Governmental
Authority (whether purportedly on behalf of the Parent Borrower or any of its
Subsidiaries) pending or, to the knowledge of the Parent Borrower, threatened
against the Parent Borrower or any of its Subsidiaries or maintained by the
Parent Borrower or any of its Subsidiaries or which may affect the Property of
the Parent Borrower or any of its Subsidiaries or any of their respective
Properties or rights, which (i) could reasonably be expected to have a Material
Adverse Effect, or (ii) call into question the validity or enforceability of, or
otherwise seek to invalidate, any Loan Document.
4.6. Required Consents
Except for information filings required to be made in the
ordinary course of business which are not a condition to the performance by the
Parent Borrower or any of its Subsidiaries under the Loan Documents to which it
is a party, no consent, authorization or approval of, filing with, notice to, or
exemption by, stockholders or holders of any other equity interest, any
Governmental Authority or any other Person, which has not already been obtained
or made, is required to be obtained or made by the Parent Borrower or any of its
Subsidiaries in order to authorize, or is required to be obtained or made by the
Parent Borrower or any of its Subsidiaries in connection with the execution,
delivery or performance of, the Loan Documents to which the Parent Borrower or
any of its Subsidiaries is a party, or is required to be obtained or made by the
Parent Borrower or any of its Subsidiaries as a condition to the validity or
enforceability of the Loan Documents to which any of the same is a party. Each
Borrower, prior to each borrowing by it hereunder in any jurisdiction, has
obtained all necessary approvals and consents of, and has filed or caused to be
filed all reports, applications, documents, instruments and information required
to be filed pursuant to all applicable laws, rules, regulations and requests of,
all Governmental Authorities in connection with such borrowing in such
jurisdiction.
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4.7. Absence of Defaults; No Conflicting Agreements
(a) None of the Parent Borrower or any of its
Subsidiaries is in default under any mortgage, indenture, contract or agreement
to which it is a party or by which it or any of its Property is bound, the
effect of which default could reasonably be expected to have a Material Adverse
Effect. The execution, delivery or carrying out of the terms of the Loan
Documents will not constitute a default under, or result in the creation or
imposition of, or obligation to create, any Lien upon any Property of the Parent
Borrower or any of its Subsidiaries or result in a breach of or require the
mandatory repayment of or other acceleration of payment under or pursuant to the
terms of any such mortgage, indenture, contract or agreement.
(b) None of the Parent Borrower or any of its
Subsidiaries is in default with respect to any judgment, order, writ,
injunction, decree or decision of any Governmental Authority which default could
reasonably be expected to have a Material Adverse Effect.
4.8. Compliance with Applicable Laws
Each of the Parent Borrower and each of its Subsidiaries is
complying in all material respects with all statutes, regulations, rules and
orders of all Governmental Authorities which are applicable to it, a violation
of which could reasonably be expected to have a Material Adverse Effect.
4.9. Taxes
Each of the Parent Borrower and each of its Subsidiaries has
filed or caused to be filed all material tax returns required to be filed and
has paid, or has made adequate provision for the payment of, all taxes shown to
be due and payable on said returns or in any assessments made against it (other
than those being contested as required under Section 7.4) which would be
material to the Parent Borrower and its Subsidiaries, taken as a whole, and no
tax Liens have been filed with respect thereto. The charges, accruals and
reserves on the books of the Parent Borrower and each of its Subsidiaries with
respect to all taxes are, to the best knowledge of the Parent Borrower, adequate
for the payment of such taxes, and the Parent Borrower knows of no unpaid
assessment which is due and payable against the Parent Borrower or any of its
Subsidiaries or any claims being asserted which could reasonably be expected to
have a Material Adverse Effect, except such
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thereof as are being contested as required under Section 7.4, and for which
adequate reserves have been set aside in accordance with GAAP.
4.10. Governmental Regulations
Neither the Parent Borrower, any of its Subsidiaries nor any
Person controlled by, controlling, or under common control with, the Parent
Borrower or any of its Subsidiaries, is subject to regulation under the Public
Utility Holding Company Act of 1935, as amended, the Federal Power Act, as
amended, or the Investment Company Act of 1940, as amended, or is subject to any
statute or regulation which prohibits or restricts the incurrence of
Indebtedness, including statutes or regulations relative to common or contract
carriers or to the sale of electricity, gas, steam, water, telephone, telegraph
or other public utility services.
4.11. Federal Reserve Regulations; Use of Loan Proceeds
Neither the Parent Borrower nor any of its Subsidiaries is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any Margin Stock.
4.12. Plans
Except as could not reasonably be expected to have a Material
Adverse Effect, (i) each Employee Benefit Plan is in compliance with ERISA and
the Code, where applicable, and (ii) no liability to the PBGC has been, or is
expected by the Parent Borrower, any of its Subsidiaries or any ERISA Affiliate
to be, incurred by the Parent Borrower, any such Subsidiary or any ERISA
Affiliate. Liability, as referred to in this Section includes any joint and
several liability.
4.13. Financial Statements
The Parent Borrower has heretofore delivered to the
Administrative Agent and the Lenders copies of its Form 10K for the fiscal year
of the Parent Borrower ending October 31, 1996, containing the audited
Consolidated Balance Sheets of the Parent Borrower and its Subsidiaries as of
October 31, 1996, and the related Consolidated Statements of Operations,
Stockholder's Equity and Cash Flows for the such fiscal year, and its Form 10Q
for the fiscal quarter of the Parent Borrower ended January 31, 1997, containing
the unaudited Consolidated Balance Sheet of the Parent Borrower and its
Subsidiaries for such fiscal quarter, together with the related Consolidated
Statements of Operations and Cash
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Flows for such fiscal quarter (with the applicable related notes and schedules,
the "Financial Statements"). The Financial Statements fairly present in all
material respects the Consolidated financial condition and results of the
operations of the Parent Borrower and its Subsidiaries as of the dates and for
the periods indicated therein and have been prepared in conformity with GAAP.
Except as reflected in the Financial Statements or in the footnotes thereto,
neither the Parent Borrower nor any of its Subsidiaries has any material
obligation or liability of any kind (whether fixed, accrued, Contingent,
unmatured or otherwise) which, in accordance with GAAP, should have been shown
in the Financial Statements and was not. Since October 31, 1996, there has been
no Material Adverse Change.
4.14. Property
Each of the Parent Borrower and each of its Subsidiaries has
good and marketable title to, or a valid leasehold interest in, all of its real
Property, and is the owner of, or has a valid lease of, all personal property,
in each case except where the failure so to have or so to be could not
reasonably be expected to have a Material Adverse Effect, subject to no Liens,
except Permitted Liens.
4.15. Authorizations
Except, in each case with respect to the matters referred to
in this sentence, as could not reasonably be expected to have a Material Adverse
Effect, each of the Parent Borrower and each of its Subsidiaries possesses or
has the right to use all franchises, licenses and other rights as are material
and necessary for the conduct of its business, and with respect to which it is
in compliance, with no known conflict with the valid rights of others. No event
has occurred which permits or, to the best knowledge of the Parent Borrower,
after notice or the lapse of time or both, or any other condition, could
reasonably be expected to permit, the revocation or termination of any such
franchise, license or other right which revocation or termination could
reasonably be expected to have a Material Adverse Effect.
4.16. Environmental Matters
Neither the Parent Borrower nor any of its Subsidiaries (i)
has received written notice or otherwise learned of any claim, demand, action,
event, condition, report or investigation indicating or concerning any potential
or actual liability which individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect, arising in connection with (a) any
non-compliance with or violation of the requirements of
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any applicable federal, state, local or foreign environmental health or safety
statute or regulation, or (b) the release or threatened release of any toxic or
hazardous waste, substance or constituent, or other substance into the
environment, (ii) to the best knowledge of the Parent Borrower, has any
threatened or actual liability in connection with the release or threatened
release of any toxic or hazardous waste, substance or constituent, or other
substance into the environment which individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect, (iii) has received
notice of any federal, state, local or foreign investigation evaluating whether
any remedial action is needed to respond to a release or threatened release of
any toxic or hazardous waste, substance or constituent or other substance into
the environment for which the Parent Borrower or any of its Subsidiaries is or
would be liable, which liability would reasonably be expected to have a Material
Adverse Effect, or (iv) has received notice that the Parent Borrower or any of
its Subsidiaries is or may be liable to any Person under the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
Section 9601 et seq., or any analogous state law, which liability would
reasonably be expected to have a Material Adverse Effect. The Parent Borrower
and each of its Subsidiaries is in compliance with the financial responsibility
requirements of federal, state, local and foreign environmental laws to the
extent applicable, including those contained in 40 C.F.R., parts 264 and 265,
subpart H, and any analogous state law, except in those cases in which the
failure so to comply would not reasonably be expected to have a Material Adverse
Effect.
5. CONDITIONS TO FIRST LOANS
In addition to the conditions precedent set forth in Section
6, the obligation of each Lender to make Revolving Credit Loans on the first
Borrowing Date shall be subject to the fulfillment of the following conditions
precedent:
5.1. Evidence of Action
The Documentation Agent shall have received a certificate,
dated the first Borrowing Date, of the Secretary or Assistant Secretary or other
analogous counterpart of each Credit Party (i) attaching a true and complete
copy of the resolutions of its Managing Person and of all documents evidencing
all necessary corporate, partnership or similar action (in form and substance
satisfactory to the Documentation Agent) taken by it to authorize the Loan
Documents to which it is a party and the transactions contemplated thereby, (ii)
attaching a true and complete copy of its Organizational Documents, (iii)
setting forth the incumbency of its officer or officers or other analogous
counterpart who may sign the
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Loan Documents, including therein a signature specimen of such officer or
officers and (iv) attaching a certificate of good standing of the Secretary of
State of the jurisdiction of its formation and of each other jurisdiction in
which it is qualified to do business, except, in the case of such other
jurisdiction, when the failure to be in good standing in such jurisdiction would
not have a Material Adverse Effect.
5.2. Absence of Litigation
There shall be no injunction, writ, preliminary restraining
order or other order of any nature issued by any Governmental Authority in any
respect affecting the transactions provided for in the Loan Documents and no
action or proceeding by or before any Governmental Authority has been commenced
and is pending or, to the knowledge of the Parent Borrower, threatened, seeking
to prevent or delay the transactions contemplated by the Loan Documents or
challenging any other terms and provisions hereof or thereof or seeking any
damages in connection therewith, and the Documentation Agent shall have received
a certificate, in all respects satisfactory to the Documentation Agent, of an
executive officer of the Parent Borrower to the foregoing effects.
5.3. Approvals and Consents
All approvals and consents of all Persons required to be
obtained in connection with the consummation of the transactions contemplated by
the Loan Documents shall have been obtained (without the imposition of any
conditions which are not acceptable to the Agents and the Lenders) and shall be
in full force and effect, and all required notices shall have been given and all
required waiting periods shall have expired, and the Documentation Agent shall
have received a certificate, in all respects satisfactory to the Documentation
Agent, of an executive officer of the Parent Borrower to the foregoing effects.
5.4. Opinion of Counsel to the Parent Borrower
The Documentation Agent shall have received an opinion of
Simpson Thacher & Bartlett, counsel to the Parent Borrower, dated the first
Borrowing Date, substantially in the form of Exhibit F.
5.5. Opinion of Special Counsel
The Documentation Agent shall have received an opinion of
Special Counsel, dated the first Borrowing Date, substantially in the form of
Exhibit G.
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5.6. Fees of Agents and the Lenders
All fees payable to the Agents and the Lenders on or prior to
the first Borrowing Date in connection with this Agreement shall have been
paid.
5.7. Fees and Expenses of Special Counsel
The reasonable fees and expenses of Special Counsel in
connection with the preparation, negotiation and closing of the Loan Documents,
to the extent invoiced in reasonable detail, shall have been paid.
6. CONDITIONS OF LENDING - ALL LOANS
The obligation of each Lender to make any Loan on a Borrowing Date is
subject to the satisfaction of the following conditions precedent as of the
date of such Loan:
6.1. Compliance
On each Borrowing Date and after giving effect to the Loans to
be made thereon (i) there shall exist no Default, and (ii) the representations
and warranties contained in the Loan Documents shall be true and correct in all
material respects with the same effect as though such representations and
warranties had been made on such Borrowing Date, except to the extent such
representations and warranties specifically relate to an earlier date, in which
case such representations and warranties shall have been true and correct in all
material respects on and as of such earlier date. Each borrowing by the Parent
Borrower shall constitute a certification by the Parent Borrower as of such
Borrowing Date that each of the foregoing matters is true and correct in all
respects.
6.2. Borrowing Request
With respect to the Revolving Credit Loans to be made on each
Borrowing Date, the Administrative Agent shall have received a Borrowing Request
duly executed by the applicable Borrower or, if such Borrower is a Subsidiary
Borrower, the Parent Borrower, on behalf of such Borrower.
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7. AFFIRMATIVE COVENANTS
The Parent Borrower agrees that, so long as this Agreement is in
effect, any Loan remains outstanding and unpaid, or any other amount is owing
under any Loan Document to any Lender or either Agent, the Parent Borrower
shall:
7.1. Financial Statements and Information
Maintain a standard system of accounting in accordance with
GAAP, and furnish or cause to be furnished to the Administrative Agent and each
Lender:
(a) Compliance Certificate. Within 60 days after
the end of each of the first three fiscal quarters of each fiscal year of the
Parent Borrower (105 days after the end of the last fiscal quarter of each such
fiscal year), a Compliance Certificate, certified by a Financial Officer of the
Parent Borrower.
(b) Form 10K. As soon as available, but in any
event within 105 days after the end of each fiscal year of the Parent Borrower,
a copy of the annual audited financial statements of the Parent Borrower and its
Subsidiaries, prepared on a Consolidated basis in accordance with GAAP, as filed
with the SEC. Such financial statements shall be certified without qualification
by the Accountants, which certification shall (i) state that the examination by
such Accountants in connection with such financial statements has been made in
accordance with generally accepted auditing standards and, accordingly, included
such tests of the accounting records and such other auditing procedures as were
considered necessary in the circumstances, and (ii) include the opinion of such
Accountants that such financial statements have been prepared in accordance with
GAAP in a manner consistent with prior fiscal periods of the Parent Borrower,
except as otherwise specified in such opinion.
(c) Form 10Q. As soon as available, but in any
event within 60 days after the end of each fiscal quarter (except the last
fiscal quarter of each such fiscal year) of each fiscal year of the Parent
Borrower, copies of the unaudited financial statements of the Parent Borrower
and its Subsidiaries, prepared on a Consolidated basis in accordance with GAAP,
as filed with the SEC.
(d) Projections; Annual Business Plans. As soon
as available, but in any event within 105 days after the end of each fiscal year
of the Parent Borrower, copies of the projected Consolidated Balance Sheets and
Consolidated Statements of Income, Stockholders' Equity and Cash Flows, in each
case of the Parent Borrower and its Subsidiaries, for the next fiscal year of
the Parent Borrower, together with any business
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plan adopted by the Parent Borrower (other than those which shall have been
prepared solely for internal purposes).
(e) Other Information. Such other information as
the Administrative Agent or any Lender may reasonably request from time to time.
7.2. Certificates; Other Information
Furnish to the Administrative Agent:
(a) Prompt written notice if: (i) any
Indebtedness of the Parent Borrower or any of its Subsidiaries in an aggregate
amount in excess of $5,000,000 is declared or shall become due and payable prior
to its stated maturity, or is called and not paid when due, (ii) the holders of
any notes (other than any notes issued hereunder), certificate, security or
other evidence of Indebtedness, or any obligees with respect to any other
Indebtedness of the Parent Borrower or any of its Subsidiaries, have the right
to declare Indebtedness in an aggregate amount in excess of $5,000,000 due and
payable prior to its stated maturity, or (iii) there shall occur and be
continuing a Default;
(b) Prompt written notice of: (i) any citation,
summons, subpoena, order to show cause or other document naming the Parent
Borrower or any of its Subsidiaries a party to any proceeding before any
Governmental Authority which could reasonably be expected to have a Material
Adverse Effect or which calls into question the validity or enforceability of
any of the Loan Documents, and include with such notice a copy of such citation,
summons, subpoena, order to show cause or other document, (ii) any lapse or
other termination of any license, permit, franchise or other authorization
issued to the Parent Borrower or any of its Subsidiaries by any Person or
Governmental Authority which could reasonably be expected to have a Material
Adverse Effect, and (iii) any refusal by any Person or Governmental Authority to
renew or extend any such material license, permit, franchise or other
authorization, which lapse, termination, refusal or dispute could reasonably be
expected to have a Material Adverse Effect;
(c) Promptly upon becoming available, copies of
all (i) regular, periodic or special reports, schedules and other material which
the Parent Borrower or any of its Subsidiaries may now or hereafter be required
to file with or deliver to any securities exchange or the SEC and (ii) annual
reports relating to the Parent Borrower or any of its Subsidiaries;
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(d) Prompt written notice in the event that the
Parent Borrower, any of its Subsidiaries or any ERISA Affiliate knows, or has
reason to know, of any of the following events which could reasonably be
expected to have a Material Adverse Effect: (i) any Termination Event with
respect to a Pension Plan has occurred or will occur, (ii) any condition exists
with respect to a Pension Plan which presents a material risk of termination of
the Pension Plan, imposition of an excise tax, requirement to provide security
to the Pension Plan or other liability on the Parent Borrower, any of its
Subsidiaries or any ERISA Affiliate, (iii) the Parent Borrower, any of its
Subsidiaries or any ERISA Affiliate has applied for a waiver of the minimum
funding standard under Section 412 of the Code with respect to a Pension Plan,
(iv) the Parent Borrower, any of its Subsidiaries or any ERISA Affiliate has
engaged in a Prohibited Transaction with respect to an Employee Benefit Plan, or
(v) the assessment of a civil penalty under Section 502(c) of ERISA, together
with a certificate of a Financial Officer of the Parent Borrower setting forth
the details of such event and the action which the Parent Borrower, such
Subsidiary or such ERISA Affiliate proposes to take with respect thereto,
together with a copy of all notices and filings with respect thereto.
(e) Prompt written notice in the event that
Parent Borrower, any of its Subsidiaries or any ERISA Affiliate shall receive a
demand letter from the PBGC notifying the Parent Borrower, such Subsidiary or
such ERISA Affiliate of any final decision finding liability which could
reasonably be expected to have a Material Adverse Effect and the date by which
such liability must be paid, together with a copy of such letter and a
certificate of a Financial Officer of the Parent Borrower setting forth the
action which the Parent Borrower, such Subsidiary or such ERISA Affiliate
proposes to take with respect thereto.
(f) Such other information as the Administrative
Agent or any Lender shall reasonably request from time to time.
7.3. Legal Existence
Except as may otherwise be permitted by Sections 8.3 and 8.4,
maintain, and cause each of the Credit Parties to maintain, its corporate,
partnership or analogous existence, as the case may be, in good standing in the
jurisdiction of its formation and in each other jurisdiction in which the
failure so to do could reasonably be expected to have a Material Adverse Effect;
provided, however, that, notwithstanding anything to contrary contained in this
Section, any Subsidiary Borrower may fail to maintain its corporate, partnership
or analogous existence, as the case may be, in good standing or otherwise in
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any jurisdiction at any time when its Subsidiary Borrower Obligations shall have
been paid in full.
7.4. Taxes
Pay and discharge when due, and cause each of its Subsidiaries
so to do, all Taxes upon or with respect to the Parent Borrower or such
Subsidiary and all Taxes upon the income, profits and Property of the Parent
Borrower and its Subsidiaries, which if unpaid, could reasonably be expected to
have a Material Adverse Effect or become a material Lien on Property of the
Parent Borrower or such Subsidiary (other than a Lien described in Section
8.2(i)), unless and to the extent only that such Taxes shall be contested in
good faith and by appropriate proceedings diligently conducted by the Parent
Borrower or such Subsidiary and provided that such reserve or other appropriate
provision as shall be required by the Accountants in accordance with GAAP shall
have been made therefor.
7.5. Insurance
Maintain, and cause each of its Subsidiaries to maintain, with
financially sound and reputable insurance companies, or pursuant to
self-insurance, insurance on all its Property in at least such amounts and
against at least such risks as are usually insured against in the same general
area by companies engaged in the same or a similar business; and furnish to the
Administrative Agent, upon written request, full information as to the insurance
carried.
7.6. Condition of Property
At all times, maintain, protect and keep in good repair,
working order and condition (ordinary wear and tear excepted), and cause each of
its Subsidiaries so to do, all Property necessary to the operation of the Parent
Borrower's or such Subsidiary's business, except where the failure so to do
could not reasonably be expected to have a Material Adverse Effect.
7.7. Observance of Legal Requirements
Observe and comply in all respects, and cause each of its
Subsidiaries so to do, with all laws, ordinances, orders, judgments, rules,
regulations, certifications, franchises, permits, licenses, directions and
requirements of all Governmental Authorities, which now or at any time hereafter
may be applicable to it, a violation of which could
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reasonably be expected to have a Material Adverse Effect, except such thereof as
shall be contested in good faith and by appropriate proceedings diligently
conducted by it, provided that the Parent Borrower shall give the Administrative
Agent prompt notice of such contest and that such reserve or other appropriate
provision as shall be required by the Accountants in accordance with GAAP shall
have been made therefor.
7.8. Inspection of Property; Books and Records; Discussions
At all reasonable times, upon reasonable prior notice
(delivered as provided in Section 12.2), permit representatives of the
Administrative Agent and each Lender to visit the offices of the Parent Borrower
and each of its Subsidiaries, to examine the books and records thereof and
Accountants' financial reports relating thereto, and to make copies or extracts
therefrom, to discuss the affairs of the Parent Borrower and each such
Subsidiary with the respective officers thereof, and to examine and inspect the
Property of the Parent Borrower and each such Subsidiary.
7.9. Authorizations
Maintain, and cause each of its Subsidiaries to maintain, in
full force and effect, all licenses, franchises, permits, licenses,
authorizations and other rights as are necessary for the conduct of its
business, except where the failure so to do could not reasonably be expected to
have a Material Adverse Effect.
7.10. Capitalization Ratio
Maintain as of the last day of each fiscal quarter of the
Parent Borrower a Capitalization Ratio of not more than 0.50:1.00.
7.11. Subsidiaries
Except as may otherwise permitted by Sections 8.3 and 8.4, at
all times cause each Subsidiary Borrower to be a Subsidiary.
8. NEGATIVE COVENANTS
The Parent Borrower agrees that, so long as this Agreement is in
effect, any Loan remains outstanding and unpaid, or any other amount is owing
under any Loan Document to any Lender or either Agent, the Parent Borrower shall
not, directly or indirectly:
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8.1. Indebtedness
Create, incur, assume or suffer to exist any liability for
Indebtedness, or permit any of its Subsidiaries so to do, except (i)
Indebtedness due under the Loan Documents, (ii) Indebtedness existing on the
Effective Date as set forth on Schedule 8.1 (other than the Existing
Indebtedness which is to be repaid on the Effective Date), together with any
refinancings thereof, but excluding any increases thereof, (iii) Intercompany
Indebtedness, (iv) Indebtedness (a) in respect of capital leases, (b) secured by
Liens on Property (including, in the event such Property constitutes capital
stock of a newly acquired Subsidiary, Liens on the Property of such Subsidiary)
acquired by the Parent Borrower or any of its Subsidiaries after the Effective
Date, provided that such Liens are in existence on the date of such acquisition
and were not placed on such Property in contemplation of such acquisition, (c)
other Indebtedness of any Operating Entity acquired by the Parent Borrower or
any of its Subsidiaries after the Effective Date, provided that such
Indebtedness is in existence on the date of such acquisition and was not
incurred in contemplation of such acquisition, together with any refinancings
thereof, but excluding any increases thereof, and (d) other purchase money
Indebtedness, provided that, in each case under this Section 8.1(iv), the Lien
securing such Indebtedness is permitted by Section 8.2, and (v) other
Indebtedness, provided that (a) no Default would exist as a result of the
incurrence thereof, (b) each Lien, if any, securing any such Indebtedness shall
be permitted by Section 8.2(xi), and (c) the aggregate outstanding principal
amount of all such Indebtedness incurred by the Subsidiaries of the Parent
Borrower shall not exceed $50,000,000 at any time.
8.2. Liens
Create, incur, assume or suffer to exist any Lien upon any of
its Property, whether now owned or hereafter acquired, or permit any of its
Subsidiaries so to do, except (i) Liens for Taxes in the ordinary course of
business which, in the case of Liens which are material, are not delinquent or
which are being contested in accordance with Section 7.4, provided that
enforcement of such Liens is stayed pending such contest, (ii) Liens in
connection with workers' compensation, unemployment insurance or other social
security obligations (but not ERISA), (iii) deposits or pledges to secure bids,
tenders, contracts (other than contracts for the payment of Indebtedness of the
type described in clauses (i) through (v) of the definition thereof), leases,
statutory obligations, surety and appeal bonds and other obligations of like
nature arising in the ordinary course of business, (iv) easements,
rights-of-way, restrictions and other similar encumbrances incurred in the
ordinary course of business which, in the aggregate, are not substantial in
amount
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and which do not in any case materially detract from the value of the Property
subject thereto or materially interfere with the ordinary conduct of the
business of the Parent Borrower or such Subsidiary, as the case may be, (v)
Liens arising by operation of law such as mechanics', materialmen's, carriers',
warehousemen's liens incurred in the ordinary course of business which are not
more than 60 days delinquent or which are being contested in good faith and by
appropriate proceedings diligently conducted by the Parent Borrower or the
applicable Subsidiary, as the case may be, and provided that such reserve or
other appropriate provision as shall be reasonably required by the Accountants
in accordance with GAAP shall have been made therefor, and provided further that
enforcement of such Liens is stayed pending such contest, (vi) Liens arising out
of judgments or decrees which are being contested in good faith and by
appropriate proceedings diligently conducted by the Parent Borrower or the
applicable Subsidiary, as the case may be, and provided that such reserve or
other appropriate provision as shall be reasonably required by the Accountants
in accordance with GAAP shall have been made therefor, and provided further that
enforcement of such Liens is stayed pending such contest, (vii) statutory Liens
in favor of lessors arising in connection with the Property leased to the Parent
Borrower or any of its Subsidiaries, (viii) Liens under capital leases and Liens
on Property (including, in the event such Property constitutes capital stock of
a newly acquired Subsidiary, Liens on the Property of such Subsidiary) acquired
after the Effective Date and either existing on such Property when acquired, or
created substantially contemporaneously with such acquisition to secure the
payment or financing of the purchase price thereof, provided that such Liens
attach only to the Property so purchased or acquired and provided further that
the Indebtedness secured by such Liens is permitted hereunder, (ix) Liens on
Margin Stock to the extent that a prohibition on such Liens would result in the
Agents and the Lenders being deemed to be "indirectly secured" by Margin Stock
under Regulation U of the Board of Governors of the Federal Reserve System, as
amended, taking into account the value of Margin Stock owned by the Parent
Borrower and its Subsidiaries and any other relevant facts and circumstances,
(x) Liens on Property of the Parent Borrower and its Subsidiaries existing on
the Effective Date as set forth on Schedule 8.2, as renewed from time to time,
but not any increases in the amounts secured thereby or extensions thereof to
additional Property, and (xi) other Liens on Property of the Parent Borrower and
its Subsidiaries securing Indebtedness and other obligations permitted hereunder
having, in the aggregate at any time outstanding, an amount not in excess of
$25,000,000.
8.3. Consolidations and Mergers
Consolidate or merge into or with any Person, or enter into
any binding agreement to do so which is not contingent on obtaining the consent
of the Required Lenders, or permit any other Credit Party so to do, except any
one or more of the following:
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(a) the Parent Borrower may at any time consolidate
or merge into or with any Person, provided that (except in the case of any such
consolidation or merger entered into solely for the purpose of effecting a
re-incorporation of the Parent Borrower in another jurisdiction within the
United States) the Parent Borrower shall be the survivor thereof;
(b) any Subsidiary Borrower may at any time
consolidate or merge into or with any Person, provided that (i) such Subsidiary
Borrower is the survivor thereof, or (ii) immediately after giving effect
thereto, the Subsidiary Borrower Obligations of such Subsidiary Borrower shall
have been paid in full;
(c) any Subsidiary Borrower which is a Domestic
Borrower may at any time consolidate or merge into or with the Parent Borrower,
provided that the Parent Borrower is the survivor thereof; and
(d) any Subsidiary Borrower may at any time
consolidate or merge into or with any other Subsidiary Borrower, provided that
(i) such other Subsidiary Borrower shall be organized under the laws of, and
have its principal office in, the same national jurisdiction as such Subsidiary
Borrower, and (ii) such other Subsidiary Borrower shall have assumed in a
manner in all respects reasonably satisfactory to the Administrative Agent all
of the obligations and liabilities of such Subsidiary Borrower under the Loans
Documents, in each case whether fixed, contingent, then existing or thereafter
arising, created, assumed, incurred or acquired, and whether before or after
the occurrence of any Event of Default under Section 9.1(g) or (h).
8.4. Acquisitions
Make any Acquisition, or enter into any binding agreement to
make any Acquisition which is not contingent on obtaining the consent of the
Required Lenders, or permit any of its Subsidiaries so to do, except (i)
Acquisitions by the Parent Borrower or any of its Subsidiaries of Investments
permitted by Section 8.6, and (ii) other Acquisitions, provided that (e) no
Default would exist as a result of any such Acquisition, and (f) if any such
Acquisition is an Acquisition of one or more Operating Entities, such
Acquisition shall be non-hostile.
8.5. Dispositions
Make any Disposition, or permit any of its Subsidiaries so to
do, except:
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(a) Dispositions of Property which, in the
reasonable opinion of the Parent Borrower or such Subsidiary, is obsolete or no
longer useful in the conduct of its business;
(b) Intercompany Dispositions; and
(c) other Dispositions made on or after the date
hereof, provided that, immediately after giving effect to each such other
Disposition, (i) no Default would result therefrom, and (ii) the aggregate book
value of the Property sold, assigned, transferred or otherwise disposed of in
connection with all such other Dispositions shall not exceed an amount equal to
50% of the Adjusted Consolidated Net Worth at such time.
8.6. Investments
At any time on or after the date hereof, purchase or otherwise
acquire or invest in the Capital Stock of, or any other interest in, any
Non-Affiliate, or make any loan or advance to, or enter into any arrangement for
the purpose of providing funds or credit to, or make any other investment,
whether by way of capital contribution, time deposit or otherwise, in or with
any Non-Affiliate (all of which are sometimes referred to herein as
"Investments"), or permit any of its Subsidiaries so to do, except Investments
made on or after the date hereof in one or more Non-Affiliates, provided that,
immediately after giving effect to each such Investment, the aggregate
outstanding principal balance at such time of all such Investments constituting
debt Investments, plus the aggregate consideration paid for all such Investments
constituting equity Investments shall not exceed an amount equal to (i)
$50,000,000, plus (ii) the aggregate net cash proceeds of all returns of capital
received by the Parent Borrower or any of its Subsidiaries from all such
Investments, plus (iii) the aggregate consideration paid for all such
Investments constituting Investments in any Non-Affiliate which shall have
become a direct or indirect Subsidiary of the Parent Borrower.
9. DEFAULT
9.1. Events of Default
The following shall each constitute an "Event of Default"
hereunder:
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(a) Any payment of principal with respect to any
Loan shall not be made on the date when due and payable; or
(b) Any payment of interest, fees, expenses or
other amounts payable under any Loan Document or otherwise to either Agent with
respect to the loan facilities established hereunder shall not be made within
three Business Days of the date when due and payable; or
(c) The failure of any Credit Party to observe
or perform any covenant or agreement contained in Section 2.9, 7.2(a)(i) or
(a)(ii) (in each case to the extent that such failure would occur if the amount
"$5,000,000" were deleted where it appears in such Section and the amount
"$10,000,000" were inserted in its place), 7.3, 7.10 or 7.11, or Section 8; or
(d) The failure of any Credit Party to observe
or perform (i) any term, covenant, or agreement contained in Section 7.2(a)(i)
or (a)(ii) (in each case to the extent that such failure would not occur if the
amount "$5,000,000" were deleted where it appears in such Section and the amount
"$10,000,000" were inserted in its place) and such failure shall have continued
unremedied for a period of 30 days after the Administrative Agent shall have
notified the Parent Borrower in writing thereof, or (ii) any other term,
covenant, or agreement contained in any Loan Document and such failure shall
have continued unremedied for a period of 30 days after the Administrative Agent
shall have notified the Parent Borrower in writing thereof; or
(e) Any representation or warranty made by any
Credit Party (or by an officer thereof on its behalf) in any Loan Document or in
any certificate, report, opinion (other than an opinion of counsel) or other
document delivered or to be delivered pursuant thereto, shall prove to have been
incorrect or misleading (whether because of misstatement or omission) in any
material respect when made; or
(f) Indebtedness of the Parent Borrower (other
than Indebtedness under the Loan Documents) or any of its Subsidiaries, in an
aggregate amount in excess of $10,000,000, (i) shall become or shall be declared
to be due and payable prior to the expressed maturity thereof or (ii) shall not
be paid when due or within any grace period for the payment thereof; or
(g) Any Credit Party shall (i) suspend or
discontinue its business (except as may otherwise be permitted hereunder), (ii)
make an assignment for the benefit of creditors, (iii) generally not be paying
its debts as such debts become due, (iv) admit in
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writing its inability to pay its debts as they become due, (v) file a voluntary
petition in bankruptcy, (vi) become insolvent (however such insolvency shall be
evidenced), (vii) file any petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment of debt, liquidation or
dissolution or similar relief under any present or future statute, law or
regulation of any jurisdiction, (viii) petition or apply to any tribunal for any
receiver, custodian or any trustee for any substantial part of its Property,
(ix) be the subject of any such proceeding filed against it which remains
undismissed for a period of 60 days, (x) file any answer admitting or not
contesting the material allegations of any such petition filed against it or any
order, judgment or decree approving such petition in any such proceeding, (xi)
seek, approve, consent to, or acquiesce in any such proceeding, or in the
appointment of any trustee, receiver, sequestrator, custodian, liquidator, or
fiscal agent for it, or any substantial part of its Property, or an order is
entered appointing any such trustee, receiver, custodian, liquidator or fiscal
agent and such order remains in effect for 60 days, or (xii) take any formal
action for the purpose of effecting any of the foregoing or looking to the
liquidation or dissolution of such Credit Party (except as may otherwise be
permitted hereunder); or
(h) An order for relief is entered under the
bankruptcy or insolvency laws of any jurisdiction or any other decree or order
is entered by a court having jurisdiction (i) adjudging any Credit Party
bankrupt or insolvent, (ii) approving as properly filed a petition seeking
reorganization, liquidation, arrangement, adjustment or composition of or in
respect of any Credit Party under the bankruptcy or insolvency laws of any
jurisdiction, (iii) appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator (or other similar official) of any Credit Party or of
any substantial part of the Property of any thereof, or (iv) ordering the
winding up or liquidation of the affairs of any Credit Party, and any such
decree or order continues unstayed and in effect for a period of 60 days; or
(i) Judgments or decrees against the Parent
Borrower or any of its Subsidiaries (excluding any portion thereof covered by
insurance) aggregating in excess of $10,000,000 shall remain unpaid, unstayed on
appeal, undischarged, unbonded or undismissed for a period of 60 days; or
(j) Any Loan Document shall cease, for any
reason, to be in full force and effect, or any Credit Party shall so assert in
writing or shall disavow any of its obligations thereunder; or
(k) (i) Any Termination Event shall occur; (ii)
any Accumulated Funding Deficiency, whether or not waived, shall exist with
respect to any Pension Plan;
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(iii) any Person shall engage in any Prohibited Transaction involving any
Employee Benefit Plan; (iv) the Parent Borrower, any of its Subsidiaries or any
ERISA Affiliate shall fail to pay when due an amount which is payable by it to
the PBGC or to a Pension Plan under Title IV of ERISA; or (v) any other event or
condition shall occur or exist with respect to an Employee Benefit Plan, which,
in the case of clauses (i) through (v) of this Section 9.1(k), would,
individually or in the aggregate, have a Material Adverse Effect; or
(l) The occurrence of a Change of Control.
9.2. Contract Remedies
(a) Upon the occurrence of an Event of Default or at any
time thereafter during the continuance thereof,
(i) if such event is an Event of Default specified in
Section 9.1(g) or 9.1(h) above with respect to any Domestic Borrower,
the Commitments of all of the Lenders shall immediately and
automatically terminate and the Loans, all accrued and unpaid interest
thereon and all other amounts owing under the Loan Documents shall
immediately become due and payable, and the Administrative Agent may,
and, upon the direction of the Required Lenders shall, exercise any and
all remedies and other rights provided in the Loan Documents,
(ii) if such event is an Event of Default specified in
Section 9.1(g) or 9.1(h) above with respect to any other Borrower, the
Commitments of all of the Lenders with respect to Loans to be made to
such Borrower shall immediately and automatically terminate and the
Subsidiary Borrower Obligations of such Borrower shall immediately
become due and payable, and, in each case, the Administrative Agent
may, and, upon the direction of the Required Lenders shall, exercise
any and all remedies and other rights provided in the Loan Documents,
and
(iii) if such event is any other Event of Default, any or
all of the following actions may be taken: (A) with the consent of the
Required Lenders, the Administrative Agent may, and upon the direction
of the Required Lenders shall, by notice to the Parent Borrower,
declare the Commitments of all of the Lenders terminated forthwith,
whereupon such Commitments shall immediately terminate, and (B) with
the consent of the Required Lenders, the Administrative Agent may, and
upon the direction of the Required Lenders shall, by notice of default
to the Parent Borrower, declare the Loans, all accrued and unpaid
interest thereon and all other amounts owing under the Loan Documents
to be due and payable forthwith, where-
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upon the same shall immediately become due and payable, and the
Administrative Agent may, and upon the direction of the Required
Lenders shall, exercise any and all remedies and other rights provided
in the Loan Documents.
Except as otherwise provided in this Section, presentment, demand, protest and
all other notices of any kind are hereby expressly waived. Each Credit Party
hereby further expressly waives and covenants not to assert any appraisement,
valuation, stay, extension, redemption or similar laws, now or at any time
hereafter in force which might delay, prevent or otherwise impede the
performance or enforcement of any Loan Document.
(b) In the event that any Commitments shall have been
terminated, or any Loans, any accrued and unpaid interest thereon or any other
amounts owing under the Loan Documents shall have been declared due and payable,
in each case pursuant to the provisions of this Section, any funds received by
the Agents and the Lenders from or on behalf of the Parent Borrower shall be
applied by the Agents and the Lenders in liquidation of the Loans and the other
obligations of the Parent Borrower under the Loan Documents in the following
manner and order: (i) first, to the payment of interest on, and then the
principal portion of, any Loans which the Administrative Agent may have advanced
on behalf of any Lender for which the Administrative Agent has not then been
reimbursed by such Lender or the Parent Borrower; (ii) second, to the payment of
any fees or expenses due each Agent from the Parent Borrower, (iii) third, to
reimburse the Agents and the Lenders for any expenses (to the extent not paid
pursuant to clause (ii) above) due from the Parent Borrower pursuant to the
provisions of Section 12.5; (iv) fourth, to the payment of accrued Fees and all
other fees, expenses and amounts due under the Loan Documents (other than
principal and interest on the Loans), (v) fifth, to the payment, pro rata
according to the outstanding principal amount of the Loans, of interest due on
the Loans of each Lender; (vi) sixth, to the payment, pro rata according to the
outstanding principal amount of the Loans, of principal outstanding on the
Loans; and (vii) seventh, to the payment of any other amounts owing to the
Agents and the Lenders under any Loan Document.
10. THE AGENTS
10.1. Appointment
Each Lender hereby irrevocably designates and appoints Bank of
Montreal as the Documentation Agent and Fleet as the Administrative Agent of
such Lender under the Loan Documents and such Lender hereby irrevocably
authorizes each Agent to take
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such action on its behalf under the provisions of the Loan Documents and to
exercise such powers and perform such duties as are expressly delegated to such
Agent by the terms of the Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, neither
Agent shall have any duties or responsibilities except those expressly set forth
herein or therein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into the Loan Documents or otherwise exist against any Agent.
10.2. Delegation of Duties
Each of the Agents may execute any of its duties under the
Loan Documents by or through agents or attorneys-in-fact and shall be entitled
to rely upon and shall be fully protected in, and shall not be under any
liability for, relying upon, the advice of counsel concerning all matters
pertaining to such duties.
10.3. Exculpatory Provisions
Neither Agent nor any of its respective officers, directors,
employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any
action lawfully taken or omitted to be taken by it or such Person under or in
connection with the Loan Documents (except for its own gross negligence or
willful misconduct), or (ii) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by any Credit Party
contained in the Loan Documents or in any certificate, report, statement or
other document referred to or provided for in, or received by any Agent under or
in connection with, the Loan Documents or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of any of the Loan
Documents or for any failure of any Credit Party or any other Person to perform
its obligations thereunder. Neither Agent shall be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, the Loan Documents, or to inspect
the Property, books or records of any Credit Party. The Lenders acknowledge that
no Agent shall be under any duty to take any discretionary action permitted
under the Loan Documents unless such Agent shall be instructed in writing to do
so by the Required Lenders and such instructions shall be binding on all
Lenders; provided, however, that neither Agent shall be required to take any
action which exposes it to personal liability or is contrary to law or any
provision of the Loan Documents. Neither Agent shall be under any liability or
responsibility whatsoever, as Agent, to any Credit Party or any other Person as
a consequence of any failure or delay in per-
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formance, or any breach, by any Lender of any of its obligations under any of
the Loan Documents.
10.4. Reliance by the Agents
Each of the Agents shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, opinion, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by a proper
Person or Persons and upon advice and statements of legal counsel (including
counsel to any Credit Party), independent accountants and other experts selected
by such Agent. Each Agent may treat each Lender or the Person designated in the
last notice filed with the Administrative Agent under this Section, as the
holder of all of the interests of such Lender in its Loans, until written notice
of transfer, signed by such Lender (or the Person designated in the last notice
filed with the Administrative Agent) and by the Person designated in such
written notice of transfer, in form and substance satisfactory to the
Administrative Agent, shall have been filed with the Administrative Agent. No
Agent shall be under any duty to examine or pass upon the validity,
effectiveness, enforceability or genuineness of the Loan Documents or any
instrument, document or communication furnished pursuant thereto or in
connection therewith, and each Agent shall be entitled to assume that the same
are valid, effective and genuine, have been signed or sent by the proper parties
and are what they purport to be. Each Agent shall be fully justified in failing
or refusing to take any action under the Loan Documents unless it shall first
receive such advice or concurrence of the Required Lenders as it deems
appropriate. Each Agent shall in all cases be fully protected in acting, or in
refraining from acting, under the Loan Documents in accordance with a request or
direction of the Required Lenders, and such request or direction and any action
taken or failure to act pursuant thereto shall be binding upon all the Lenders
and all future holders of the Loans.
10.5. Notice of Default
Neither Agent shall be deemed to have knowledge or notice of
the occurrence of any Default unless such Agent has received written notice
thereof from a Lender or the Parent Borrower. In the event that an Agent
receives such a notice, such Agent shall promptly give notice thereof to the
other Agent, each Lender and the Parent Borrower. Each Agent shall take such
action with respect to such Default as shall be directed by the Required
Lenders, provided, however, that unless and until such Agent shall have received
such directions, such Agent may (but shall not be obligated to) take such
action,
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or refrain from taking such action, with respect to such Default as it shall
deem to be in the best interests of the Lenders.
10.6. Non-Reliance on the Agents and Other Lenders
Each Lender expressly acknowledges that neither Agent nor any
of its respective officers, directors, employees, agents, attorneys-in- fact or
affiliates has made any representations or warranties to it and that no act by
either Agent hereinafter, including any review of the affairs of the Parent
Borrower or any of its Subsidiaries, shall be deemed to constitute any
representation or warranty by such Agent to any Lender. Each Lender represents
to each Agent that it has, independently and without reliance upon either Agent
or any Lender, and based on such documents and information as it has deemed
appropriate made its own evaluation of and investigation into the business,
operations, Property, financial and other condition and creditworthiness of each
Credit Party and the value and Lien status of any collateral security and made
its own decision to enter into this Agreement. Each Lender also represents that
it will, independently and without reliance upon either Agent or any Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, evaluations and decisions in
taking or not taking action under any Loan Document, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, Property, financial and other condition and creditworthiness of each
Credit Party and the value and Lien status of any collateral security. Except
for notices, reports and other documents expressly required to be furnished to
the Lenders by either Agent hereunder, such Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, Property, financial and other condition or
creditworthiness of any Credit Party which at any time may come into the
possession of such Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
10.7. Indemnification
Each Lender agrees to indemnify and hold harmless each Agent
in its capacity as such (to the extent not promptly reimbursed by the Parent
Borrower and without limiting the obligation of the Parent Borrower to do so),
pro rata according to (i) at any time prior to the Commitment Termination Date,
its Commitment Percentage, and (ii) at all other times, (a) if no Loan is
outstanding, its Commitment Percentage, and (b) if any Loan is outstanding, the
percentage equal to the fraction, the numerator of which is the outstanding
principal amount of the Loans of such Lender (determined, in the case of each
Alternate Currency Loan, on the basis of the Dollar Equivalent thereof), and the
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nator of which is the Aggregate Credit Exposure, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever including any amounts
paid to the Lenders (through either Agent) by any Credit Party pursuant to the
terms of the Loan Documents, that are subsequently rescinded or avoided, or must
otherwise be restored or returned) which may at any time (including at any time
following the payment of the Loans) be imposed on, incurred by or asserted
against either Agent in any way relating to or arising out of the Loan Documents
or any other documents contemplated by or referred to therein or the
transactions contemplated thereby or any action taken or omitted to be taken by
such Agent under or in connection with any of the foregoing; provided, however,
that no Lender shall be liable to either Agent for the payment of any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements to the extent resulting primarily from
the finally adjudicated gross negligence or willful misconduct of such Agent.
Without limitation of the foregoing, each Lender agrees to reimburse each Agent
promptly upon demand for its pro rata share (calculated as set forth in the
first sentence of this Section) of any costs and expenses (including reasonable
fees and expenses of counsel) payable by any Credit Party under Section 12.5, to
the extent that such Agent has not been reimbursed for such costs and expenses
by any Credit Party, provided, however, that, in the event of such reimbursement
by such Credit Party, such Agent shall promptly remit to each Lender which shall
have reimbursed such Agent for such costs and expenses under this Section 10.7
its pro rata share (according to the amount of such reimbursement by such
Lender) of the amount of such reimbursement by such Credit Party. The failure of
any Lender to reimburse such Agent promptly upon demand for its pro rata share
(as so calculated) of any amount required to be paid by the Lenders to such
Agent as provided in this Section shall not relieve any other Lender of its
obligation hereunder to reimburse such Agent for its pro rata share (as so
calculated) of such amount, but no Lender shall be responsible for the failure
of other Lender to reimburse such Agent for such other Lender's pro rata share
(as so calculated) of such amount. The agreements in this Section shall survive
the termination of the Commitments of all of the Lenders and the payment of all
amounts payable under the Loan Documents.
10.8. Lenders in Their Respective Individual Capacities
Each of Bank of Montreal, Fleet, each Lender and the
respective affiliates thereof may make secured or unsecured loans to, accept
deposits from, issue letters of credit for the account of, act as trustee under
indentures of, and generally engage in any kind of business with, any Credit
Party as though Bank of Montreal were not Documentation Agent hereunder, Fleet
were not Administrative Agent hereunder, and each Lender were not a Lender
hereunder. With respect to the Commitments made or
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renewed by each of Bank of Montreal and Fleet and the Loans made it, it shall
have the same rights and powers under the Loan Documents as any Lender and may
exercise the same as though it were not the Documentation Agent or the
Administrative Agent, as the case may be, and the terms "Lender" and "Lenders"
shall in each case include Bank of Montreal or Fleet, as the case may be.
10.9. Successor Agents
If at any time either Agent deems it advisable, in its sole
discretion, it may submit to each of the Lenders a written notification of its
resignation as such Agent under this Agreement, such resignation to be effective
on the earlier to occur of (i) the thirtieth day after the date of such notice,
and (ii) the date upon which any successor to such Agent, in accordance with the
provisions of this Section 10.9, shall have accepted in writing its appointment
as such successor Agent. If Fleet resigns as Administrative Agent, Bank of
Montreal shall have the right to become the Administrative Agent if it is then
the acting Documentation Agent, and, if Bank of Montreal resigns as
Documentation Agent, Fleet shall have the right to become the Documentation
Agent if it is then the acting Administrative Agent. If Bank of Montreal or
Fleet does not succeed the retiring Agent as set forth above, upon any such
resignation, the Required Lenders shall have the right, with the consent of the
Parent Borrower, which consent shall not be unreasonably withheld, to appoint
from among the Lenders a successor Agent. If no such successor Agent shall have
been so appointed by the Required Lenders and accepted such appointment within
30 days after the retiring Agent's giving of notice of resignation, then the
retiring Agent may, with the consent of the Parent Borrower, which consent shall
not be unreasonably withheld, on behalf of the Lenders, appoint a successor
Agent therefor. Upon the written acceptance of any appointment as an Agent
hereunder by a successor Agent, such successor Agent shall automatically become
a party to this Agreement and shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent's rights, powers, privileges and duties as an Agent under this
Agreement shall be terminated. The Parent Borrower and the Lenders shall execute
such documents as shall be necessary to effect such appointment. After any
retiring Agent's resignation as an Agent, the provisions of this Section 10
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was an Agent under this Agreement. If at any time there shall not be a
duly appointed and acting Administrative Agent, upon notice duly given, each
Credit Party agrees to make each payment when due hereunder and the other Loan
Documents directly to the Lenders entitled thereto during such time. Any such
successor Agent shall be a commercial bank organized under the laws of the
United States or of any State thereof.
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11. GUARANTY OF THE PARENT BORROWER
In order to induce the Agents and the Lenders to enter into this
Agreement, and the Lenders to make the Loans, the Parent Borrower hereby agrees
as follows:
11.1. Guaranty
The Parent Borrower hereby absolutely, irrevocably and
unconditionally guarantees the full and prompt payment when due in the
applicable Currency, whether at stated maturity, by acceleration, by mandatory
prepayment, by notice of intention to prepay or otherwise, of all of the
obligations and liabilities of each Subsidiary Borrower under the Loan
Documents, in each case whether fixed, contingent, now existing or hereafter
arising, created or assumed, incurred or acquired, and whether before or after
the occurrence of any Event of Default under Sections 9.1(g) or (h), including
any obligation or liability in respect of any breach of any representation or
warranty, and all post-petition interest, funding losses and make-whole
premiums, whether or not allowed as a claim in any proceeding arising in
connection with any Event of Default under Sections 9.1(g) or (h) (collectively,
the "Borrower Obligations"). This Section 11 constitutes a guaranty of payment,
and none of the Agents or the Lenders shall have any obligation to enforce any
Loan Document or exercise any right or remedy with respect to any collateral
security thereunder by any action, including making or perfecting any claim
against any Person or any collateral security for any of the Borrower
Obligations prior to being entitled to the benefits of this Section 11. The
Administrative Agent may, at its option, proceed against the Parent Borrower, in
the first instance, to enforce any of the obligations and liabilities of the
Parent Borrower under this Section 11, whether fixed, contingent, now existing
or hereafter arising, created, assumed, incurred or acquired (collectively, the
"Guarantor Obligations") without first proceeding against any Subsidiary
Borrower or any other Person, and without first resorting to any other rights or
remedies, as the Administrative Agent may deem advisable. In furtherance hereof,
if either Agent or any Lender is prevented by law from collecting or otherwise
hindered from collecting or otherwise enforcing any Obligation in accordance
with its terms, such Agent or such Lender, as the case may be, shall be entitled
to receive hereunder from the Parent Borrower after demand therefor, the sums
which would have been otherwise due had such collection or enforcement not been
prevented or hindered.
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11.2. Absolute Obligation
Subject to Section 11.4, the Parent Borrower shall not be
released from liability hereunder unless and until the Commitment Termination
Date shall have occurred and either (a) each Subsidiary Borrower shall have paid
in full the outstanding principal amount of the Loans made to it, together with
all accrued interest thereon and all other sums then due and owing by it under
the Loan Documents, or (b) the Guarantor Obligations shall have been paid in
full. The Parent Borrower acknowledges and agrees that (i) none of the Agents
and the Lenders has made any representation or warranty to the Parent Borrower
with respect to any Subsidiary Borrower, the other Subsidiaries of the Parent
Borrower, any Loan Document, or any agreement, instrument or document executed
or delivered in connection therewith, or any other matter whatsoever, and (ii)
the Parent Borrower shall be liable hereunder, and such liability shall not be
affected or impaired, irrespective of (A) the validity or enforceability of any
Loan Document or any agreement, instrument or document executed or delivered in
connection therewith, or the collectability of any of the Borrower Obligations,
(B) the preference or priority ranking with respect to any of the Borrower
Obligations, (C) the existence, validity, enforceability or perfection of any
security interest or collateral security under any Loan Document or the release,
exchange, substitution or loss or impairment of any such security interest or
collateral security, (D) any failure, delay, neglect or omission by either Agent
or any Lender to realize upon or protect any direct or indirect collateral
security, indebtedness, liability or obligation, any Loan Document or any
agreement, instrument or document executed or delivered in connection therewith,
or any of the Borrower Obligations, (E) the existence or exercise of any right
of set-off by either Agent or any Lender, (F) the existence, validity or
enforceability of any other guaranty with respect to any of the Borrower
Obligations, the liability of any other Person in respect of any of the Borrower
Obligations, or the release of any such Person or any other guarantor of any of
the Borrower Obligations, (G) any act or omission of either Agent or any Lender
in connection with the administration of any Loan Document or any of the
Borrower Obligations, (H) the bankruptcy, insolvency, reorganization or
receivership of, or any other proceeding for the relief of debtors commenced by
or against, any Person, (I) the disaffirmance or rejection, or the purported
disaffirmance or purported rejection, of any of the Borrower Obligations, any
Loan Document or any agreement, instrument or document executed or delivered in
connection therewith, in any bankruptcy, insolvency, reorganization or
receivership, or any other proceeding for the relief of debtor, relating to any
Person, (J) any law, regulation or decree now or hereafter in effect which might
in any manner affect any of the terms or provisions of any Loan Document or any
agreement, instrument or document executed or delivered in connection therewith
or any of the Borrower Obligations, or which might cause or permit to be invoked
any alteration in the time, amount, manner or payment or performance of any of
the obligations and liabilities of any Subsidiary Borrower (including the
Borrower Obligations), (K) the merger or consolidation of any Subsidiary
Borrower
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into or with any Person, (L) the sale by any Subsidiary Borrower of all or any
part of its assets, (M) the fact that at any time and from time to time none of
the Borrower Obligations may be outstanding or owing to either Agent or any
Lender, (N) any amendment or modification of, or supplement to, any Loan
Document, or (O) any other reason or circumstance which might otherwise
constitute a defense available to or a discharge of any Subsidiary Borrower in
respect of its obligations or liabilities (including the Borrower Obligations)
or of the Parent Borrower in respect of any of the Guarantor Obligations (other
than by the performance in full thereof).
11.3. Repayment in Bankruptcy
If, at any time or times subsequent to the payment of all or
any part of the Borrower Obligations or the Guarantor Borrower Obligations,
either Agent or any Lender shall be required to repay any amounts previously
paid by or on behalf of any Subsidiary Borrower or the Parent Borrower in
reduction thereof by virtue of an order of any court having jurisdiction in the
premises, including as a result of an adjudication that such amounts constituted
preferential payments or fraudulent conveyances, the Parent Borrower
unconditionally agrees to pay to the Administrative Agent within 10 days after
demand a sum in cash equal to the amount of such repayment, together with
interest on such amount from the date of such repayment by such Agent or such
Lender, as the case may be, to the date of payment to the Administrative Agent
at the applicable after-maturity rate set forth in Section 3.1.
11.4. No Subrogation
The Parent Borrower expressly waives any and all rights of
subrogation, reimbursement, indemnity, exoneration, contribution or any other
claim which Parent Borrower may now or hereafter have against any Subsidiary
Borrower, any other guarantor or any other Person directly or contingently
liable for the Borrower Obligations, or against or with respect to such
Subsidiary Borrower's or such other guarantor's Property, arising from the
existence or performance of this Section 11 until the Borrower Obligations have
been paid in full and the Commitments shall have been terminated. In
furtherance, and not in limitation, of the preceding waiver, the Parent Borrower
agrees that in the event that any money or Property shall be transferred to
either Agent or any Lender by the Parent Borrower pursuant to this Section 11 in
reduction of the Borrower Obligations or the Guarantor Obligations, such
transfer shall be deemed to be a contribution to the capital of such Subsidiary
Borrower (in the case of the transfer of Property, in an amount equal to the
fair market value of the Property so transferred) as of the date of such
transfer, and any such transfer shall not cause the Parent Borrower to be a
creditor of such Subsidiary
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Borrower until the Borrower Obligations have been paid in full and the
Commitments shall have been terminated.
12. OTHER PROVISIONS
12.1. Amendments and Waivers
Notwithstanding anything to the contrary contained in any Loan
Document, with the written consent of the Required Lenders, the Administrative
Agent and the appropriate parties to the Loan Documents (other than the Lenders)
may, from time to time, enter into written amendments, supplements or
modifications thereof and, with the consent of the Required Lenders, the
Administrative Agent on behalf of the Lenders may execute and deliver to any
such parties a written instrument waiving or consenting to the departure from,
on such terms and conditions as the Administrative Agent may specify in such
instrument, any of the requirements of the Loan Documents or any Default or
Event of Default and its consequences; provided, however, that no such
amendment, supplement, modification, waiver or consent shall (i) increase the
amount or length of any Lender's Commitment, reduce the amount or extend the
maturity of any Loan, or reduce the rate of interest or extend the time of
payment of interest thereon, or reduce any fee (including the Facility Fee)
payable to any Lender under the Loan Documents, in each case without the prior
written consent of the Lender directly affected thereby, (ii) amend, modify or
waive any provision of Section 2.1(a), 2.10(a)(i)(B) or this Section 12.1, amend
or modify the definition of "Core Currency", reduce the percentage specified in
the definition of Required Lenders, consent to the assignment or transfer by any
Credit Party of any of its rights and obligations under the Loan Documents, or
release all or substantially all of the obligations of the Parent Borrower under
Section 11, in each case without the prior written consent of each Lender, (iii)
increase the Aggregate Commitment Amount or amend, modify or waive any provision
of Section 7.10 without the consent of the Super-majority Lenders, or (iv)
amend, modify or waive any provision of Section 10 without the prior written
consent of each Agent directly affected thereby. Any such amendment, supplement,
modification, waiver or consent shall apply equally to each of the Lenders and
shall be binding upon the parties to the applicable agreement, the Lenders, the
Agents and all future holders of the Loans. In the case of any waiver, the
parties to the applicable agreement, the Lenders and each Agent shall be
restored to their former position and rights hereunder and under the other Loan
Documents, and any Default waived shall not extend to any subsequent or other
Default, or impair any right consequent thereon.
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12.2. Notices
All notices and other communications under the Loan Documents
shall be given to each party hereto, initially, at the following address, and,
thereafter, such other address through which it may from time to time be
accepting notices, as designated by it in writing to each Agent and the Parent
Borrower:
(a) if to the Parent Borrower or any other Borrower, the
office, branch or affiliate thereof designated as its address for notices in
Exhibit O or the Borrower Addendum, if any, executed and delivered with respect
to such Borrower pursuant to Section 2.10, as the case may be;
(b) if to any Lender, the office, branch, affiliate, or
correspondent bank thereof designated as its address for notices in Exhibit N;
(c) if to the Administrative Agent, the office, branch,
affiliate, or correspondent bank thereof designated as its address for notices
in Exhibit M; and
(d) if to the Documentation Agent, at the following
address:
Bank of Montreal
430 Park Avenue
14th Floor
New York, New York 10022
Attention: Jordan Fragiacomo,
Director
Telephone: (212) 605-1663
Telecopy: (212) 605-1455
Such notices and other communications will be effective only if and when given
in writing, and shall be deemed to have been given three days after deposit in
the mail, designated as certified mail, return receipt requested,
postage-prepaid, at the applicable address specified above, or when delivered at
the applicable address specified above, or when sent by telecopy addressed to
the party to which such notice is directed at its address determined as provided
above and receipt is confirmed, except that any notice, request or demand by any
Borrower to or upon either Agent or the Lenders pursuant to Sections 2.3, 2.4,
2.7, 2.8 or 3.3 shall not be effective until received. Any party to a Loan
Document may rely on signatures of the parties thereto which are transmitted by
fax or other electronic means as fully as if originally signed.
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12.3. No Waiver; Cumulative Remedies
No failure to exercise and no delay in exercising, on the part
of either Agent or any Lender, any right, remedy, power or privilege under any
Loan Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege under any Loan Document
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
under the Loan Documents are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
12.4. Survival of Representations and Warranties and Certain
Obligations
(a) All representations and warranties made under the
Loan Documents and in any document, certificate or statement delivered pursuant
thereto or in connection therewith shall survive the execution and delivery of
the Loan Documents.
(b) The obligations of the Credit Parties under Sections
3.4, 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 12.5 and 12.7 shall survive the termination
of the Commitments and the payment of the Loans and all other amounts payable
under the Loan Documents.
12.5. Expenses
The Parent Borrower agrees, promptly upon presentation of a
statement or invoice therefor, and whether any Loan is made (i) to pay or
reimburse the Documentation Agent for all its out-of-pocket costs and expenses
reasonably incurred in connection with the development, preparation and
execution of, the Loan Documents and any amendment, supplement or modification
thereto (whether or not executed or effective), any documents prepared in
connection therewith and the consummation of the transactions contemplated
thereby, including the reasonable fees and disbursements of Special Counsel,
(ii) to pay or reimburse the Agents and the Lenders for all of their respective
costs and expenses, including reasonable fees and disbursements of counsel,
incurred in connection with (a) any enforcement or collection proceedings
resulting from any Default or in connection with the negotiation of any
restructuring or "work-out" (whether consummated or not) of the obligations of
any Credit Party under any of the Loan Documents, including any amendment,
supplement or modification thereto or any waiver or consent thereunder (in each
case whether or not executed or effective) in connection therewith, and (b) the
enforcement of this Section, (iii) to pay, indemnify, and hold each of the
Lenders and the Agents harmless from and against, any and all recording and
filing fees and any and all liabilities
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with respect to, or resulting from any delay in paying, stamp, excise and other
similar taxes, if any, which may be payable or determined to be payable in
connection with the execution and delivery of, or consummation of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, the Loan Documents and any such
other documents, and (iv) to pay, indemnify and hold each of the Lenders and the
Agents and each of their respective affiliates, officers, directors and
employees harmless from and against any and all other liabilities, obligations,
claims, losses, damages, penalties, actions, judgments, suits, costs, expenses
or disbursements of any kind or nature whatsoever (including reasonable counsel
fees and disbursements) with respect to the enforcement and performance of the
Loan Documents, the use of the proceeds of the Loans and the enforcement and
performance of the provisions of any subordination agreement involving the
Agents and the Lenders (all the foregoing, collectively, the "Indemnified
Liabilities"), and, if and to the extent that the foregoing indemnity may be
unenforceable for any reason, the Parent Borrower agrees to make the maximum
payment not prohibited under applicable law; provided, however, that the Parent
Borrower shall have no obligation to pay Indemnified Liabilities to either Agent
or any Lender, as the case may be, arising from the gross negligence or willful
misconduct of such Agent or such Lender, as the case may be, or claims between
one indemnified party and another indemnified party. The agreements in this
Section shall survive the termination of the Commitments and the payment of all
amounts payable under the Loan Documents.
12.6. Assignments and Participations
(a) The Loan Documents shall be binding upon and inure to
the benefit of the Parent Borrower, the Lenders, the Agents, all future holders
of the Loans, and their respective successors and assigns, except that neither
the Parent Borrower nor any other Credit Party may assign, delegate or transfer
any of its rights or obligations under the Loan Documents (other than in
connection with a dissolution or a transaction involving a merger, consolidation
or Disposition, in each case otherwise permitted by this Agreement) without the
prior written consent of the Administrative Agent and each Lender.
(b) In addition to its rights under Section 12.6(f), each
Lender shall have the right to sell, assign, transfer or negotiate (each an
"Assignment") one hundred percent, or any lesser percentage, of its rights and
obligations under the Loan Documents to any subsidiary or affiliate of such
Lender, to any other Lender, or to any other bank, insurance company, financial
institution, pension fund, mutual fund or other similar fund (each an "Eligible
Assignee"), provided that (i) each such Assignment shall be of a constant, and
not a varying, percentage of all of the assignor Lender's rights and obligations
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under the Loan Documents, (ii) the Commitment assigned shall be not less than
$10,000,000, or the full Commitment Amount of such assignor Lender's Commitment,
(iii) unless the assignee is another Lender or a Subsidiary or affiliate of any
Lender (in which case no claims may be made by such assignee pursuant to Section
3.5, 3.6, 3.7, 3.8 or 3.9, in each case except to the extent that the assignor
Lender would otherwise have the right to do so), the Parent Borrower and the
Administrative Agent shall have consented thereto in writing (which consents
shall not be unreasonably withheld or delayed and, in the case of the Parent
Borrower, shall not be required upon the occurrence and during the continuance
of an Event of Default), and (iv) the assignor Lender and such assignee shall
deliver to the Administrative Agent three copies of an Assignment and Acceptance
Agreement executed by each of them, along with an assignment fee in the sum of
$5,000 for the account of the Administrative Agent. Upon receipt of such number
of executed copies of each such Assignment and Acceptance Agreement, together
with the assignment fee therefor and the Parent Borrower's and the
Administrative Agent's consents to such Assignment, if required, the
Administrative Agent shall record the same and execute not less than two copies
of such Assignment and Acceptance Agreement in the appropriate place, deliver
one such copy to the assignor and one such copy to the assignee, and deliver one
photocopy thereof, as executed, to the Parent Borrower. From and after the
effective date specified in such Assignment and Acceptance Agreement, the
assignee thereunder shall be a party hereto and shall for all purposes of this
Agreement and the other Loan Documents be deemed a "Lender" and, to the extent
provided in such Assignment and Acceptance Agreement, the assignor Lender
thereunder shall be released from its obligations under this Agreement and the
other Loan Documents. The Administrative Agent shall be entitled to rely upon
the representations and warranties made by the assignee under each Assignment
and Acceptance Agreement.
(c) In addition to the participations provided for in
Section 12.10(a), each Lender may grant participations in all or any part of its
rights under the Loan Documents to one or more Persons, provided that (i) such
Lender's obligations under this Agreement and the other Loan Documents shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties to this Agreement and the other Loan Documents for the performance of
such obligations, (iii) the Borrowers, the Agents and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and the other Loan
Documents, (iv) the granting of such participation does not require that any
additional loss, cost or expense be borne by any Borrower at any time, and (v)
the voting rights of any holder of any participation shall be limited to the
voting rights of such Lender under Section 12.1(i).
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(d) No Lender shall, as between and among the Credit
Parties, the Agents and such Lender, as the case may be, be relieved of any of
its obligations under the Loan Documents as a result of any Assignment or the
granting of any participation in all or any part of its rights under the Loan
Documents, except that it shall be relieved of its obligations to the extent of
any such Assignment of all or any part of its rights and obligations under the
Loan Documents pursuant to Section 12.6(b).
(e) Subject to Section 12.6(d), any Lender may at any
time or from time to time assign all or any portion of its rights under the Loan
Documents to a Federal Reserve Bank, provided that any such assignment shall not
release such assignor from its obligations thereunder.
12.7. Indemnity
The Parent Borrower agrees to defend, protect, indemnify, and
hold harmless each Agent, and each and all of the Lenders, each of their
respective affiliates and each of the respective officers, directors, employees
and agents of each of the foregoing (each an "Indemnified Person") from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including the reasonable fees and disbursements of counsel
to such Indemnified Persons in connection with any investigative, administrative
or judicial proceeding, whether direct, indirect or consequential and whether
based on any federal or state laws or other statutory regulations of any
jurisdiction, including securities and commercial laws and regulations, under
common law or at equitable cause, or on contract or otherwise, including any
liabilities and costs under Environmental Laws, federal, state or local health
or safety laws, regulations, or common law principles, arising from or in
connection with the past, present or future operations of the Parent Borrower,
any other Credit Party, or their respective predecessors in interest, or the
past, present or future environmental condition of the Property of the Parent
Borrower or any of its Subsidiaries, the presence of asbestos-containing
materials at any such Property, or the release or threatened release of any
Hazardous Substance into the environment from any such Property) in any manner
relating to or arising out of the Loan Documents, any commitment letter or fee
letter executed and delivered by the Parent Borrower or any of its Subsidiaries
and/or the Agents, the capitalization of the Parent Borrower or any of its
Subsidiaries, the Commitments, the making of, management of and participation in
the Loans, or the use or intended use of the proceeds of the Loans hereunder,
provided that the Parent Borrower shall have no obligation under this Section to
an Indemnified Person with respect to any of the foregoing to the extent
resulting primarily out of the gross negligence or wilful misconduct of such
Indemnified Person or arising solely from claims between
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one such Indemnified Person and another such Indemnified Person. The indemnity
set forth herein shall be in addition to any other obligations or liabilities of
the Parent Borrower to each Indemnified Person under the Loan Documents or at
common law or otherwise, and shall survive any termination of the Loan
Documents, the expiration of the Commitments and the payment of all Indebtedness
under the Loan Documents.
12.8. Limitation of Liability
No claim may be made by the Parent Borrower, any of its
Subsidiaries, any Lender or other Person against either Agent, any Lender, or
any directors, officers, employees, or agents of any of them for any special,
indirect, consequential or punitive damages in respect of any claim for breach
of contract or any other theory of liability arising out of or related to the
transactions contemplated by any Loan Document, or any act, omission or event
occurring in connection therewith, and each of the Parent Borrower, its
Subsidiaries, each Lender and each such other Person hereby waives, releases and
agrees not to sue upon any claim for any such damages, whether or not accrued
and whether or not known or suspected to exist in its favor.
12.9. Counterparts
This Agreement may be executed by one or more of the parties
thereto on any number of separate counterparts and all of said counterparts
taken together shall be deemed to constitute one and the same document. It shall
not be necessary in making proof of any Loan Document to produce or account for
more than one counterpart signed by the party to be charged. A counterpart of
any Loan Document or to any document evidencing, and of any an amendment,
modification, consent or waiver to or of any Loan Document transmitted by
telecopy shall be deemed to be an originally executed counterpart. A set of the
copies of the Loan Documents signed by all the parties thereto shall be
deposited with each of the Parent Borrower and each Agent. Any party to a Loan
Document may rely upon the signatures of any other party thereto which are
transmitted by telecopy or other electronic means to the same extent as if
originally signed.
12.10. Adjustments; Set-off
(a) If any Lender (a "Benefited Lender") shall at any
time receive any payment of all or any part of the principal of its Loans owing
to such Lender, or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or proceedings of
the nature referred to in Sections 9.1(g) or (h), or otherwise), in a greater
proportion than any such payment to and collateral received by any other
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Lender in respect of the principal of such other Lender's Loans to such other
Lender, or interest thereon, such Benefited Lender shall purchase for cash from
each of the other Lenders such portion of each such other Lender's Loans, and
shall provide each of such other Lenders with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
Benefited Lender to share the excess payment or benefits of such collateral or
proceeds ratably with each of the Lenders, provided, however, that if all or any
portion of such excess payment or benefits is thereafter recovered from such
Benefited Lender, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest. Each
Credit Party agrees that each Lender so purchasing a portion of another Lender's
Loans may exercise all rights of payment (including rights of set-off, to the
extent not prohibited by law) with respect to such portion as fully as if such
Lender were the direct holder of such portion.
(b) In addition to any rights and remedies of the Lenders
provided by law, upon the occurrence of an Event of Default and the acceleration
of the obligations owing in connection with the Loan Documents, or at any time
upon the occurrence and during the continuance of an Event of Default under
Section 9.1(a) or (b), each Lender shall have the right, without prior notice to
the Parent Borrower or any other Credit Party, any such notice being expressly
waived by the Parent Borrower and each other Credit Party to the extent not
prohibited by applicable law, to set-off and apply against any indebtedness,
whether matured or unmatured, of the Parent Borrower or such other Credit Party,
as the case may be, to such Lender any amount owing from such Lender to the
Parent Borrower or such other Credit Party, as the case may be, at, or at any
time after, the happening of any of the above-mentioned events. To the extent
not prohibited by applicable law, the aforesaid right of set-off may be
exercised by such Lender against the Parent Borrower or such other Credit Party,
as the case may be, or against any trustee in bankruptcy, custodian, debtor in
possession, assignee for the benefit of creditors, receiver, or execution,
judgment or attachment creditor of the Parent Borrower or such other Credit
Party, as the case may be, or against anyone else claiming through or against
the Parent Borrower or such other Credit Party, as the case may be, or such
trustee in bankruptcy, custodian, debtor in possession, assignee for the benefit
of creditors, receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of set-off shall not have been
exercised by such Lender prior to the making, filing or issuance, or service
upon such Lender of, or of notice of, any such petition, assignment for the
benefit of creditors, appointment or application for the appointment of a
receiver, or issuance of execution, subpoena, order or warrant. Each Lender
agrees promptly to notify the Parent Borrower and the Administrative Agent after
any such set-off and application made by such Lender, provided that the failure
to give such notice shall not affect the validity of such set-off and
application.
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12.11. Construction
Each party to a Loan Document represents that it has been
represented by counsel in connection with the Loan Documents and the
transactions contemplated thereby and that the principle that agreements are to
be construed against the party drafting the same shall be inapplicable.
12.12. Governing Law
The Loan Documents and the rights and obligations of the
parties thereunder shall be governed by, and construed and interpreted in
accordance with, the internal laws of the State of New York, without regard to
principles of conflict of laws, but including Section 5-1401 of the General
Obligations Law.
12.13. Judgment Currency
(a) Each Credit Party's obligations under the Loan
Documents to make payments in the applicable Currency (the "Obligation
Currency") shall not be discharged or satisfied by any tender or recovery
pursuant to any judgment expressed in or converted into any currency other than
the Obligation Currency, except to the extent that, on the Business Day
immediately following the date of such tender or recovery, either Agent or the
applicable Lender, as the case may be, may, in accordance with normal banking
procedures, purchase the Obligation Currency with such other currency. If for
the purpose of obtaining or enforcing judgment against any Credit Party in any
court or in any jurisdiction, it becomes necessary to convert into any currency
other than the Obligation Currency (such other currency being hereinafter
referred to as the "Judgment Currency") an amount due in the Obligation
Currency, the conversion shall be made at the rate of exchange at which, in
accordance with normal banking procedures in the relevant jurisdiction, the
Obligation Currency could be purchased with the Judgment Currency as of the day
immediately preceding the day on which the judgment is given (such Business Day
being hereinafter referred to as the "Judgment Currency Conversion Date").
(b) If the amount of Obligation Currency purchased
pursuant to the last sentence of Section 12.13(a) is less than the sum
originally due in the Obligation Currency, the applicable Credit Party covenants
and agrees to indemnify the applicable recipient against such loss, and if the
Obligation Currency so purchased exceeds the sum originally due to such
recipient, such recipient agrees to remit to the applicable Credit Party such
excess.
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12.14. International Banking Facilities
(a) The Parent Borrower and the other Credit Parties
acknowledge that some or all of the Lenders may, in connection with the Loan
Documents, utilize an International banking facility (as defined in Regulation
D).
(b) Each Credit Party which is an entity located outside
the United States (i) understands that it is the policy of the Board of
Governors of the Federal Reserve System that deposits received by International
banking facilities may be used only to support the non-U.S. operations of a
depositor (or its foreign affiliates) located outside the United States and that
extensions of credit by International banking facilities may be used only to
finance the non-U.S. operations of a customer (or its foreign affiliates)
located outside the United States, and (ii) acknowledges that the proceeds of
its borrowings hereunder from an international banking facility will be used
solely to finance its operations outside the United States, or that of its
foreign affiliates.
12.15. Incorporation by Reference
To the extent that any covenant or other similar agreement in
respect of any Indebtedness of the Parent Borrower or any of its Subsidiaries
is more restrictive than any covenant or other similar agreement contained in
the Loan Documents, it shall be incorporated by reference in the Loan Documents
as if fully set forth therein, including the definitions of capitalized terms
so incorporated, mutatis mutandis.
12.16. Headings Descriptive
Section headings have been inserted in the Loan Documents for
convenience only and shall not be construed to be a part thereof.
12.17. Severability
Every provision of the Loan Documents is intended to be
severable, and if any term or provision thereof shall be invalid, illegal or
unenforceable for any reason, the validity, legality and enforceability of the
remaining provisions thereof shall not be affected or impaired thereby, and any
invalidity, illegality or unenforceability in any jurisdiction shall not affect
the validity, legality or enforceability of any such term or provision in any
other jurisdiction.
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12.18. Integration
All exhibits to a Loan Document shall be deemed to be a part
thereof. Except for agreements between either Agent and the Parent Borrower
with respect to certain fees, the Loan Documents embody the entire agreement
and understanding among the Credit Parties, the Agents and the Lenders with
respect to the subject matter thereof and supersede all prior agreements and
understandings among the Credit Parties, the Agents and the Lenders with
respect to the subject matter thereof.
12.19. Consent to Jurisdiction
Each party to a Loan Document hereby irrevocably submits to
the jurisdiction of any New York State or Federal court sitting in the City of
New York over any suit, action or proceeding arising out of or relating to the
Loan Documents. Each party to a Loan Document hereby irrevocably waives, to the
fullest extent permitted or not prohibited by law, any objection which it may
now or hereafter have to the laying of the venue of any such suit, action or
proceeding brought in such a court and any claim that any such suit, action or
proceeding brought in such a court has been brought in an inconvenient forum.
Each Credit Party hereby agrees that a final judgment in any such suit, action
or proceeding brought in such a court, after all appropriate appeals, shall be
conclusive and binding upon it.
12.20. Service of Process
Each party to a Loan Document hereby irrevocably consents to
the service of process in any suit, action or proceeding by sending the same by
first class mail, return receipt requested or by overnight courier service, to
the address of such party set forth in Section 12.2 of the applicable Loan
Document executed by such party. Each party to a Loan Document hereby agrees
that any such service (i) shall be deemed in every respect effective service of
process upon it in any such suit, action, or proceeding, and (ii) shall to the
fullest extent enforceable by law, be taken and held to be valid personal
service upon and personal delivery to it.
12.21. No Limitation on Service or Suit
Nothing in the Loan Documents or any modification, waiver,
consent or amendment thereto shall affect the right of either Agent or any
Lender to serve process in any manner permitted by law or limit the right of
either Agent or any Lender to bring pro-
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ceedings against any Credit Party in the courts of any jurisdiction or
jurisdictions in which such Credit Party may be served.
12.22. WAIVER OF TRIAL BY JURY
EACH OF THE AGENTS, THE LENDERS AND THE CREDIT PARTIES HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN
CONNECTION WITH THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREIN.
FURTHER, EACH CREDIT PARTY HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF
EITHER AGENT OR THE LENDERS, OR COUNSEL TO THE EITHER AGENT OR THE LENDERS, HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE AGENTS OR THE LENDERS WOULD NOT,
IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY
TRIAL PROVISION. EACH CREDIT PARTY ACKNOWLEDGES THAT THE AGENTS AND THE LENDERS
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, INTER ALIA, THE PROVISIONS
OF THIS SECTION.
12.23. Parent Borrower as Agent for Subsidiary Borrowers
Each Subsidiary Borrower hereby irrevocably designates and
appoints the Parent Borrower as its agent under the Loan Documents and such
Subsidiary Borrower hereby irrevocably authorizes the Parent Borrower to take
such action on its behalf under the provisions of the Loan Documents and to
exercise such powers and perform such duties as are expressly delegated to the
Parent Borrower by the terms of the Loan Documents, together with such other
powers as are reasonably incidental thereto.
12.24. Effective Date
This Agreement shall be effective at such time (the "Effective
Date") as (i) executed counterparts hereof shall have been delivered to the
Documentation Agent by the Parent Borrower, each Lender and the Administrative
Agent, and the Documentation Agent shall have executed and delivered a
counterpart hereof to the Parent Borrower, each Lender and the Administrative
Agent, (ii) the Existing Indebtedness shall have been fully repaid by the Parent
Borrower, the Existing Promissory Note shall have been cancelled or terminated,
and all Liens, if any, securing the Existing Indebtedness shall have been
terminated, and the Documentation Agent shall have received satisfactory
evidence thereof,
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and (iii) all fees payable to the Agents and the Lenders in connection herewith
on or prior to the Effective Date shall have been paid.
12.25. Treatment of Certain Information
Each of the Agents and the Lenders agrees to use reasonable
precautions to keep confidential, in accordance with its customary procedures
for handling confidential information of the same nature, all non-public
information (i) provided to it by or on behalf the Parent Borrower or any of its
Subsidiaries pursuant to or in connection with any Loan Document or (ii)
obtained by it based on a review of the books and records of the Parent Borrower
or any of its Subsidiaries, provided, however, that nothing herein shall limit
the disclosure of any such information (c) to the extent required by statute,
rule, regulation or judicial process, (d) on a confidential basis, to counsel
for any of the Lenders or either of the Agents, (e) to bank examiners, auditors
or accountants, and any analogous counterpart thereof, (f) to either Agent or
any Lender, (g) in connection with any litigation to which any one or more of
the Lenders or one or both of the Agents is a party, (h) to any assignee or
participant (or prospective assignee or participant) so long as such assignee or
participant (or prospective assignee or participant) agrees to keep such
information confidential on substantially the same basis as set forth in this
Section, or (i) to affiliates of either Agent or any Lender.
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IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
BOWNE & CO., INC.
By: /s/ Denise K. Fletcher
-------------------------------------
Name: Denise K. Fletcher
-----------------------------------
Title: Vice President, Chief Financial
Officer
----------------------------------
<PAGE> 100
BANK OF MONTREAL,
Individually and as Documentation Agent
By: /s/ Kann Mode
-------------------------------------
Name: Kann Mode
-----------------------------------
Title: Director
----------------------------------
<PAGE> 101
FLEET BANK, NATIONAL
ASSOCIATION, Individually and
as Administrative Agent
By: /s/ Michael P. O'Brien
-------------------------------------
Name: Michael P. O'Brien
-----------------------------------
Title: Vice President
----------------------------------
<PAGE> 102
FIRST UNION NATIONAL BANK
By: /s/ William Johnson
-------------------------------------
Name: William Johnson
-----------------------------------
Title: Vice President
----------------------------------
<PAGE> 103
THE BANK OF TOKYO-MITSUBISHI,
LTD., NEW YORK BRANCH
By: /s/ Paula Mueller
-------------------------------------
Name: Paula Mueller
-----------------------------------
Title: Vice President
----------------------------------
<PAGE> 104
ABN AMRO BANK N.V., NEW YORK BRANCH
By: /s/ George M. Dugan
-------------------------------------
Name: George M. Dugan
-----------------------------------
Title: Vice President
----------------------------------
By: /s/ David J. Kraut
-------------------------------------
Name: David J. Kraut
-----------------------------------
Title: Assistant Vice President
----------------------------------
<PAGE> 105
WACHOVIA BANK, N.A.
By: /s/ M. Eugene Wood, III
-------------------------------------
Name: M. Eugene Wood, III
-----------------------------------
Title: Vice President
----------------------------------
<PAGE> 106
NATIONAL WESTMINSTER BANK PLC
By: /s/ Peter J. Stringer
-------------------------------------
Name: Peter J. Stringer
-----------------------------------
Title: Senior Vice President
----------------------------------
<PAGE> 1
EXHIBIT 7.10
AGREEMENT AND PLAN OF MERGER
AMONG
BOWNE & CO., INC.,
DESI ACQUISITION, INC.
AND
DONNELLEY ENTERPRISE SOLUTIONS INCORPORATED
DATED AS OF MAY 27, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
RECITALS......................................................... 1
AGREEMENT........................................................ 1
1. The Offer................................................... 1
1.1 The Offer.............................................. 1
1.2 Company Action......................................... 3
1.3 Directors.............................................. 4
1.4 Confidentiality........................................ 5
2. The Merger.................................................. 5
2.1 The Merger............................................. 5
2.2 Effect of the Merger................................... 5
2.3 Effective Time......................................... 5
2.4 Certificate of Incorporation and By-laws of the
Surviving Corporation....................................... 5
2.5 Directors and Officers of the Surviving Corporation.... 5
2.6 Conversion of Shares................................... 6
2.7 Appraisal Rights....................................... 6
2.8 Employee Stock Options................................. 6
2.9 Surrender of Certificates.............................. 7
3. Representations and Warranties of the Company............... 8
3.1 Organization and Qualifications; Subsidiaries.......... 8
3.2 Capitalization......................................... 8
3.3 Authority and Absence of Conflict...................... 8
3.4 Reports................................................ 9
3.5 Absence of Certain Changes............................. 10
3.6 Employee Benefit Plans................................. 10
3.7 Litigation; Violation of Law........................... 12
3.8 Labor.................................................. 12
3.9 Taxes.................................................. 12
3.10 Environmental Matters................................. 12
3.11 Brokers............................................... 13
3.12 Offer Documents, Proxy Statement, Etc................. 13
3.13 No Undisclosed Liabilities............................ 13
4. Representations and Warranties of Parent and Purchaser...... 14
4.1 Organization and Qualification......................... 14
4.2 Capital Stock of Purchaser............................. 14
4.3 Authority and Absence of Conflict...................... 14
4.4 Financing.............................................. 15
4.5 Brokers................................................ 15
4.6 Proxy Statement, Etc................................... 15
4.7 Ownership of Shares.................................... 15
4.8 No Litigation.......................................... 16
5. Conduct of Business......................................... 16
6. Additional Agreements....................................... 17
6.1 Proxy Statement........................................ 17
6.2 Stockholders' Meeting.................................. 17
6.3 Access to Information.................................. 18
6.4 Filings; Reasonable Efforts............................ 18
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
6.5 Public Announcements................................... 18
6.6 Notification of Certain Matters........................ 19
6.7 Employees.............................................. 19
6.8 Indemnification and Insurance.......................... 20
6.9 Solicitation........................................... 21
6.10 Disposition of Certain Litigation..................... 22
7. Conditions.................................................. 22
7.1 Consummation of Offer.................................. 22
7.2 Stockholder Approval................................... 23
7.3 Violation of Law....................................... 23
7.4 Litigation............................................. 23
8. Termination................................................. 23
8.1 Termination by Mutual Consent.......................... 23
8.2 Termination by either Parent or the Company............ 23
8.3 Termination by Parent.................................. 23
8.4 Termination by the Company............................. 24
8.5 Effect of Termination and Abandonment.................. 24
8.6 Certain Fees and Expenses.............................. 24
9. General Provisions.......................................... 25
9.1 Closing................................................ 25
9.2 Notices................................................ 25
9.3 Interpretation......................................... 26
9.4 Representations and Warranties; Etc.................... 26
9.5 Payment of Expenses.................................... 26
9.6 Entire Agreement....................................... 26
9.7 Counterparts........................................... 26
9.8 Severability........................................... 26
9.9 Captions............................................... 26
9.10 Amendment............................................. 26
9.11 Waiver................................................ 27
9.12 No Third-Party Beneficiaries; Assignability........... 27
9.13 Knowledge............................................. 27
9.14 Person................................................ 27
9.15 Affiliate............................................. 27
9.16 Governing Law......................................... 27
</TABLE>
ii
<PAGE> 4
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement"), dated as of May 27,
1998, is made among Bowne & Co., Inc., a New York corporation ("Parent"), DESI
Acquisition, Inc., a Delaware corporation and wholly-owned subsidiary of Parent
("Purchaser"), and Donnelley Enterprise Solutions Incorporated, a Delaware
corporation (the "Company").
RECITALS
A. The respective Boards of Directors of Parent, Purchaser and the Company
have approved the acquisition of the Company pursuant to the terms of this
Agreement.
B. In furtherance of such acquisition, and subject to the conditions set
forth in Annex I hereto, it is proposed that Purchaser will make a tender offer
(the "Offer") to purchase all of the issued and outstanding shares of common
stock, par value $.01 per share, of the Company (the "Shares") at a price of
$21.00 per Share in cash (such amount or such higher price per Share as may be
paid pursuant to the Offer being hereinafter referred to as the "Per Share
Amount").
C. The Board of Directors of the Company has duly approved the Offer, has
resolved to recommend its acceptance by the holders of Shares, and has duly
approved the merger of Purchaser with and into the Company upon the terms and
subject to the conditions set forth in this Agreement (the "Merger") following
consummation of the Offer.
D. The respective Board of Directors of Parent and Purchaser and Parent,
as sole stockholder of Purchaser, have each duly approved the Offer and the
Merger.
E. Purchaser and R. R. Donnelley & Sons Company ("Donnelley") are entering
into a Stockholders' Agreement, dated as of the date hereof (the "Stockholders'
Agreement"), pursuant to which Donnelley will, among other things, agree to sell
Shares to Purchaser under certain circumstances.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Parent, Purchaser and the Company
hereby agree as follows:
1. The Offer.
1.1 The Offer. Parent shall cause Purchaser to, and Purchaser shall, as
soon as practicable after the date hereof, but in any event within five business
days after the public announcement of the execution hereof, commence (within the
meaning of Rule 14d-2(a) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") the Offer for all of the outstanding Shares at a price
equal to the Per Share Amount, net to the sellers thereof in cash, subject to
the conditions set forth in Annex I hereto (the "Offer Conditions") including
the Minimum Condition (as defined therein) and the termination provisions of
Section 8 hereof. Purchaser shall consummate the Offer on the terms and subject
to the conditions provided in this Section 1.1. Subject to the terms and
conditions of this Agreement, the obligation of Purchaser to accept for payment
Shares tendered pursuant to the Offer shall be subject to the satisfaction or
waiver by Purchaser of the Offer Conditions.
The Offer shall be made by means of an offer to purchase which shall
contain as conditions only the Minimum Condition and the other conditions set
forth in Annex I hereto, and, subject to the succeeding sentence, shall
otherwise contain, and be entirely consistent with, the terms and conditions of
the Offer as described in this Agreement. Each of Purchaser and Parent expressly
reserves the right, in its sole discretion, to waive any such condition and make
any other changes to the terms of the Offer, provided that, without the consent
of the Company, neither Parent nor Purchaser shall (i) amend or waive the
Minimum Condition or the HSR Condition (as defined
<PAGE> 5
herein), (ii) amend any other condition of the Offer as set forth herein or in
Annex I hereto, (iii) reduce the Per Share Amount, (iv) change the form of
consideration to be paid in the Offer (other than by adding cash consideration),
(v) reduce the maximum number of Shares to be purchased in the Offer, or (vi)
amend any other term of the Offer in a manner which, in the reasonable judgment
of the Company, is adverse to the holders of Shares. The Per Share Amount shall
be net to the sellers in cash, without interest, subject to reduction only for
any applicable federal back-up withholding taxes. Notwithstanding the foregoing,
Purchaser may, without the consent of the Company, subject to the Company's
right to terminate this Agreement pursuant to Article 8, (i) extend the Offer on
one or more occasions for up to ten business days for each such extension beyond
the then-scheduled expiration date (the initial scheduled expiration date being
20 business days following commencement of the Offer), if at the then-scheduled
expiration date of the Offer any of the conditions to Purchaser's obligation to
accept for payment and pay for the Shares shall not be satisfied or waived,
until such time as such conditions are satisfied or waived, and, at the request
of the Company, Purchaser shall, subject to Parent's right to terminate this
Agreement pursuant to Article 8, extend the Offer for additional periods up to
but not later than September 30, 1998, unless the conditions not satisfied or
earlier waived on the then-scheduled expiration date are one or more of the
Minimum Condition or the conditions set forth in paragraphs (a), (c), (d) or (f)
of Annex I hereto, provided that (x) if the only condition not satisfied is the
Minimum Condition, the satisfaction or waiver of all other conditions shall have
been publicly disclosed at least five business days before termination of the
Offer and (y) if paragraph (a) or (f) of Annex I hereto has not been satisfied
and the failure to so satisfy can be remedied, the Offer shall not be terminated
unless the failure is not remedied within 30 calendar days after Parent has
furnished the Company with written notice of such failure), (ii) extend the
Offer for any period required by any rule, regulation, interpretation or
position of the Securities and Exchange Commission (the "Commission") or the
staff thereof applicable to the Offer, and (iii) extend the Offer for an
aggregate period of not more than five business days beyond the latest
expiration date that would otherwise be permitted under clause (i) or (ii) of
this sentence if there shall not have been tendered sufficient Shares so that
the Merger could be effected without a meeting of the Company's stockholders in
accordance with Section 253 of the Delaware General Corporation Law (the
"DGCL"). In addition, the Per Share Amount may be increased without the consent
of the Company. Subject to the terms of the Offer, including the Offer
Conditions, Purchaser shall accept for payment and pay for all Shares duly
tendered at the earliest time at which it is permitted to do so under applicable
provisions of the Exchange Act; provided that, as set forth above, Purchaser
shall have the right, in its sole discretion, to extend the Offer for up to five
business days notwithstanding the prior satisfaction of the Offer Conditions, in
order to attempt to satisfy the requirements of Section 253 of the DGCL. It is
agreed that the Offer Conditions other than the Minimum Condition and the
condition relating to the termination or expiration of applicable waiting
periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act") (the "HSR Condition") are solely for the benefit of
Purchaser and may be asserted by Purchaser regardless of the circumstances
resulting in a condition not being satisfied (except for any action or inaction
by Purchaser or Parent constituting a breach of this Agreement) or, except with
respect to the Minimum Condition and the HSR Condition, may be waived by
Purchaser, in whole or in part at any time and from time to time, in its sole
discretion.
On the date of commencement of the Offer, Parent and Purchaser, with the
cooperation of, and prior review thereof by, the Company, shall file with the
Commission a Schedule 14D-1 (the "Schedule 14D-1") with respect to the Offer
that will contain or will incorporate by reference the Offer (or portions
thereof) and forms of the related letter of transmittal and summary
advertisement (which documents, together with any supplements or amendments
thereto, are referred to herein collectively as the "Offer Documents"). The
Schedule 14D-1, and all amendments and supplements thereto, shall comply as to
form in all material respects with the provisions of all applicable federal
securities laws. Purchaser, and the Company with respect to information supplied
by it for use in the Schedule 14D-1 or the Offer Documents, agree promptly to
correct the Schedule 14D-1 or the Offer
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Documents if and to the extent that any of them shall have become false or
misleading in any material respect or any event occurs which should be set forth
in an amendment or supplement to the Schedule 14D-1, and Purchaser shall take
all steps necessary to cause the Schedule 14D-1 as so corrected or supplemented
to be filed with the Commission and such Offer Documents as so corrected to be
disseminated to holders of Shares and any other holders of securities of the
Company (if any), in each case as and to the extent required by applicable
federal securities laws. In addition, Parent and Purchaser agree to promptly
provide the Company and its counsel in writing with any comments Parent,
Purchaser or their counsel may receive from time to time from the SEC or its
staff.
1.2 Company Action. The Board of Directors of the Company has received
the opinion of William Blair & Company, L.L.C. that as of the date of such
opinion the consideration to be received by holders of Shares pursuant to the
Offer and the Merger is fair to the holders of Shares from a financial point of
view, based on certain stated assumptions. The Company has been authorized by
William Blair & Company, L.L.C. to permit, subject to prior review and consent
by them (such consent not to be unreasonably withheld), the inclusion of such
fairness opinion (or a reference thereto) in the Offer Documents and in the
Schedule 14D-9 referred to below and the Proxy Statement referred to in Section
3.12. The Company hereby consents to the inclusion in the Offer Documents of the
recommendations of the Company's Board of Directors described in this Section
1.2 (subject to the proviso at the end of the first paragraph of this Section
1.2). The Company hereby approves of and consents to the Offer and represents
that, at a meeting duly called and held, the Board of Directors of the Company
has: (i) determined that this Agreement and the transactions contemplated
hereby, including, without limitation, the Offer and the Merger, are advisable
and fair to and in the best interest of the Company's stockholders, (ii)
approved this Agreement and the transactions contemplated hereby, including,
without limitation, the Offer and Merger, and (iii) resolved to recommend that
the stockholders of the Company accept the Offer, tender their Shares thereunder
to Purchaser and adopt this Agreement (if such approval and adoption are
required by the DGCL by the holders of the Shares), provided that such
recommendation may be withdrawn, modified or amended if, the Board of Directors
of the Company by majority vote determines in good faith, based on the advice of
outside legal counsel, that the failure to withdraw, modify or amend such
recommendation would constitute a breach of fiduciary duty to the Company's
stockholders under applicable law.
The Company agrees to file with the Commission and mail to its stockholders
contemporaneously with the commencement of the Offer a Solicitation/
Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") which shall
reflect the actions of the Board of Directors referred to above and shall comply
in all material respects with the provisions of applicable federal securities
laws. The Company, and Parent and Purchaser with respect to information supplied
by either of them for use in the Schedule 14D-9, agree promptly to correct the
Schedule 14D-9 if and to the extent that it shall have become false or
misleading in any material respect, and the Company shall take all steps
necessary to cause the Schedule 14D-9 as so corrected to be filed with the
Commission and mailed to holders of Shares and any other holders of securities
of the Company (if any) to the extent required by applicable federal securities
laws. The Offer Documents and the Schedule 14D-9 shall contain the
recommendation of the Board of Directors of the Company that the holders of
Shares accept the Offer unless the Board of Directors of the Company by majority
vote determines in good faith, based on the advice of outside legal counsel,
that providing such recommendation would constitute a breach of fiduciary duty
to the Company's stockholders under applicable law. In addition, the Company
agrees to promptly provide Parent, Purchaser and their counsel in writing with
any comments the Company or its counsel may receive from time to time from the
SEC or its staff.
The Company shall promptly furnish Parent or Purchaser with a list of the
record holders of Shares and their addresses, as well as mailing labels
containing the names and addresses of the record holders of Shares and lists of
securities positions of Shares held in stock depositories, each
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<PAGE> 7
as of the most recent practicable date, and shall furnish Parent or Purchaser
with such additional information, including updated lists of holders of Shares,
mailing labels and lists of securities positions, and other assistance as
Purchaser or its agents may reasonably request for the purpose of disseminating
the Offer Documents and communicating with the record and beneficial holders of
Shares with respect thereto. The Company hereby consents to the inclusion in the
Offer Documents of the recommendations of the Company's Board of Directors as
described in this Section 1.2.
1.3 Directors.
(a) Promptly upon the payment by Purchaser for the Shares tendered
pursuant to the Offer in accordance with the terms of this Agreement,
Parent shall be entitled to designate such number of directors on the Board
of Directors of the Company, rounded to the nearest whole number, as will
give Purchaser representation on such Board equal to at least the number of
directors which equals the product of the total number of the directors on
such Board (after giving effect to the directors elected pursuant to this
sentence) multiplied by the percentage that such number of Shares owned and
paid for by the Purchaser or an Affiliate of Purchaser bears to the number
of Shares outstanding. Promptly after consummation of the Offer, the
Company shall, upon request of Parent, use its best efforts promptly either
to increase the size of the Board of Directors of the Company or, at the
Company's election, secure the resignations of such number of its incumbent
directors as is necessary to enable Parent's designees to be so elected or
appointed to the Company's Board, and shall cause Parent's designees to be
so elected or appointed (the date of such election or appointment being the
"Appointment Date"). Notwithstanding the foregoing, until the Effective
Time (as defined in Section 2.3 hereof), the Company and Parent shall use
all reasonable best efforts to retain as members of the Company's Board of
Directors at least three directors who are directors of the Company on the
date hereof and who are not representatives of Parent (the "Independent
Directors"); provided that subsequent to the purchase of and payment for
not less than a majority of the outstanding Shares pursuant to the Offer,
Parent shall always have its designees represent at least a majority of the
entire Board of Directors. As used in this Agreement, the term "Independent
Directors" shall initially mean each of Ms. Rhonda I. Kochlefl and Messrs.
Charles F. Moran and Gregory A. Stoklosa; provided that in the event that
any such initial directors resigns or otherwise ceases to be a director for
any reason, then the other Independent Directors shall have the right, by
majority vote, to designate a replacement for such directors (and such
replacement shall be an "Independent Director"). If for any reason at any
time prior to the Effective Time no Independent Directors then remain, the
other directors shall use reasonable best efforts to designate three
persons to be the Independent Directors, none of whom shall be directors,
officers, employees or Affiliates (as defined in Section 9.15 hereof) of
Parent or Purchaser or employees of the Company.
(b) The Company's obligations to appoint designees to the Board of
Directors 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 Section 14(f) and Rule 14f-1 in order to fulfill its
obligations under this Section 1.3 and shall include in the Schedule 14D-9
or separate Rule 14f-1 information statement mailed to stockholders
promptly after the commencement of the Offer such information with respect
to the Company and its officers and directors as is required under Section
14(f) and Rule 14f-1 to fulfill its obligations under this Section 1.3.
Parent or Purchaser will supply to the Company and be solely responsible
for any information with respect to itself and its nominees, officers,
directors and Affiliates required by Section 14(f) and Rule 14f-1.
(c) Notwithstanding anything in this Agreement to the contrary, in the
event that Parent's designees are appointed or elected pursuant to this
Section 1.3, after the payment for the Shares pursuant to the Offer and
prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors (who shall act as an independent committee of the
Board of Directors for this purpose) shall be required, and alone shall be
sufficient, to take action by the
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<PAGE> 8
Company to (i) amend or terminate this Agreement, (ii) exercise or waive
any of the Company's rights or remedies hereunder, (iii) extend the time
for performance of Parent's and Purchaser's respective obligations
hereunder, or (iv) approve any other action by the Company that could
adversely affect the interests of the stockholders of the Company (other
than Parent, Purchaser and their Affiliates) with respect to the
transactions contemplated hereby.
1.4 Confidentiality. Subject to the requirements of law, and except for
such steps as are necessary to such dissemination of, and communication with
respect to, the Offer Documents and any other documents necessary to consummate
the Offer and the Merger, Purchaser shall hold in confidence the information
contained in any such labels and lists and the additional information referred
to in the last sentence of Section 1.2 hereof, will use such information only in
connection with the Offer and the Merger, and, if this Agreement is terminated,
will, upon request, deliver to the Company all such written information then in
its possession.
2. The Merger.
2.1 The Merger. At the Effective Time (as defined in Section 2.3 hereof),
and subject to the terms and conditions hereof and the provisions of the DGCL,
Purchaser shall be merged with and into the Company in accordance with the DGCL
and substantially in the manner described in the Offer, the separate existence
of Purchaser shall thereupon cease, and the Company shall continue as the
surviving corporation (the "Surviving Corporation"). Purchaser and the Company
are sometimes hereinafter referred to collectively as the "Constituent
Corporations."
2.2 Effect of the Merger. The separate corporate existence of the
Company, as the Surviving Corporation, with all its purposes, objects, rights,
privileges, powers, certificates and franchises, shall continue unimpaired by
the Merger. The Surviving Corporation shall succeed to all of the properties and
assets of the Constituent Corporations and to all of the debts, choses in action
and other interests due or belonging to the Constituent Corporations and shall
be subject to, and responsible for, all of the debts, liabilities, obligations
and duties of the Constituent Corporations with the effect set forth in the
DGCL.
2.3 Effective Time. Subject to the terms and conditions hereof, the
Merger shall be consummated as promptly as practicable after the later of
consummation of the Offer or, if required under the DGCL, the approval of this
Agreement by the stockholders of the Company, by Parent duly filing, or causing
the Company and/or Purchaser to duly file, the appropriate Certificate of Merger
in such form as is required by, and executed in accordance with, the relevant
provisions of the DGCL. The Merger shall be effective at such time as the
Certificate of Merger is duly filed with the Secretary of State of the State of
Delaware in accordance with the DGCL or at such later time as is specified in
the Certificate of Merger (the "Effective Time").
2.4 Certificate of Incorporation and By-laws of the Surviving Corporation.
(a) At the Effective Time and without any further action on the part
of the Company or Purchaser, the Certificate of Incorporation of the
Company, as in effect at the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation.
(b) At the Effective Time and without further action on the part of
the Company or Purchaser, the By-laws of the Company, as in effect at the
Effective Time, shall be the By-laws of the Surviving Corporation.
2.5 Directors and Officers of the Surviving Corporation. At the Effective
Time, the directors of Purchaser immediately prior to the Effective Time shall
be the initial directors of the Surviving Corporation, each of such directors to
hold office, subject to the applicable provisions of the Certificate of
Incorporation and By-laws of the Surviving Corporation, until the next annual
stockholders' meeting of the Surviving Corporation and until their successors
shall be duly elected or appointed and shall duly qualify. At the Effective
Time, the officers of the Company immediately
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<PAGE> 9
prior to the Effective Time shall be the initial officers of the Surviving
Corporation until their respective successors are duly elected or appointed and
qualified.
2.6 Conversion of Shares. At the Effective Time and by virtue of the
Merger, and without any action on the part of the holders thereof:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than Shares to be cancelled pursuant to Subsection
2.6(b) below and Dissenting Shares (as defined in Section 2.7 hereof))
shall be converted into the right to receive the Per Share Amount in cash,
without interest, less any withholding taxes required under applicable law.
(b) Each Share held in the treasury of the Company, if any, and each
Share owned by Parent, Purchaser or the Company, or by any direct or
indirect subsidiary of any of them, shall be cancelled and retired without
payment of any consideration therefor.
(c) Each share of common stock, par value $.01 per share, of Purchaser
issued and outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and non-assessable share of
common stock, par value $.01 per share, of the Surviving Corporation.
2.7 Appraisal Rights. Notwithstanding the provisions of Section 2.6 or
any other provision of this Agreement to the contrary, Shares that are issued
and outstanding immediately prior to the Effective Time and that are held by
stockholders who shall have properly demanded appraisal of their Shares in
accordance with Section 262 of the DGCL (the "Dissenting Shares"), shall not be
converted into the right to receive the Per Share Amount applicable to such
Shares at or after the Effective Time unless and until the holder of such
Dissenting Shares shall have failed to perfect or shall have effectively
withdrawn or lost such right to appraisal and payment under the DGCL. If a
holder of Dissenting Shares shall have so failed to perfect or shall have
effectively withdrawn or lost such right to appraisal and payment, then, as of
the Effective Time or the occurrence of such event, whichever last occurs, such
holder's Dissenting Shares shall be converted into and shall represent solely
the right to receive the Per Share Amount applicable to such Shares, without any
interest thereon, as provided in Section 2.6 hereof. The Company shall give
prompt notice of any demands for appraisal received by the Company and provide
Parent the opportunity to direct all negotiations and proceedings with respect
to demands for appraisal rights under the DGCL. The Company shall not, without
the prior written consent of Parent, make any payment with respect to any such
demands or offer to settle such demands.
2.8 Employee Stock Options. The Company shall (i) terminate each
outstanding stock option plan for its employees and non-employee directors,
including the 1996 Stock Incentive Plan, the 1996 Broad-Based Employee Stock
Plan, the 1997 Non-Employee Director Plan (the "Option Plans") and each employee
stock purchase plan for its employees and non-employee directors, including the
1997 Employee Stock Purchase Plan (the "ESPP") (collectively the "Stock Plans"),
immediately prior to the consummation of the Offer without prejudice to the
rights of the holders of options awarded pursuant thereto and (ii) grant no
additional options or similar rights under the Stock Plans or otherwise on or
after the date hereof.
With respect to options outstanding under the Option Plans (whether or not
then exercisable) immediately prior to consummation of the Offer, the Company
shall (a) cancel immediately prior to consummation of the Offer each such option
it has the right to cancel, and (b) with respect to options it does not have the
right to cancel, use its reasonable best efforts to obtain the consent of the
holder of such option to its cancellation and, subject to such consent, cancel
such option immediately prior to consummation of the Offer. In consideration,
the Company shall agree to and shall pay to the holder of each cancelled option
under the Option Plans, upon cancellation of such option and consummation of the
Offer (whether or not such option was exercisable immediately prior to its
cancellation), an amount equal to the excess, if any, of the Per Share Amount
over the per-share exercise price for such option, multiplied by the number of
Shares subject to such option
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(such payment to be net of applicable withholding taxes). The Company shall
cancel immediately prior to consummation of the Offer each option outstanding
under the ESPP or any other Stock Plan and shall pay to the holder thereof (a) a
refund of any amount withheld from the holder's compensation to pay the exercise
price thereof, and (b) an amount equal to the excess, if any, of the Per Share
Amount over the per-share exercise price for such option, multiplied by the
number of Shares subject to such option (such payment to be net of applicable
withholding taxes).
2.9 Surrender of Certificates.
(a) From and after the Effective Time, a bank or trust company to be
designated by Parent, with the prior approval of the Company (the "Paying
Agent"), shall act as exchange agent in effecting the exchange, for the Per
Share Amount multiplied by the number of Shares formerly represented
thereby, of certificates (the "Certificates") that, prior to the Effective
Time, represented Shares, which Shares have become entitled to payment
pursuant to Section 2.6. Upon the surrender of each Certificate and the
delivery by the Paying Agent of the Per Share Amount in exchange therefor,
such Certificate shall forthwith be cancelled. Until so surrendered and
exchanged, each such Certificate (other than Certificates representing
Shares held by Parent, Purchaser or the Company or any direct or indirect
subsidiary of Parent, Purchaser or the Company and Dissenting Shares) shall
represent solely the right to receive the Per Share Amount applicable to
the Shares represented by such Certificate multiplied by the number of
Shares represented by such Certificate. No interest shall be paid or shall
accrue on any amount payable on and after the Effective Time by reason of
the Merger upon the surrender of any such Certificate. Upon the surrender
and exchange of such an outstanding Certificate accompanied by a properly
executed letter of transmittal (referred to in Section 2.9(c)), the holder
shall receive the Per Share Amount applicable to the Shares represented
thereby, without any interest thereon. If the Per Share Amount is to be
paid to a person other than the person in whose name the Certificate
representing Shares surrendered in exchange therefor is registered, it
shall be a condition to such payment or exchange that such Certificate so
surrendered be properly endorsed or otherwise be in proper form for
transfer, and that the person requesting such payment or exchange shall pay
to the Paying Agent any transfer or other taxes required by reason of the
payment of such Per Share Amount to a person other than the registered
holder of the Certificate surrendered, or such person shall establish to
the satisfaction of the Paying Agent that such tax has been paid or is not
applicable. Notwithstanding the foregoing, neither the Paying Agent nor any
party hereto shall be liable to a holder of Shares for any Per Share Amount
or interest delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(b) Promptly following the date six months after the Effective Time,
the Paying Agent shall return to the Surviving Corporation all cash in its
possession relating to the transactions described in this Agreement, and
the Paying Agent's duties shall terminate. Thereafter, each holder of a
Certificate formerly representing Shares may surrender such Certificate to
the Surviving Corporation and (subject to applicable abandoned property,
escheat or similar laws) receive in exchange therefor the Per Share Amount
applicable to the Shares represented thereby, without any interest thereon,
but shall have no greater rights against the Surviving Corporation than may
be accorded to general creditors of the Surviving Corporation under
applicable law.
(c) Promptly after the Effective Time, the Paying Agent shall mail to
each record holder of Certificates that immediately prior to the Effective
Time represented Shares a form of letter of transmittal and instructions,
approved by Parent, for use in surrendering such Certificates and receiving
the Per Share Amount therefor.
(d) At and after the Effective Time, holders of Certificates shall
cease to have any rights as stockholders of the Company except for the
right to surrender such Certificates in exchange for the Per Share Amount
or the right, if any, to receive payment from the Surviving Corporation of
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<PAGE> 11
the "fair value" of such Shares as determined in accordance with Section
262 of the DGCL and Section 2.7 hereof, and there shall be no transfers on
the stock transfer books of the Company or the Surviving Corporation of any
Shares that were outstanding immediately prior to the Merger. If, after the
Effective Time, Certificates are presented to the Surviving Corporation or
the Paying Agent, they shall be cancelled and exchanged for the Per Share
Amount, as provided in Section 2.6 hereof, subject to applicable law in the
case of Dissenting Shares.
3. Representations and Warranties of the Company.
The Company represents and warrants to Parent and Purchaser that, except as
disclosed or reflected (including, in the case of financial statements, provided
for) in the Disclosure Schedule delivered herewith to Parent and Purchaser, or
in the Company's Form 10-K for the fiscal year ended December 31, 1997 ("Form
10-K") as filed with the Commission, any subsequently filed Forms 10-Q and Forms
8-K, the annual report to stockholders for the fiscal year ended December 31,
1997 delivered to Parent and Purchaser (the "Annual Report"), and the proxy
statement for the 1998 Annual Meeting (such Forms, the Annual Report and such
proxy statements, including any financial statements and related notes or
schedules included in such documents and all exhibits and schedules included or
incorporated by reference therein, are herein collectively referred to as the
"SEC Reports"):
3.1 Organization and Qualifications; Subsidiaries. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and is in good standing as a foreign corporation
in each jurisdiction where the properties owned, leased or operated by it, or
the businesses conducted by it, requires such qualification and where failure to
so qualify or be in good standing would have a material adverse effect on the
financial condition or businesses of the Company and its subsidiaries taken as a
whole (a "Material Adverse Effect") or prevent or delay the consummation of the
Offer or the Merger in any material respect. The Company does not have any
material subsidiaries. The Company has the corporate power to carry on its
businesses as they are now being conducted. Copies of the charter and by-laws of
the Company, and all amendments thereto as presently in effect, have been
delivered to Parent, and such copies are complete and correct as of the date
hereof. Such charter and by-laws are in full force and effect and no other
organizational documents are applicable to or binding upon the Company. The
Company is not in violation of any of the provisions of its Charter or by-laws.
3.2 Capitalization. The authorized capital stock of the Company on the
date hereof is as set forth in the Disclosure Schedule. The issued and
outstanding capital stock of the Company as of May 27, 1998 is as set forth in
the Disclosure Schedule. Except as set forth in the Disclosure Schedule, no
equity securities of the Company are authorized on the date hereof, and except
for options granted pursuant to the Stock Plans, there are no outstanding
options, warrants, agreements, contracts, calls, commitments or demands of any
character, preemptive or otherwise, other than this Agreement, relating to any
of the capital stock of the Company. Since May 27, 1998, no options to purchase
Shares have been granted, and no shares of the Company's capital stock have been
issued except Shares issued upon exercise of options granted pursuant to the
Stock Plans. At December 31, 1997, the Company did not hold any of its capital
stock as treasury stock. As of the commencement of the Offer, all of the
outstanding Shares shall be duly authorized, validly issued, fully paid and
non-assessable.
3.3 Authority and Absence of Conflict.
(a) The Company has the requisite corporate power and authority to
enter into this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of the Company, and, except for the approval of the holders of
outstanding Shares (if required under the DGCL) as set forth in Section 6.2
of this Agreement, no other corporate proceedings on the part of the
Company are necessary to authorize the execution,
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delivery and performance of this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
the Company and (assuming due authorization, execution and delivery by
Parent and Purchaser) constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except to the extent that its enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of creditors' rights generally or by general equitable
principles. The only vote required to authorize the Merger is the
affirmative vote of a majority of the outstanding Shares. The Company has
elected, pursuant to its charter, not to be subject to Section 203 of the
DGCL.
(b) The execution, delivery and performance of this Agreement by the
Company, the consummation by the Company of the transactions contemplated
hereby, and the compliance by the Company with any of the provisions
hereof, will not (i) violate, conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of
any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company or any of its subsidiaries under, any
of the terms, conditions or provisions of (x) the charter or by-laws of the
Company or any of its subsidiaries, or (y) any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which the Company or any of its subsidiaries is a party or to
which any of them or any of their respective properties or assets may be
subject, or (ii) subject to compliance with the statutes and regulations
referred to in the next subsection, violate any judgment, ruling, order,
writ, injunction, decree, statute, rule or regulation applicable to the
Company or its subsidiaries or any of their respective properties or
assets; except, in the case of each of clauses (i)(y) and (ii) above, for
such violations, conflicts, breaches, defaults, terminations, accelerations
or creations of liens, security interests, charges or encumbrances (A)
which, in the aggregate, would not have a Material Adverse Effect or
prevent or delay the consummation of the Merger or the Offer in any
material respect; or (B) which are cured, waived or terminated prior to the
acceptance for payment of Shares by Purchaser under the Offer.
(c) Other than in connection with or in compliance with the provisions
of the DGCL, the Hart-Scott-Rodino Anti-trust Improvements Act of 1976, as
amended (the "HSR Act"), the Exchange Act and the "takeover" laws of
various states, no notice to, filing with, or authorization, consent or
approval of, any domestic or foreign public body or authority is necessary
for the execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions
contemplated by this Agreement, except where the failure to give such
notices, make such filings or obtain such authorizations, consents or
approvals would, in the aggregate, not have a Material Adverse Effect or
prevent or delay in any material respect consummation of the Merger or
Offer or otherwise prevent or delay the Company from performing its
obligations under this Agreement in any material respect.
3.4 Reports. The Company has filed all forms, reports and documents
required under Section 13(a) under the Exchange Act with the Commission since
December 31, 1996, and none of such forms, reports or documents, including any
financial statements or schedules included therein, when filed, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein not
misleading. The balance sheets (including the related notes) included in the
Form 10-Ks fairly present the consolidated financial position of the Company and
its consolidated subsidiaries as of the respective dates thereof, and the other
related statements (including the related notes) included therein fairly present
the consolidated results of operations and the changes in consolidated financial
position of the Company and its consolidated subsidiaries for the fiscal periods
set forth therein. Each of the financial statements (including the related
notes) included or incorporated by reference in the Form 10-Ks have been
prepared in accordance with generally accepted accounting principles
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consistently applied during the periods involved, except as otherwise noted
therein and except that the quarterly financial statements do not contain all
the footnote disclosures required by generally accepted accounting principles.
The representations and warranties set forth in this Section 3.4 shall not apply
to any noncompliance, non-filings, misstatements, omissions or failures to
present fairly or conform to generally accepted accounting principles which
either (i) were corrected in a subsequent form, report or document filed with
the Commission prior to the date of this Agreement, or (ii) are not, in the
aggregate, material to the financial condition or business of the Company and
its subsidiaries taken as a whole and will not prevent or delay in any material
respect the consummation of the transactions contemplated hereby. The Company
has heretofore furnished to Parent a complete and correct copy of any amendments
or modifications which have not yet been filed with the Commission to
agreements, documents or other instruments which previously had been filed by
the Company with the Commission pursuant to the Securities Act and the rules and
regulations promulgated thereunder or the Exchange Act and the rules and
regulations promulgated thereunder.
3.5 Absence of Certain Changes. Since December 31, 1997, except for
actions taken in connection with the potential sale of the Company or certain of
its divisions, the Company and its subsidiaries have conducted their respective
businesses and operations consistent with past practice only in the ordinary and
usual course and, since December 31, 1997, to the Company's knowledge, neither
the Company nor any of its subsidiaries has incurred any liabilities or
obligations (secured or unsecured and whether accrued, absolute, contingent,
direct, indirect or otherwise) material to the business and financial condition
of the Company and its subsidiaries taken as a whole (the "Liabilities") except
(i) Liabilities incurred in the ordinary course of business, (ii) Liabilities
incurred in connection with or as a result of the Offer, and (iii) expenditures
for professional services in connection with the solicitation of expressions of
interest in the Company.
3.6 Employee Benefit Plans.
The Disclosure Schedule sets forth a true and complete list of each
"employee benefit plan" (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), including, without
limitation, each bonus, incentive compensation, profit sharing, retirement,
pension, group insurance, death benefit, cafeteria, flexible spending account,
medical, dependent care, stock option, stock purchase, stock appreciation
rights, savings, deferred compensation, incentive, consulting, severance or
termination pay, change of control, vacation, welfare and all other material
employee benefit or fringe benefit plans, programs, policies, agreements or
arrangements whether or not subject to ERISA, whether formal or informal, oral
or written, legally binding or not, which the Company or any of its subsidiaries
maintains or contributes to or has any present or future liability under with
respect to any employee or former employee of the Company. All such plans,
programs, agreements and arrangements shall be collectively referred to herein
as the "Employee Benefit Plans."
(a) Neither the existence of nor the failure of the Company or any of
its subsidiaries to comply with the terms of or to satisfy any liability
under any Employee Benefit Plan would have a Material Adverse Effect.
(b) Each Employee Benefit Plan which is intended to comply with the
provisions of Section 401(a) of the Internal Revenue Code (the "Code") has
been determined by the Internal Revenue Service to be so qualified and has
received a favorable determination letter as to its qualification from the
Internal Revenue Service and there have been no amendments to such Employee
Benefit Plan or any other facts or conditions that would reasonably be
expected to cause a loss of such qualified status.
(c) With respect to each Employee Benefit Plan, each such Plan has
been administered and is in compliance with the terms of such Plan and (i)
neither the Company nor any of its subsidiaries has failed to comply with
any material applicable reporting, disclosure or other requirements of
ERISA, the Code, or other applicable laws, rules and regulations, except
for
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such failures to comply which would not have a Material Adverse Effect,
(ii) to the knowledge of the Company, there has been no "prohibited
transaction" as described in Section 4975 of the Internal Revenue Code or
Section 406 of ERISA the failure to correct which would have a Material
Adverse Effect; and (iii) no event has occurred and no condition exists
that would subject the Company or any of its subsidiaries, either directly
or by reason of their affiliation with any member of their "Controlled
Group" (defined as any organization which is a member of a controlled group
of organizations within the meaning of Code Sections 414(b), (c), (m) or
(o)), to any tax, fine, lien, penalty or other liability imposed by ERISA,
the Code or other applicable laws, rules or regulations; and (iv) for each
Employee Benefit Plan with respect to which a Form 5500 has been filed, no
material change has occurred with respect to the matters covered by the
most recent Form since the date thereof.
(d) Neither the Company nor any subsidiary maintains any Employee
Benefit Plans subject to the minimum funding standards of ERISA and the
Internal Revenue Code.
(e) Neither the Company nor any of its subsidiaries presently
maintains, contributes to or has any liability (including current or
potential withdrawal liability) with respect to any "multiemployer plan" as
such term is defined in Section 3(37) of ERISA.
(f) Neither the Company nor any of its subsidiaries has ever
maintained an employee pension benefit plan subject to Title IV of ERISA.
(g) There is no pending or, to the knowledge of the Company,
threatened legal action, proceeding or investigation against or involving
any Employee Benefit Plan maintained by the Company or any of its
subsidiaries (other than routine claims for benefits), the adverse
resolution of which would have a Material Adverse Effect.
(h) With respect to any employee or former employee of the Company,
neither the Company nor any of its subsidiaries presently maintains,
contributes to or has any liability under any funded or unfunded medical,
health or life insurance plan or arrangement for present or future retirees
or present or future terminated employees except as required by the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), the existence of which or the failure to satisfy which would
have a Material Adverse Effect. Neither the Company nor any subsidiary of
the Company maintains or contributes to a trust, organization or
association described in any of Sections 501(c)(9), 501(c)(17) or
501(c)(20) of the Code.
(i) With respect to each of the Employee Benefit Plans, the Company
has delivered or made available to Purchaser true and complete copies of:
(i) the plan documents, including any related trust agreements, insurance
contracts or other funding arrangements, or a written summary of the terms
and conditions of the plan if there is no written plan document; (ii) any
summary plan description and other written communications by the Company or
any of its subsidiaries to their employees concerning the extent of the
benefits provided under an Employee Benefit Plan; and (iii) for the three
most recent years or such shorter period as such Employee Benefit Plan has
been in effect, (A) Internal Revenue Service Form 5500 and attached
schedules required to be filed prior to the date hereof, (B) actuarial
valuation reports (if any), (C) attorney's response to an auditor's request
for information (if any), and (D) financial statement.
(j) Except as set forth in the Disclosure Schedule, no Employee
Benefit Plan exists that could result in the payment to any present or
former employee of the Company or any of its subsidiaries of any money or
other property or accelerate or provide any other rights or benefits to any
present or former employee of the Company or any of its subsidiaries as a
result of the transaction contemplated by this Agreement, whether or nor
such payment would constitute a parachute payment within the meaning of
Code Section 280G.
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3.7 Litigation; Violation of Law.
(a) There are no claims, actions, suits or proceedings or
investigations pending or, to the knowledge of the Company, threatened
against the Company or any of its subsidiaries, nor is the Company or any
of its subsidiaries subject to any order, judgment, writ, injunction,
decree, determination or award, except in either case for matters which, in
the aggregate, do not have a Material Adverse Effect or would not prevent
or delay the Company's ability to consummate the transactions contemplated
hereby.
(b) To the knowledge of the Company, the businesses of the Company and
its subsidiaries are not being conducted in violation of any applicable
law, ordinance, rule, regulation, decree or order of any court or
governmental entity, except for violations which, in the aggregate, do not
have a Material Adverse Effect.
3.8 Labor.
(a) The Company is not a party to or otherwise bound by any collective
bargaining agreements, contracts or other agreements or understandings with
a labor union or labor organization with respect to any employee, nor, as
of the date hereof, is there any material dispute, grievance, controversy,
strike or request for union representation pending, or, to the knowledge of
the Company, threatened, against either the Company or any of its
subsidiaries.
3.9 Taxes. All material federal, state, local and foreign tax returns,
reports and statements required to be duly and timely filed by the Company and
its subsidiaries have been, or will be, duly and timely filed with the
appropriate governmental authority in all jurisdictions in which such returns,
reports and statements are required to be filed, except where the failure to do
so would not have a Material Adverse Effect. The Company has paid or, to the
extent required by generally accepted accounting principles, made provisions for
(by a tax reserve on its books and records) all taxes, assessments, fees and
other governmental charges and impositions due and payable or that, to the
knowledge of the Company, will become due and payable, in respect of all taxable
periods or portions thereof ending on or before the Closing Date, the failure of
which payment would have a Material Adverse Effect. Except as set forth in the
Disclosure Schedule, no audit of any federal, state, local or foreign tax return
of the Company of any of its subsidiaries is in progress or pending or, to the
knowledge of the Company, threatened, and no waiver of any statute of
limitations has been given and is in effect with respect to the assessment of
any taxes, assessments, fees and other governmental charges or impositions
against the Company or any of its subsidiaries or any of their respective
properties or assets. Except as set forth in the Disclosure Schedule, no taxing
authority has assessed or to the knowledge of the Company, proposed an
assessment against of any taxes, fees or other governmental charges or
impositions against the Company or any of its subsidiaries of any federal,
state, local or foreign tax, which would have a Material Adverse Effect.
3.10 Environmental Matters.
(a) There are no Environmental Liabilities (as defined below) of the
Company or its subsidiaries or any conditions or events that could
reasonably be expected to result in such Environmental Liabilities which
would have, individually or in the aggregate, a Material Adverse Effect.
(b) As used in this Agreement, "Environmental Laws" means federal,
state and local laws, rules, orders, judgments, decrees and regulations in
effect prior to or as of the date of this Agreement which are applicable to
the real property owned or leased by the Company and relating to
environmental matters or the protection of human health, including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Resource Conservation and Recovery Act of 1976,
the Federal Water Pollution Control Act, the Clean Air Act, the Hazardous
Materials Transportation Act, the Toxic Substances Control Act, the Safe
Drinking Water Act, the Occupational Safety and Health Act, and any other
federal environmental laws, as such environmental laws have been amended
from time to time, and
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similar state and local laws, and regulations in effect as of the date of
this Agreement which implement such laws. "Environmental Liabilities" with
respect to any Person means any and all liabilities of or relating to such
Person or any of its subsidiaries which (i) arise under or relate to
matters covered by Environmental Laws, and (ii) relate to actions occurring
or conditions existing on or prior to the date of this Agreement.
3.11 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by the Company in such
manner as not to give rise to any valid claim against the Company or Purchaser
for a brokerage commission, finder's fee or like payment to any person or
entity, except that the Company has retained William Blair & Company, L.L.C.,
whose fees and expenses as its financial adviser in connection herewith shall be
paid by the Company pursuant to the engagement letter between the Company and
William Blair & Company, L.L.C. The Company has heretofore furnished to Parent a
complete and correct copy of all agreements between the Company and William
Blair & Company, L.L.C. pursuant to which such firm would be entitled to any
payment relating to the transactions contemplated hereby.
3.12 Offer Documents, Proxy Statement, Etc. Neither the Schedule 14D-9,
or any amendments thereof or supplements thereto, nor any of the information
supplied in writing by the Company specifically for inclusion in the Offer
Documents or in any amendments thereof or supplements thereto, will, at the
respective times the Schedule 14D-9, the Offer Documents or any such amendments
or supplements are filed with the Commission or distributed to the holders of
Shares, contain any statement which, at such time and in light of the
circumstances under which made, will be false or misleading with respect to any
material fact, or will omit to state any material fact required to be stated
therein, necessary in order to make the statements therein, in light of the
circumstances under which they were made, not false or misleading or necessary
to correct any statement in any earlier filing with the Commission or
communication with the holders of Shares in connection with the Offer, the
Merger or the Company Stockholders' Meeting (if any, and as defined below) that
has become false or misleading. Neither the proxy statement ("Proxy Statement")
to be sent to the stockholders of the Company in connection with the meeting of
the Company's stockholders, if such meeting is necessary to effect the Merger
(the "Company Stockholders' Meeting"), nor the Proxy Statement, as amended or
supplemented from time to time, will, on the date first mailed to stockholders,
or at the time of the Company Stockholders' Meeting contain any statement which,
at such time and in light of the circumstances under which made, will be false
or misleading with respect to any material fact, or will omit to state any
material fact required to be stated therein, necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not false or misleading or necessary to correct any statement in any earlier
filing with the Commission or communication with the holders of Shares in
connection with the Offer, the Merger or the Company Stockholders' Meeting (if
any) that has become false or misleading. Notwithstanding the foregoing, the
Company makes no representation or warranty with respect to any information that
has been supplied by Parent or Purchaser or any of their accountants, counsel or
other authorized representatives in writing specifically for use in any of the
foregoing documents (collectively, "Parent Information"). The Schedule 14D-9 and
the Proxy Statement, and any amendments or supplements thereto, will comply as
to form in all material respects with the provisions of the Exchange Act and the
rules and regulations promulgated thereunder.
3.13 No Undisclosed Liabilities. Except to the extent specifically
reflected or reserved against in the consolidated balance sheet of the Company
as of March 31, 1998 or for liabilities arising thereafter in the ordinary
course of business, or as otherwise set forth in the Disclosure Schedule, the
Company does not have any liabilities or obligations required by generally
accepted accounting principles to be reflected on the Company's balance sheet of
any nature, whether absolute, accrued, contingent or otherwise which would
result in a Material Adverse Effect.
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4. Representations and Warranties of Parent and Purchaser.
Parent and Purchaser each represent and warrant, jointly and severally, to
the Company that, except as disclosed in the Disclosure Schedule delivered
herewith to the Company:
4.1 Organization and Qualification. Each of Parent and Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and is in good standing as a foreign
corporation in each jurisdiction where the properties owned, leased or operated
by it, or the business conducted by it, requires such qualification and where
failure to so qualify or be in good standing would have a material adverse
effect on the financial condition or business of Parent and its subsidiaries
taken as a whole or prevent or delay the consummation of the Offer or the Merger
in any material respect. Each of Parent and Purchaser has the corporate power to
carry on their respective businesses as they are now being conducted. Copies of
the charter documents and by-laws of Parent and Purchaser have heretofore been
delivered to the Company, and such copies are complete and correct as of the
date hereof.
4.2 Capital Stock of Purchaser. As of the commencement of the Offer, and
at all times thereafter up to and including the Effective Time, all of the
outstanding capital stock of Purchaser shall be owned directly by Parent.
4.3 Authority and Absence of Conflict.
(a) Each of Parent and Purchaser has the requisite corporate power and
authority to enter into this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by Parent and Purchaser and the
consummation by Parent and Purchaser of the transactions contemplated
hereby have been duly authorized by all necessary corporate action, and no
other corporate proceedings on the part of Parent or Purchaser are
necessary to authorize the execution, delivery and performance of this
Agreement and the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Parent and Purchaser and (assuming due
authorization, execution and delivery by the Company) constitutes a valid
and binding obligation of each of them, enforceable against each of them in
accordance with its terms except to the extent that its enforceability may
be limited by applicable bankruptcy, insolvency, reorganization or other
laws affecting the enforcement of creditors' rights generally or by general
equitable principles.
(b) The execution, delivery and performance of this Agreement by
Parent or Purchaser, the consummation by them of the transactions
contemplated hereby, and the compliance by Parent or Purchaser with any of
the provisions hereof, will not (i) violate, conflict with, or result in a
breach of any provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of
the properties or assets of Parent or Purchaser or any other direct or
indirect subsidiary of Parent under any of the terms, conditions or
provisions of (x) the charter documents or by-laws of Parent or Purchaser,
or (y) any note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which Parent or Purchaser or
any other direct or indirect subsidiary of Parent is a party, or to which
any of them, or any of their respective properties or assets, may be
subject, or (ii) subject to compliance with the statutes and regulations
referred to in the next subsection, violate any judgment, ruling, order,
writ, injunction, decree, statute, rule or regulation applicable to Parent
or Purchaser or any of their respective properties or assets; except, in
the case of each of clauses (i)(y) and (ii) above, for such violations,
conflicts, breaches, defaults, terminations, accelerations or creations of
liens, security interests, charges or encumbrances which, in the aggregate,
would not have a material adverse effect upon the business or financial
condition of Parent and its subsidiaries taken as a whole or prevent or
delay in any material respect the consummation of the Merger or the Offer.
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(c) Other than in connection with or in compliance with the provisions
of the DGCL, the HSR Act, the Exchange Act and the "takeover" laws of
various states, no notice to, filing with, or authorization, consent or
approval of, any domestic or foreign public body or authority is necessary
for the execution, delivery and performance of this Agreement by each of
Parent and Purchaser and the consummation by Parent and Purchaser of the
transactions contemplated by this Agreement, except where the failure to
give such notices, make such filings, or obtain authorizations, consents or
approvals would, in the aggregate, not materially impair the ability of
Parent and Purchaser to perform their obligations hereunder or have a
material adverse effect upon the business or financial condition of Parent
and its subsidiaries taken as a whole or prevent or delay in any material
respect the consummation of the Merger or Offer in any material respect.
4.4 Financing. Parent has and will have all funds necessary to consummate
the Offer and the Merger and shall make such funds available to Purchaser for
such purposes.
4.5 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Parent and Purchaser or
any of their respective subsidiaries in such manner as not to give rise to any
valid claim against the Company, Parent or Purchaser for a brokerage commission,
finder's fee or other like payment to any person or entity, except that Parent
has retained Goldman, Sachs & Co., whose fees and expenses as its financial
adviser in connection herewith shall be paid by Parent pursuant to the
engagement letter between Parent and Goldman, Sachs & Co.
4.6 Proxy Statement, Etc. None of the Parent Information supplied in
writing by Parent or Purchaser specifically for inclusion in the Schedule 14D-9,
as amended or supplemented from time to time, or in the Proxy Statement (if
any), as amended or supplemented from time to time, will, on the date filed with
the Commission or mailed to the Company stockholders, or, in the case of the
Proxy Statement, at the time of the Company Stockholders' Meeting (if any),
contain any statement which, at such time and in light of the circumstances
under which made, will be false or misleading with respect to any material fact,
or will omit to state any material fact required to be stated therein, necessary
in order to make the statements therein not false or misleading or necessary to
correct any statement in any earlier filing with the Commission or communication
with the holders of Shares with respect to the Offer, the Merger or the Company
Stockholders' Meeting (if any) that has become false or misleading. Neither the
Schedule 14D-1, the Offer Documents nor any amendments thereof or supplements
thereto will, at the respective times that the Schedule 14D-1, the Offer
Documents or any such amendments or supplements are first filed with the
Commission or distributed to holders of Shares, or at the consummation of the
Offer, contain any statement which, at such time and in light of the
circumstances under which made, will be false or misleading with respect to any
material fact, or will 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 false or misleading or necessary
to correct any statement in any earlier filing with the Commission or
communication with the holders of Shares with respect to the Offer, the Merger
or the Company Stockholders' Meeting (if any) that has become false or
misleading. Notwithstanding the foregoing, Parent and Purchaser make no
representation or warranty with respect to any information that has been
supplied by the Company or its accountants, counsel or other authorized
representatives in writing specifically for use in any of the foregoing
documents. The Schedule 14D-1, the Offer Documents and any amendments or
supplements thereto shall comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations promulgated
thereunder.
4.7 Ownership of Shares. Neither Parent nor Purchaser owns beneficially
or of record any Shares. Without limiting the generality of the foregoing,
neither Parent nor Purchaser is an "interested stockholder," as defined in
Section 203 of the DGCL, of the Company and neither Parent nor Purchaser is an
affiliate, as defined in Section 203 of the DGCL, of an interested stockholder
of the Company.
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4.8 No Litigation. There are no claims, actions, suits or proceedings or
investigations pending or, to the best knowledge of the Company, threatened
against Parent, Purchaser or any of their respective Affiliates, nor is Parent,
Purchaser or any of their respective Affiliates subject to any order, judgment,
writ, injunction or decree, in either case which would materially impair the
ability of Parent or Purchaser to consummate the Offer or the Merger.
5. Conduct of Business.
Except as otherwise contemplated hereby or as set forth in Schedule 5
of the Disclosure Schedule, the Company covenants and agrees that, unless
Parent shall otherwise agree in writing (which consent shall not
unreasonably be withheld), prior to the Effective Time:
(a) The business of the Company and its subsidiaries shall be
conducted only in, and the Company and its subsidiaries shall not take any
action except in, the ordinary and usual course of business and in a manner
consistent with past practice, and the Company shall use its reasonable
best efforts to maintain and preserve intact its and its subsidiaries'
business organization, assets, employees, officers and consultants and
advantageous business relationships.
(b) Neither the Company nor any of its subsidiaries shall directly or
indirectly do any of the following: (i) except in the ordinary course of
business, sell, pledge, dispose of or encumber any assets of the Company or
of any of its subsidiaries; (ii) amend its charter or by-laws or similar
organizational documents; (iii) split, combine or reclassify any shares of
its capital stock or declare, set aside, make or pay any dividend or
distribution payable in cash, stock, property or otherwise with respect to
any of its capital stock; (iv) redeem, purchase or otherwise acquire or
offer to redeem, purchase or otherwise acquire any capital stock of the
Company or its subsidiaries; (v) adopt a plan of liquidation or resolutions
providing for the liquidation, dissolution, merger, consolidation or other
reorganization of the Company; or (vi) authorize or propose any of the
foregoing, or enter into any contract, agreement, commitment or arrangement
to do any of the foregoing.
(c) Neither the Company nor any of its subsidiaries shall, directly or
indirectly, (i) except for Shares issuable upon exercise of options
outstanding under the Stock Plans on the date hereof, issue, deliver, sell,
pledge, dispose of or encumber, or authorize, propose or agree to the
issuance, sale, pledge, disposition or encumbrance of, any shares of, or
any options, warrants or rights of any kind to acquire any shares of or any
securities convertible into or exchangeable or exercisable for any shares
of, its capital stock of any class or any other securities in respect of,
in lieu of, or in substitution for Shares outstanding on the date hereof;
(ii) acquire (by merger, consolidation or acquisition of stock or assets)
any corporation, partnership or other business organization or division
thereof; (iii) except in an amount not in excess of $12,000,000, and other
than drawdowns on the Company's line of credit that do not result in its
indebtedness increasing by more than $12,000,000 over the amount thereof on
the date of this Agreement, incur any indebtedness or issue any debt
securities or assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for, the
obligations of any other individual or entity, or make any loans or
advances, or capital contributions to, or investment in, any other person
or modify any indebtedness or other liability; (iv) change the
capitalization of the Company; (v) except in the ordinary course, change
any assumption underlying, or method of calculating, any bad debt,
contingency or other reserve; (vi) pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business consistent with past practice or as required by applicable law;
(vii) waive, release, grant or transfer any rights of value or modify or
change in any material respect any existing license, lease, contract or
other document, other than in the ordinary course of business consistent
with past practice; (viii) enter into any contract or agreement other than
in the ordinary course of business consistent with past practice; or (ix)
authorize
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any capital expenditures which are, in the aggregate, in excess of $2.0
million for the Company and its subsidiaries taken as a whole.
(d) Subject to Section 2.8, neither the Company nor any of its
subsidiaries shall (A) establish, adopt, amend or terminate (except as may
be required by law) any Employee Benefit Plan or any other bonus, profit
sharing, compensation, stock option, pension, retirement, deferred
compensation, employment, collective bargaining, fringe benefit, change of
control, incentive, stock purchase, severance, termination or other
employee benefit plan, agreement, trust, fund or other arrangement for the
benefit or welfare of any employee or any officer or director or former
employee; (B) increase the compensation or benefits of any of its
directors, officers or employees, except for increases in compensation for
officers and employees of the Company, in the ordinary course of business
and in a manner consistent with past practice; or (C) grant any severance,
termination pay or fringe benefits not required to be paid under existing
agreements or policies, including, without limitation, amounts available in
the three sale incentive bonus pools described in the Disclosure Schedule.
(e) Except as contemplated in connection with this Agreement, neither
the Company nor any of its subsidiaries shall make any tax election, change
any method of tax accounting, enter into or amend any tax sharing,
allocation or indemnity agreement (whether written or unwritten) or, except
in the ordinary course of business, settle or compromise any federal,
state, local or foreign income tax liability.
(f) Neither the Company nor any of its subsidiaries shall permit any
insurance policy naming it as beneficiary or a loss payee to be cancelled
or terminated without notice to Parent.
(g) Neither the Company nor any of its subsidiaries shall, except as
may be required as a result of a change in law or in generally accepted
accounting principles, change any of the accounting practices or principles
used by it.
(h) Neither the Company nor any of its subsidiaries shall agree, in
writing or otherwise, to take any of the foregoing actions or any action
which would make any representation or warranty in Article 3 hereof untrue
or incorrect so as to result in a Material Adverse Effect or would result
in any of the conditions set forth in Annex I not being satisfied.
(i) Neither the Company nor any of its subsidiaries shall authorize
any of the foregoing, or enter into or modify any contract, agreement,
commitment or arrangement to do any of the foregoing.
6. Additional Agreements.
6.1 Proxy Statement. If a Company stockholder vote is required under the
DGCL or any other applicable law in order to effect the Merger, then promptly
after consummation of the Offer the Company shall file with the Commission under
the Exchange Act, and shall use all reasonable efforts to have cleared by the
Commission, and promptly thereafter shall mail to its stockholders, the Proxy
Statement. Parent, Purchaser and the Company each agree promptly to correct any
information provided by it for use in the Proxy Statement which shall have
become false or misleading. The Proxy Statement shall contain the recommendation
of the Board of Directors of the Company in favor of the Merger and, if a
Company Stockholders' Meeting is required, the Board of Directors of the Company
shall recommend that the stockholders of the Company vote for approval and
adoption of this Agreement and the Merger; provided, however, that prior to the
Stockholders' Meeting such recommendation may be withdrawn, modified or amended
to the extent the Board of Directors deems it necessary to do so in the exercise
of its fiduciary obligations after being so advised by outside counsel.
6.2 Stockholders' Meeting.
(a) If a Company stockholder vote is required under the DGCL in order
to effect the Merger, then promptly after consummation of the Offer the
Company shall take all actions in
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accordance with the DGCL and its Restated Certificate of Incorporation and
by-laws to convene the Company Stockholders' Meeting for purposes of
adopting this Agreement. Unless the Board of Directors by majority vote
determines in good faith, based on the advice of outside legal counsel that
to do so would constitute a breach of fiduciary duty to the stockholders of
the Company under applicable law, the Company shall (A) include in the
Proxy Statement the recommendation of the Board that stockholders of the
Company vote in favor of adoption and approval of this Agreement and the
Merger and the written opinion of William Blair & Company, L.L.C. that the
consideration to be received by the holders of Shares of the Company
pursuant to the Offer and the Merger is fair from a financial point of view
to such stockholders and (B) use its reasonable best efforts to obtain the
necessary approval of this Agreement and the Merger by its stockholders.
Parent agrees that it will vote, or cause to be voted, at the Company
Stockholders' Meeting all Shares then owned by it or Purchaser or any of
Parent's other subsidiaries and Affiliates in favor of the Merger and the
adoption of this Agreement.
(b) Notwithstanding the foregoing, in the event that Purchaser shall
acquire at least 90% of the then-outstanding Shares, the parties hereto
agree, at the request of Purchaser, subject to Article 7, to take all
necessary and appropriate action to cause the Merger to become effective,
in accordance with Section 253 of the DGCL, as soon as reasonably
practicable after such acquisition, without a meeting of the stockholders
of the Company.
6.3 Access to Information.
(a) From and after the date of this Agreement and until the earlier of
the Effective Time or termination of this Agreement, the Company shall, and
shall cause its subsidiaries, officers, directors, employees and agents to,
afford to Parent, Purchaser and their officers, employees and agents,
complete access at all reasonable times to the officers, employees, agents,
properties, books, records and contracts of the Company and its
subsidiaries, and shall furnish Parent and Purchaser and their respective
officers, employees and agents, all financial, operating and other data and
information as Parent and Purchaser may reasonably request.
(b) Parent hereby confirms to the Company that the confidentiality and
standstill agreement dated as of March 19, 1998 between Parent and the
Company (the "Confidentiality Agreement") is in full force and effect.
Parent shall cause Purchaser, and Purchaser hereby agrees, to be bound by
and to comply with the Confidentiality Agreement to the same extent as
Parent is bound thereby and Parent shall cause Purchaser's officers,
employees, agents and representatives, including attorneys, accountants,
consultants, financial advisers and lenders and their respective counsel
(collectively, the "Parent Representatives") to comply therewith as though
they were parties thereto.
6.4 Filings; Reasonable Efforts. Subject to the terms and conditions
herein provided, the Company, Parent and Purchaser shall (a) promptly after the
date hereof make their respective filings and thereafter make any other required
submissions under the HSR Act with respect to the Offer and the Merger; and (b)
use their reasonable efforts promptly to take, or cause to be taken, and to
cooperate with each other with respect to, all other actions and do, or cause to
be done, all things necessary, proper or appropriate under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement. Notwithstanding the foregoing, the Company shall not be
obligated to use its reasonable efforts or take any action pursuant to this
Section 6.4 if the Board of Directors of the Company by majority vote determines
in good faith, based on the advice of outside legal counsel to the Company, that
such actions would constitute a breach of the Board of Directors' fiduciary
duties to the stockholders of the Company under applicable law.
6.5 Public Announcements. Parent, Purchaser and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to the Offer or the Merger, and shall not issue any such
press release or make any such public
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statement prior to such consultation, except as may be required by law or any
listing agreement with a national securities exchange.
6.6 Notification of Certain Matters. The Company, Parent and Purchaser
each agree to give prompt notice to each other at any time from the date hereof
to the Effective Time of the obtaining by it of actual knowledge as to the
occurrence, or failure to occur, of any event which occurrence or failure would
be likely to cause a breach of any representation or warranty contained in this
Agreement or result in any failure of the Company, Parent or Purchaser, as the
case may be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder, if such breach or failure would
result in a Material Adverse Effect or in a material adverse effect upon Parent
or any of its Affiliates or prevent or delay the consummation of the Merger in
any material respect.
6.7 Employees.
(a) Prior to the Effective Time, the Company shall pay all
compensation and benefits earned through or prior to the Effective Time as
provided pursuant to the terms of any compensation arrangements, employment
agreements and employee or director benefit plans, programs and policies in
existence as of the date hereof for all employees (and former employees)
and directors (and former directors) of the Company and its subsidiaries,
as well as all compensation and benefits earned and required to be paid
prior to the Effective Time pursuant to the terms of an individual
agreement with any employee, former employee, director or former director
in effect as of the date hereof, it being understood that the amounts
payable in the three sale incentive bonus pools shall not exceed the
amounts set forth in Schedule 5 of the Disclosure Schedule.
(b) During the period from the Effective Time until the first
anniversary thereof (the "Employment Continuation Period"), Parent shall
provide for each employee of the Surviving Corporation or its subsidiaries
(each, an "Employee"), so long as he or she is actively employed by the
Surviving Corporation (or as required by law), and for each former employee
of the Company or one of its subsidiaries, to the extent such person has
rights thereto immediately prior to the Effective Time (collectively,
"Company Employees") (i)(A) to continue to participate in the Company's
welfare benefit plans and the Company's compensation plans, employee
incentive programs and bonus plans (including, without limitation,
hospitalization, medical, prescription, dental, disability, salary
continuation, vacation, accidental death, travel accident, and individual
or group life or other insurance) (each, a "Company Plan"), as each such
Company Plan is in effect on the date of this Agreement (without
modification or amendment) during the period commencing at the Effective
Time through December 31, 1998, and (B) during the period commencing
January 1, 1999 through the first anniversary of the Effective Time, the
Surviving Corporation shall provide the Company Employees with benefits
that are at least as valuable in the aggregate to such Company Employee as
the benefits provided to employees of Parent and its Affiliates in
comparable positions of employment, to waive any pre-existing condition
clause or waiting period requirement in such welfare benefit plans or
programs and to give credit for deductible amounts and co-payments paid by
a Company Employee during the current deductible year prior to the
Effective Time; (ii) participation in such tax-qualified retirement plans
of Parent (or an Affiliate of Parent), which shall provide in the aggregate
benefits that are at least as valuable as the benefits provided to
employees of Parent and its Affiliates in comparable positions of
employment, and to grant each Company Employee credit under such plans, for
eligibility and vesting purposes, for such Company Employee's service with
the Company and its Affiliates prior to the Effective Time, except to the
extent it would result in a duplication of benefits with respect to the
same period of service; and (iii) participation in such other benefit plans
and programs of Parent and its Affiliates (including without limitation,
bonus, deferred compensation, incentive compensation, stock purchase, stock
option, excess and supplemental retirement, severance or termination pay,
and fringe benefits) which, in the aggregate will provide benefits to
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Company Employees which are no less favorable in the aggregate under those
provided to employees of Parent and its Affiliates in comparable positions
of employment; provided, however, that except as set forth in clause (i)(A)
above nothing herein shall prevent the amendment or termination of any
specific plan, program or amendment or interfere with the Surviving
Corporation's right or obligation to make such changes as are necessary to
conform with applicable law. Notwithstanding anything in this Agreement to
the contrary, Parent shall cause the Surviving Corporation to honor
(without modification) and assume (i) the written employment agreements,
severance agreements, indemnification agreements with existing directors
and officers of the Company and (ii) incentive arrangements and other
agreements listed in Schedule 5 of the Disclosure Schedule, all as in
effect on the date of this Agreement. Nothing in this Section 6.7 shall
require the continued employment of any person, or, except as set forth in
this Section 6.7, prevent the Company and/or the Surviving Corporation and
their subsidiaries from taking any action or refraining from taking any
action which the Company and its subsidiaries prior to the Effective Time
could have taken or refrained from taking. The parties agree that Company
severance plans and policies in effect as of the date hereof shall remain
in effect for at least the one-year period commencing at the Effective
Time. During such one-year period, any Company Employee whose employment is
terminated by the Surviving Corporation or any of its subsidiaries (other
than a Company Employee terminated for cause or a Company Employee who is a
"site" Employee terminated upon the cancellation of an outsourcing
agreement, which employees shall only be entitled to severance benefits, if
any, provided to employees of Parent (or an Affiliate of Parent ) in
comparable positions of employment under similar circumstances) shall be
deemed to have been terminated as a result of a change of control of the
Company. For purposes of this Section 6.7 a termination for "cause" shall
include a termination for deficient performance or for material violations
of any Company policy. The provisions of this Section 6.7 are intended for
the benefit of, and shall be enforceable by, current and former employees,
officers and directors of the Company and their respective heirs and legal
representatives and shall be binding on all successors and assigns of
Parent.
6.8 Indemnification and Insurance. Parent agrees that at all times after
consummation of the Offer, it shall indemnify, or shall cause the Company (or
the Surviving Corporation if after the Effective Time) and its subsidiaries to
indemnify, each person who is now, or has been at any time prior to the date
hereof, an employee, agent, director or officer of the Company or of any of the
Company's subsidiaries, together with each such person's heirs, representatives,
successors and assigns (individually an "Indemnified Party" and collectively the
"Indemnified Parties"), to the same extent and in the same manner as is now
provided in the respective charters or by-laws of the Company and such
subsidiaries or otherwise in effect on the date hereof, with respect to any
claim, liability, loss, damage, cost or expense (whenever asserted or claimed)
("Indemnified Liability") based in whole or in part on, or arising in whole or
in part out of, any matter existing or occurring at or prior to the Effective
Time. Parent shall, and shall cause the Company (or the Surviving Corporation if
after the Effective Time) to, maintain in effect for not less than six years
after consummation of the Offer the current policies of directors' and officers'
liability insurance maintained by the Company and the Company's subsidiaries on
the date hereof (provided that Parent may substitute therefor policies having at
least the same coverage and containing terms and conditions which are no less
advantageous to the persons currently covered by such policies as insureds) with
respect to matters existing or occurring at or prior to the Effective Time);
provided, however, that if the aggregate annual premiums for such insurance at
any time during such period shall exceed 300% of the per annum rate of premium
currently paid by the Company and its subsidiaries for such insurance on the
date of this Agreement (which the Company represents and warrants is $788,000 as
of the date hereof), then Parent shall cause the Company (or the Surviving
Corporation if after the Effective Time) to, and the Company (or the Surviving
Corporation if after the Effective Time) shall, provide the maximum coverage
that shall then be available at an annual premium equal to 300% of such rate.
Without limiting the foregoing, in the event any Indemnified Party becomes
involved in any capacity in any action, proceeding or investigation based in
whole or
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in part on, or arising in whole or in part out of, any matter, including the
transactions contemplated hereby, existing or occurring at or prior to the
Effective Time, then to the extent permitted by law, Parent shall, or shall
cause the Company (or the Surviving Corporation if after the Effective Time) to,
periodically advance to such 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 Indemnified Party of an undertaking
to reimburse the amounts so advanced in the event of a final determination by a
court of competent jurisdiction that such Indemnified Party is not entitled
thereto. The provisions of this Section 6.8 are intended for the benefit of, and
shall be enforceable by, the respective Indemnified Parties.
6.9 Solicitation. Neither the Company nor any of its subsidiaries, nor
any of their respective directors, officers, employees, representatives or
agents shall, directly or indirectly, solicit or initiate offers or proposals
from, or provide any confidential information to, or participate in any
discussions or negotiations (or if currently engaged in any of the foregoing
actions, the Company, its Affiliates and their respective officers, directors,
employees, representatives and agents shall immediately cease such activities)
with, any person or entity (other than Parent and its subsidiaries and their
respective directors, officers, employees, representatives and agents)
concerning (i) any merger, acquisition, exchange or sale of all or any material
portion of the assets not in the ordinary course of business consistent with
past practice, or other similar transaction involving the Company or any
subsidiary or division of the Company, or the sale of any equity interest in the
Company or any subsidiary, or (ii) except for Shares issuable upon exercise of
the 477,913 options outstanding under the Stock Plans on the date hereof, any
sale by the Company or its subsidiaries of authorized but unissued Shares or of
any shares (whether or not outstanding) of any of the Company's subsidiaries
(all such offers and proposals being referred to herein as "Acquisition
Proposals"), provided, however, that nothing contained in this Section 6.9 shall
prohibit the Company or its Board of Directors from (i) subject to the
provisions of Section 6.5, issuing a press release or otherwise publicly
disclosing the terms of this Agreement, including this Section 6.9 or disclosing
the terms of any Acquisition Proposal; (ii) proceeding with the transactions
contemplated by this Agreement; (iii) communicating to the Company's
stockholders a position as contemplated by Rule 14e-2 promulgated under the
Exchange Act; provided, however, that the Board of Directors shall not recommend
that the stockholders of the Company tender their Shares in connection with any
such tender offer unless the Board of Directors by majority vote determines in
good faith, based on the advice of outside legal counsel to the Company, that
failing to take such action would constitute a breach of the Board's fiduciary
duty to the stockholders of the Company under applicable law; (iv) making any
disclosure to the Company's stockholders which, in the judgment of the Board of
Directors of the Company determines, based on the advice of outside counsel, is
required to be made under applicable law (including laws relating to the
fiduciary duties of directors); or (v) taking any non-appealable, final action
ordered to be taken by the Company by any court of competent jurisdiction; and,
provided, further, that the Board of Directors of the Company may, on behalf of
the Company, furnish or cause to be furnished information and may direct the
Company, its directors, officers, employees, representatives or agents to
furnish information and to participate in discussions or negotiations, in each
case in response to an unsolicited oral or written Acquisition Proposal or
expression of intention to make an Acquisition Proposal (except that discussion
or negotiations cannot proceed prior to receipt of such Acquisition Proposal) if
the Board of Directors by majority vote determines in good faith based on the
advice of outside legal counsel that failing to take such action would
constitute a breach of the Board's fiduciary duty under applicable law (an
Acquisition Proposal which satisfies the above requirement being referred to
herein as a "Superior Proposal"). The Board of Directors shall provide a copy of
any written Acquisition Proposal (or describe the material terms of any oral
Acquisition Proposal) to Parent promptly after receipt thereof, shall notify
Parent promptly if any such proposal is made and shall keep Parent promptly
advised of all developments which could reasonably be expected to culminate in
the Board of Directors withdrawing, modifying or amending its recommendation of
the Offer, the Merger and the other transactions contemplated by this Agreement.
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Except as set forth in this Section 6.9, neither the Company or any of its
Affiliates, nor any of its or their respective officers, directors, employees,
representatives or agents, shall, directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, or provide any
information to, any corporation, partnership, person or other entity or group
(other than Parent and Purchaser, any Affiliate or associate of Parent and
Purchaser or any designees of Parent or Purchaser) concerning any merger, sale
of assets, sale of shares of capital stock or similar transactions (including an
exchange of stock or assets) involving the Company or any subsidiary or division
of the Company. The Company agrees not to release any third-party from, or waive
any provisions of, any confidentiality or standstill agreement to which the
Company is a party unless the Board of Directors of the Company, by a majority
vote, determines in good faith, based on the advice of outside legal counsel
that the failure to provide such release or waiver would constitute a breach of
fiduciary duty to the stockholders of the Company under applicable law.
Notwithstanding the foregoing, the Board of Directors of the Company may
(subject to the terms of this and the following sentence) withdraw or modify its
approval or recommendation of this Agreement or the Merger, approve or recommend
a Superior Proposal or enter into an agreement with respect to a Superior
Proposal, in each case if the Board of Directors of the Company by a majority
vote determines in good faith based on the advice of outside legal counsel that
failing to take such action would constitute a breach of fiduciary duty to the
stockholders of the Company under applicable law; provided that the Company
shall not enter into an agreement with respect to a Superior Proposal unless the
Company shall have furnished Parent with written notice specifying the material
terms and conditions of such Superior Proposal and identifying the person making
such Superior Proposal not later 48 hours in advance of the time that it intends
to enter into such agreement and shall have caused its financial and legal
advisors to negotiate with Parent to make such amendments to the terms and
conditions of this Agreement as would make this Agreement as so amended at least
as favorable to the Company's stockholders from a financial point of view as the
Superior Proposal, unless the Board of Directors of the Company, by majority
vote, determines in good faith, based on the advice of outside legal counsel to
the Company, that failure to enter into an agreement with respect to a Superior
Proposal without regard to such notice or 48-hour period would constitute a
breach of fiduciary duty to the stockholders of the Company under applicable
law. In addition, if the Company proposes to enter into an agreement with
respect to any Superior Proposal, it shall concurrently with entering into such
agreement pay, or cause to be paid, to Parent the amount required to be paid
pursuant to Section 8.6(a) of this Agreement.
6.10 Disposition of Certain Litigation.
(a) The Company agrees that it will not settle any litigation
currently pending, or commenced after the date hereof, against the Company
or any of its directors by any stockholder of the Company relating to the
Offer or this Agreement, without the prior written consent of Parent (which
consent shall not unreasonably be withheld).
(b) The Company will not voluntarily cooperate with any third-party
which has sought or may hereafter seek to restrain or prohibit or otherwise
oppose the Offer or the Merger and will cooperate with Parent and Purchaser
to resist any such effort to restrain or prohibit or otherwise oppose the
Offer or the Merger, unless the Board of Directors of the Company, by a
majority vote, determines in good faith, based on the advice of outside
legal counsel, that compliance with such requirements would constitute a
breach of fiduciary duty to the stockholders of the Company under
applicable law.
7. Conditions.
The respective obligations of Parent and Purchaser, on the one hand, and
the Company, on the other, to consummate the Merger are subject to the
fulfillment of each of the following conditions:
7.1 Consummation of Offer. Purchaser shall have purchased the Shares
pursuant to the Offer (provided that the purchase of Shares pursuant to the
Offer shall not be a condition to the
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obligations of Parent and Purchaser hereunder if Purchaser shall fail to accept
for payment and pay for Shares pursuant to the Offer in violation of the terms
thereof or of this Agreement).
7.2 Stockholder Approval. If necessary to effect the Merger, this
Agreement shall have been duly approved by the holders of Shares in accordance
with the DGCL and the Certificate of Incorporation and by-laws of the Company
(provided that stockholder approval shall not be a condition to the obligations
of Parent and Purchaser hereunder if Parent shall fail to comply with the last
sentence of Section 6.2(a)).
7.3 Violation of Law. Consummation of the Merger shall not result in
violation of any applicable United States federal or state law providing for
criminal penalties.
7.4 Litigation. No preliminary or permanent injunction or other order
issued by any federal or state court of competent jurisdiction in the United
States prohibiting the consummation of the Merger shall be in effect.
8. Termination.
8.1 Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any approval thereof by the stockholders of the Company), by
the mutual consent of Parent and the Company.
8.2 Termination by either Parent or the Company. This Agreement may be
terminated and the Merger may be abandoned by either Parent or the Company at
any time prior to the Effective Time (notwithstanding any approval thereof by
the stockholders of the Company), if (a) any court of competent jurisdiction or
other governmental body located or having jurisdiction within the United States
or any country in which the Company, directly or indirectly, has material assets
or operations, shall have issued a final order, injunction, decree, judgment or
ruling or taken any other final action restraining, enjoining or otherwise
prohibiting the Offer or the Merger and such order, injunction, decree,
judgment, ruling or other action is or shall have become final and
nonappealable, (b) the Offer shall have expired or terminated pursuant to the
terms of this Agreement without the purchase of any Shares pursuant thereto;
provided that Purchaser shall not have the right to terminate this Agreement
pursuant to this clause if the termination or expiration of the Offer without
the purchase of Shares thereunder is in violation of the terms of the Offer or
of this Agreement, or (c) if Purchaser has not purchased Shares pursuant to the
Offer prior to September 30, 1998, provided that the right to terminate this
Agreement pursuant to clauses (b) or (c) shall not be available to any party
whose failure (or the failure of whose Affiliate) to fulfill any obligation
under this Agreement or whose breach of a representation or warranty under this
Agreement has resulted in the Offer not being consummated.
8.3 Termination by Parent. This Agreement may be terminated and the Offer
may be abandoned at any time prior to consummation of the Offer, by Parent, (i)
if the Company shall have breached any of its representations and warranties or
failed to comply with any of the covenants or agreements contained in this
Agreement to be complied with or performed by the Company at or prior to
consummation of the Offer and such breach or failure shall have resulted in a
Material Adverse Effect that is not curable or, if curable, is not cured within
30 calendar days after written notice of such breach is given by Parent to the
Company or (ii) (x) if the Company shall have received from a third party a bona
fide Acquisition Proposal, and the Board of Directors of the Company in
accordance with the terms of this Agreement, shall have accepted such a proposal
or (y) if the Board of Directors of the Company shall have withdrawn or modified
in a manner adverse to Parent or Purchaser its approval or recommendation with
respect to the Offer and the Merger, or shall have resolved to effect any of the
foregoing or (iii) the Minimum Condition shall not have been satisfied by the
expiration date of the Offer as it may have been extended pursuant hereto and on
or prior to such date any person other than Parent or Purchaser shall have made
a proposal or communication with respect to a Superior Proposal.
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8.4 Termination by the Company. This Agreement may be terminated at any
time prior to the consummation of the Offer, by the Company, if (i) Purchaser
shall fail to commence the Offer as specified in Section 1.1 hereof, or (ii)
Parent or Purchaser shall have breached any of its representations and
warranties or failed to comply with any of the covenants or agreements contained
in this Agreement (other than the obligation to commence the Offer and to
purchase Shares upon the terms and subject to the conditions thereof) to be
complied with or performed by Parent or Purchaser at or prior to consummation of
the Offer and such breach or failure has a Material Adverse Effect on Parent's
or Purchaser's ability to consummate the Offer and such breach, if curable, is
not cured within 30 calendar days after written notice of such breach is given
by the Company to Parent and Purchaser, or (iii) if the Company enters into a
written agreement concerning a transaction that constitutes a Superior Proposal,
provided that the Company shall have complied with the provisions of Section 6.9
hereof (including the requirement that the Board of Directors of the Company by
majority vote determines in good faith based on the advice of outside legal
counsel to the Company that failing to accept the Superior Proposal would
constitute a breach of fiduciary duty to the stockholders of the Company under
applicable law and the payment of any amounts payable to Parent pursuant to
Section 8.6 of this Agreement).
8.5 Effect of Termination and Abandonment. In the event of termination of
this Agreement and abandonment or rejection of the Offer pursuant to Section
8.1, 8.2, 8.3 or 8.4, no party hereto (or any of its directors, officers,
employees, advisers or other representatives) shall have any liability or
further obligation to any other party to this Agreement, except as provided in
Sections 1.4, 6.3(b) and 8.6 of this Agreement, and except that nothing herein
shall relieve any party from liability for its fraud or wilful breach of this
Agreement.
8.6 Certain Fees and Expenses.
(a) If: (i) Parent terminates this Agreement pursuant to Section
8.3(i) hereof, and within 12 months thereafter, the Company enters into an
agreement with respect to a Third Party Acquisition, or a Third Party
Acquisition occurs, involving any party (or any affiliate or associate
thereof) (x) with whom the Company (or its agents) had any discussions with
respect to a Third Party Acquisition, (y) to whom the Company (or its
agents) furnished information with respect to or with a view to a Third
Party Acquisition or (z) who had submitted a proposal or expressed any
interest publicly or to the Company in a Third Party Acquisition, in the
case of each of clauses (x), (y) and (z) prior to such termination, (ii)
Parent terminates this Agreement pursuant to Section 8.3(ii) or the Company
terminates this Agreement pursuant to 8.4(iii) or (iii) Parent terminates
this Agreement pursuant to Section 8.3(iii) and within 12 months thereafter
the Company enters into an agreement or consummates a transaction with
respect to a Third Party Acquisition that provides for consideration for
Shares or value (on a per share basis) in excess of the Per Share Amount;
then the Company shall pay to Parent, within three business days following
the execution and delivery of such agreement or such occurrence, as the
case may be, or simultaneously with any termination contemplated by Section
8.6(a)(ii) above, a fee, in cash, of $4.0 million (less any amounts
previously paid pursuant to Section 8.6(b)), provided, however, that the
Company in no event shall be obligated to pay more than one such fee with
respect to all such agreements and occurrences and such termination and
that the Company in no event shall be obligated to pay more than $4.0
million in fees and expenses pursuant to Section 8.6(a) and (b) of this
Agreement.
"Third Party Acquisition" means the occurrence of any of the following
events: (i) the acquisition of the Company by merger, tender offer or
otherwise or similar business combination by any person other than Parent,
Purchaser or any affiliate thereof (a "Third Party"); (ii) the acquisition
by a Third Party of more than 35.0% of the outstanding Shares or 35% or
more of the aggregate book or fair market value of the assets of the
Company and its subsidiaries considered as a whole; or (iii) the adoption
by the Company of a plan of liquidation or the declaration or payment of an
extraordinary dividend of cash or assets.
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(b) Upon the termination of this Agreement by Parent pursuant to
Section 8.3(i) hereof, the Company shall reimburse Parent (not later than
three business days after submission of statements therefor) for all
documented out-of-pocket fees and expenses actually and reasonably incurred
by Parent, Purchaser and their affiliates or on their behalf in connection
with the Offer and the Merger and the consummation of the transactions
contemplated by this Agreement (including, without limitation, fees and
disbursements payable to financing sources, investment bankers, counsel to
Purchaser or Parent or any of the foregoing, and accountants) up to a
maximum amount of $2.0 million (subject to the limitations set forth in the
first paragraph of Section 8.6(a) of this Agreement).
9. General Provisions.
9.1 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to the
provisions of Article 8, and subject to the provisions of Article 7 hereof, the
closing of the Merger (the "Closing") shall take place at the offices of
Sonnenschein Nath & Rosenthal, 8000 Sears Tower, Chicago, Illinois 60606 as soon
as practicable following the consummation of the Offer or, if later, approval
and adoption of this Agreement by Company stockholders if required pursuant to
the DGCL, or at such other place, time and date as the parties may mutually
agree; provided, however, that if any of the conditions provided for in Article
7 hereof shall not have been met or waived by the date on which the Closing is
otherwise scheduled, then, subject to Article 8 hereof, the party to this
Agreement which is unable to meet such condition or conditions shall be entitled
to postpone the Closing by notice to the other parties until such condition or
conditions shall have been met (which such notifying party will use all
reasonable efforts to cause to happen at the earliest practicable date) or
waived. The date and time of such Closing are referred to herein as the "Closing
Date."
9.2 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 telecopy (followed by telephonic advice of such transmission) or
nationally-recognized overnight service to the parties at the following
addresses or at such other addresses as shall be specified by the parties by
like notice:
(a) If to Parent or Purchaser:
Bowne & Co., Inc.
345 Hudson Street
New York, New York 10014
Attention: Robert M. Johnson
Fax Number: (212) 229-7202
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3854
Attention: Alan G. Schwartz
Fax Number: (212) 455-2502
25
<PAGE> 29
(b) If to the Company:
Donnelley Enterprise Solutions Incorporated
161 North Clark Street, Suite 2400
Chicago, Illinois 60601
Attention: Rhonda I. Kochlefl
Fax Number: (312) 419-7668
with a copy to:
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Attention: Andrew L. Weil
Fax Number: (312) 876-7934
9.3 Interpretation. When a reference is made in this Agreement to
subsidiaries of Parent, Purchaser or the Company, the word "subsidiaries" means
any corporation 50 percent or more of whose outstanding voting securities, or
any partnership, joint venture or other entity 50% or more of whose total equity
interest, is directly or indirectly owned by Parent, Purchaser or the Company,
as the case may be.
9.4 Representations and Warranties; Etc. The respective representations
and warranties of the Company, Parent and Purchaser contained herein shall
expire with, and be terminated and extinguished upon, consummation of the Offer.
This Section 9.4 shall have no effect upon any other obligation of the parties
hereto, whether to be performed before or after the consummation of the Offer.
9.5 Payment of Expenses. Subject to Section 8.6 of this Agreement,
whether or not the Offer 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 Offer and the Merger.
9.6 Entire Agreement. This Agreement (including the Disclosure Schedule
and the Annexes hereto) contains the entire agreement between the parties with
respect to the transactions contemplated hereby, and supersedes all written or
oral negotiations, representations, warranties, commitments, offers, bids, bid
solicitations and other understandings prior to the date hereof, except to the
extent expressly confirmed or provided herein.
9.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.8 Severability. If any provision hereof shall be held invalid or
unenforceable by any court of competent jurisdiction or as a result of future
legislative action, such holding or action shall be strictly construed and shall
not affect the validity or effect of any other provision hereof.
9.9 Captions. The captions of the various Articles and Sections of this
Agreement have been inserted only for convenience of reference and shall not be
deemed to modify, explain, enlarge or restrict any provision of this Agreement
or affect the construction hereof.
9.10 Amendment. Subject to applicable law, this Agreement may be amended
by an instrument in writing signed by the parties hereto at any time before or
after the purchase of Shares pursuant to the Offer or approval and adoption of
this Agreement and the Merger by the stockholders of the Company, but after any
such purchase of Shares or approval no amendment shall be made that modifies the
consideration to be given to the holders of Shares or in any other way
materially adversely affects the rights of such stockholders (other than a
termination of this Agreement pursuant to its terms).
26
<PAGE> 30
9.11 Waiver. Subject to applicable law, at any time prior to the
Effective Time, any party hereto may (a) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, or (b) waive
compliance with any of the agreements or conditions contained herein. In
addition to the provisions contained in Section 6.6 hereof, at any time prior to
consummation of the Offer, any party hereto may waive any inaccuracies in the
representations and warranties contained herein or in any documents delivered
pursuant hereto. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed by such party.
9.12 No Third-Party Beneficiaries; Assignability. Except for Sections
2.8, 2.9, 6.7 and 6.8 (which are intended for the benefit of, and may be
enforced by, the persons or entities specified therein), this Agreement is not
intended to confer or impose upon any person not a party hereto any rights,
remedies, obligations or liabilities hereunder. This Agreement shall not be
assigned by any party hereto, by operation of law or otherwise, except that
Parent and Purchaser may assign all or any of their respective rights and
obligations hereunder to any direct or indirect wholly owned subsidiary or
subsidiaries of Parent, provided that no such assignment shall relieve the
assigning party of its obligations hereunder if such assignee does not perform
such obligations. Only Purchaser or Parent may commence the Offer and purchase
Shares pursuant thereto unless the Company otherwise consents.
9.13 Knowledge. When used with respect to the Company in this Agreement,
the term "knowledge" shall mean the actual present knowledge of the following
individuals: the chief executive officer of the Company, the chief financial
officer of the Company, the controller of the Company and the presidents of the
Company's divisions.
9.14 Person. The term "Person" as used in this Agreement shall mean any
individual, partnership, corporation, company, limited liability company, trust
or other entity.
9.15 Affiliate. The term "Affiliate" as used in this Agreement shall have
the meaning set forth in Rule 12b-2 promulgated under the Exchange Act;
provided, however, that for purposes of this Agreement, R.R. Donnelley & Sons
Company shall not be deemed to be an affiliate of the Company.
9.16 Governing Law. The validity, interpretation and effect of this
Agreement shall be governed exclusively by the laws of the State of Delaware,
without giving effect to the principles of conflict of laws thereof.
27
<PAGE> 31
Each of Parent, Purchaser and the Company has caused this Agreement to be
executed as of the date first written above by their respective duly authorized
officers.
BOWNE & CO., INC.
By: /s/ ROBERT M. JOHNSON
--------------------------------------
Name: Robert M. Johnson
Title: Chairman and Chief Executive
Officer
DESI ACQUISITION, INC.
By: /s/ ROBERT M. JOHNSON
--------------------------------------
Name: Robert M. Johnson
Title: Chief Executive Officer
DONNELLEY ENTERPRISE SOLUTIONS
INCORPORATED
By: /s/ RHONDA I. KOCHLEFL
--------------------------------------
Name: Rhonda I. Kochlefl
Title: Chairman, President and Chief
Executive Officer
28
<PAGE> 32
ANNEX I
CONDITIONS OF THE OFFER
The capitalized terms used in this Annex I have the meanings set forth in
the attached Agreement, except that the term "Merger Agreement" shall be deemed
to refer to the attached Agreement.
Notwithstanding any other provisions of the Offer, and in addition to the
conditions that (i) at the expiration of the Offer there shall have been validly
tendered and not withdrawn prior to the expiration of the Offer a number of
Shares (including all Shares tendered pursuant to the Stockholders' Agreement)
which constitutes more than 50% of the voting power (determined on a
fully-diluted basis) on the date of purchase, of all the securities of the
Company entitled to vote generally in the election of directors or in a merger
(the "Minimum Condition") (for purposes of determining at any time whether the
Minimum Condition has been met, each outstanding Share legally or beneficially
owned by Parent or Purchaser or any of its Affiliates at the commencement of the
Offer shall be deemed validly tendered under the Offer and not withdrawn), and
(ii) any and all applicable waiting periods under the HSR Act shall have expired
or been terminated, Purchaser shall not be required to accept for payment, or
subject to applicable rules and regulations of the SEC, including Rule 14e-1(c)
under the Exchange Act (relating to Purchaser's obligation to pay for or return
tendered Shares promptly after termination or withdrawal of the Offer), purchase
or pay for any Shares tendered pursuant to the Offer, may postpone the
acceptance for payment of Shares tendered, and subject to the terms and
conditions of the Merger Agreement may terminate the Offer if at any time on or
after May 27, 1998 and at or before the time of payment for any such Shares any
of the following conditions shall occur or has occurred:
(a)(x) the representations and warranties of the Company set forth in
the Merger Agreement shall not be true and correct in any material respect,
except (i) those representations and warranties that address matters only
as of a particular date (which shall be true and correct as of such date),
and (ii) where the failure of such representations and warranties to be
true and correct is not likely to result in a Material Adverse Effect, or
(y) the Company shall have breached in any material respect any covenants
contained in the Merger Agreement resulting in or likely to have a Material
Adverse Effect;
(b) there shall have been any statute, rule, regulation, judgment,
injunction or other order promulgated, enacted, entered, enforced or issued
by any federal or state governmental authority or agency or court of
competent jurisdiction in the United States which would have the effect of
(i) making the purchase of, or payment for, some or all of the Shares by
Parent or Purchaser or their Affiliates pursuant to the Offer or the Merger
illegal, (ii) otherwise preventing consummation of the Offer or Merger;
(iii) prohibiting the ownership or operation by the Company or any of its
subsidiaries, or Parent or any of its subsidiaries, of all or any material
portion of the business or assets of the Company or any of its
subsidiaries, taken as a whole, or Parent or its subsidiaries, taken as a
whole; (iv) materially limiting the ownership or operation by the Company
or any of its subsidiaries, or Parent or any of its subsidiaries, of all or
any material portion of the business or assets of the Company or any of its
subsidiaries, taken as a whole, or Parent or its subsidiaries, taken as a
whole or compelling Parent or any of its subsidiaries to dispose of or hold
separate all or any material portion of the businesses or assets of the
Company or any of its significant subsidiaries (as defined in Regulation
S-X) or Parent or any of its significant subsidiaries (as defined in
Regulation S-X), as a result of the transactions contemplated by the Offer
or the Merger; (v) imposing limitations on the ability of Parent, Purchaser
or any of Parent's Affiliates effectively to acquire or hold or to exercise
full rights of ownership of the Shares, including, without limitation, the
right to vote any Shares acquired or owned by Parent or Purchaser or any of
its Affiliates on all matters properly presented to the stockholders of the
Company, including, without limitation, the adoption and approval of the
Agreement and the merger or the right to vote any shares of capital stock
of any
29
<PAGE> 33
significant subsidiary (as defined in Regulation S-X), directly or
indirectly owned by the Company; or (vi) requiring divestiture by Parent or
Purchaser or any of their Affiliates of any Shares; and, in each case, no
such action or proceeding seeking to do any of the foregoing shall be
instituted or pending by any governmental administrative or regulatory
authority;
(c)(i) the Board of Directors of the Company shall have withdrawn,
modified or amended in any manner adverse to Parent or Purchaser its
recommendation or approval of the Offer, the Merger or the Merger
Agreement, or approved or recommended any takeover proposal other than the
Offer and the Merger, (ii) any corporation, partnership, person or entity
shall have entered into a definitive agreement or an agreement in principle
with the Company with respect to an alternative acquisition transaction
involving the Company, or (iii) the Board of Directors of the Company shall
have resolved to do any of the foregoing (except that the foregoing shall
not apply to a change solely in the reasons for such recommendation so long
as the Board of Directors of the Company continues to recommend acceptance
of the Offer by all holders of the Shares);
(d) the Agreement shall have been terminated by the Company, Parent or
Purchaser in accordance with its terms;
(e) there shall be instituted any action, proceeding or counterclaim
by a federal or state governmental authority or agency by or before any
court or governmental, administrative or regulatory agency or authority
which has or is likely to have any of the effects described in clause (b)
above;
(f) there shall have occurred any event that has had, or is likely to
have, a Material Adverse Effect; which, in the reasonable judgment of
Purchaser, makes it inadvisable to proceed with the Offer or with such
acceptance for payment.
The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances giving rise to such
condition or may be waived by Purchaser in whole or in part at any time and from
time to time in its sole discretion. The foregoing conditions (other than the
Minimum Condition and the HSR Condition) may be waived by Purchaser in whole or
in part at any time and from time to time in its sole discretion. The failure by
Purchaser at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right, the waiver of any such right with respect to
particular facts and other circumstances shall not be deemed a waiver with
respect to any other facts and circumstances, and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time.
30
<PAGE> 1
EXHIBIT 7.11
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT (this "Agreement"), dated as of May 27, 1998, by
and between Bowne & Co., Inc., a New York corporation ("Purchaser"), and R.R.
Donnelley & Sons Company, a Delaware corporation ("Seller").
RECITALS
Concurrently herewith, Purchaser, DESI Acquisition, Inc., a Delaware
corporation and a wholly-owned subsidiary of Purchaser ("Acquisition"), and
Donnelley Enterprise Solutions Incorporated (the "Company"), a Delaware
corporation, are entering into an Agreement and Plan of Merger of even date
herewith attached hereto (the "Merger Agreement"; capitalized terms used but
not defined herein shall have the meanings set forth in the Merger Agreement),
pursuant to which Sub agrees to make a tender offer (the "Offer") for all
outstanding shares of common stock, $.01 par value per share (the "Common
Stock"), of the Company, at $21.00 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.
As a condition to their willingness to enter into the Merger Agreement and
make the Offer, Purchaser and Sub have required that the Seller agree, and
Seller has agreed, among other things, to tender in the Offer and to otherwise
grant to Purchaser the Option and irrevocable proxy with respect to 2,140,000
shares of Common Stock together with any additional shares when and if they are
acquired (such shares, and any additional shares when and if they are acquired,
being referred to herein as the "Shares") on the terms and conditions provided
for herein.
The Board of Directors of the Company has approved the Purchaser becoming
an "interested shareholder" for purposes of Section 203 of the Delaware General
Corporation Law.
AGREEMENT
To implement the foregoing and in consideration of the mutual agreements
contained herein, the parties agree as follows:
1. Option to Purchase Shares.
1.1 Grant of Option. Seller hereby grants to Purchaser an irrevocable
option (the "Option") to purchase all of the Shares at a purchase price of
$21.00 per share (the "Exercise Price") in cash (subject to adjustment pursuant
to Section 7 below) for each Share purchased.
1.2 Exercise of Option. (a) Subject to applicable law (including Rule
10b-13 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), the Option may be exercised by Purchaser as to all of the Shares, at
any time, commencing upon the Exercise Date and prior to the Expiration Date
(as hereinafter defined). As used herein, the term "Exercise Date" means the
first to occur of any of the following dates:
<PAGE> 2
(i) the Seller fails to perform any agreement or covenant of Seller
contained herein; or
(ii) the Merger Agreement is terminated and Purchaser is entitled to
the payment of the fees or expenses pursuant to Section 8.6 of the Merger
Agreement.
As used herein, the term "Expiration Date" means the first to occur of any
of the following dates:
(1) the Effective Time (as defined in the Merger Agreement);
(2) 10 business days after the termination of the Merger Agreement
in accordance with Article VIII of the Merger Agreement because the
Federal Trade Commission, the Antitrust Division of the Department of
Justice or any state, federal or foreign court or other governmental body
of competent jurisdiction shall have issued an order, decree or ruling or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action
shall have become final and nonappealable;
(3) the earliest of (i) the consummation of a third party
transaction that triggered the payment of the termination fee pursuant to
Section 1.2 and (ii) the first anniversary of the date of the termination
of the Merger Agreement, except as set forth in clause (2) above; or
(4) written notice of termination of this Agreement by Purchaser to
the Seller.
(b) In the event Purchaser wishes to exercise the Option, Purchaser shall
send a written notice to Seller of its intention to so exercise the Option (a
"Notice"), specifying the place, time and date of the closing of such purchase
(the "Closing"), which date shall not be less than two business days nor more
than five business days from the date on which a Notice is delivered; provided,
that the Closing shall be held only if such purchase would not otherwise then
violate or cause the violation of, any applicable law or regulations
(including, without limitation, the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act")) or any decree, order or injunction of any
governmental agency, authority or court, whether temporary, preliminary or
permanent. If the Closing shall be violative of any such laws or rules or any
such decree, order or injunction, then such Notice shall be deemed rescinded
and of no effect and Purchaser shall send a new Notice at such time as the
Closing is not violative of such laws, rules, decrees, orders or injunctions.
Notwithstanding the occurrence of such rescission, this Agreement shall remain
in full force and effect.
(c) At the Closing, Seller shall deliver to Purchaser all of the Shares
to be purchased by delivery of a certificate or certificates evidencing such
Shares so purchased by Purchaser duly endorsed or with executed blank stock
power attached, in either event with signature guaranteed such that registered
ownership of the Shares may be registered for transfer on the books of the
Company and Purchaser will make payment to Seller of the aggregate Exercise
Price for the Shares being purchased upon exercise of the Option by wire
transfer of immediately available funds to an account designated by Seller in
the amount equal to the Exercise Price multiplied by the number of Shares
purchased pursuant to this Section 1.
<PAGE> 3
1.3 Effectiveness. This Agreement shall be of no force and effect, and
shall be void ab initio, in the event that the Merger Agreement is not executed
by all parties thereto by 9:00 a.m., Central time, on May 28, 1998.
2. Agreement to Tender. Seller hereby agrees to validly tender pursuant
to the Offer and not withdraw all Shares, except to the extent that the tender
of Shares pursuant to the Offer would subject any profit realized on the
transaction by Seller to recovery by the Company under Section 16(b) of the
Exchange Act.
3. Irrevocable Proxy. The Seller hereby irrevocably appoints Purchaser
or any designee of Purchaser the lawful agent, attorney and proxy of such
shareholder, during the term of this Agreement, to (a) vote the Shares in favor
of the Merger; (b) vote the 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 or agreement of the Company under the Merger
Agreement; and (c) vote the Shares against any action or agreement (other than
the Merger Agreement or the transactions contemplated thereby) that would
impede, interfere with, delay, postpone or attempt to discourage the Merger or
the Offer, including, but not limited to: (i) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving the Company and its subsidiaries; (ii) a sale or transfer of a
material amount of assets of the Company and its subsidiaries or a
reorganization, recapitalization or liquidation of the Company and its
subsidiaries; (iii) any change in the management or board of directors of the
Company, except as otherwise agreed to in writing by Purchaser; (iv) any
material change in the present capitalization or dividend policy of the
Company; or (v) any other material change in the Company's corporate structure
or business. Seller intends this proxy to be irrevocable and coupled with an
interest and will take such further action or execute such other instruments as
may be necessary to effectuate the intent of this proxy and hereby revokes any
proxy previously granted by it with respect to the Shares.
4. Representations and Warranties.
4.1 Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to Seller as follows:
(a) Due Authorization. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the Board of Directors of
Purchaser, and no other corporate proceedings on the part of Purchaser are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed
and delivered by Purchaser and constitutes a valid and binding agreement
of Purchaser, enforceable against Purchaser in accordance with its terms,
except that such enforceability (i) may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) is subject to general
principles of equity.
(b) No Conflicts. Except for (i) filings under the HSR Act, if
applicable, (ii) the applicable requirements of the Exchange Act and the
Securities Act of 1933, as amended (the "Securities Act"), (iii) the
applicable requirements of state securities, takeover or Blue Sky laws and
(iv) such notifications, filings, authorizing actions, orders and
<PAGE> 4
approvals as may be required under other laws, (A) no filing with, and no
permit, authorization, consent or approval of, any state, federal or
foreign public body or authority is necessary for the execution of this
Agreement by Purchaser and the consummation by Purchaser of the
transactions contemplated hereby and (B) neither the execution and
delivery of this Agreement by Purchaser nor the consummation by Purchaser
of the transactions contemplated hereby nor compliance by Purchaser with
any of the provisions hereof shall (1) conflict with or result in any
breach of any provision of the certificate of incorporation or by-laws (or
similar documents) of Purchaser, (2) result in a violation or breach of,
constitute (with or without notice or lapse of time or both) a default (or
give rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
agreement or other instrument or obligation to which Purchaser is a party
or by which it or any of its properties or assets may be bound or (3)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Purchaser or any of its properties or assets, except in the
case of (2) or (3) for violations, breaches or defaults which would not in
the aggregate materially impair the ability of Purchaser to perform its
obligations hereunder.
(c) Good Standing. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of New York and has
all requisite corporate power and authority to execute and deliver this
Agreement.
(d) Investment Intent. Purchaser hereby represents that any
securities it purchases pursuant to this Agreement are being purchased
for its own account for purposes of investment and not with a view to, or
for sale in connection with, any public distribution thereof. In
addition, Purchaser acknowledges that the Shares which are subject to the
Option have not been registered and will not be registered under the
Securities Act of 1933, as amended, and may not be resold without
registration under such Act or an exemption therefrom.
4.2 Representations and Warranties of Seller. The Seller hereby
represents and warrants to Purchaser as follows:
(a) Ownership of Shares. The Seller is the registered owner of the
Shares and the Shares are all of the Shares of the capital stock of the
Company owned beneficially or of record by Seller. To the Seller's
knowledge, the Shares are validly issued, fully paid and nonassessable,
with no personal liability attaching to the ownership thereof. The
Seller has good title to the Shares, free and clear of any agreements,
liens, adverse claims or encumbrances whatsoever with respect to the
ownership of or the right to vote the Shares.
(b) Power; Binding Agreement. Seller has the legal capacity, power
and authority to enter into and perform all of its obligations under this
Agreement. The execution, delivery and performance of this Agreement by
Seller will not violate any other agreement to which Seller is a party
including, without limitation, any voting agreement, stockholders
agreement or voting trust. This Agreement has been duly and validly
executed and delivered by Seller and constitutes a valid and binding
agreement of Seller, enforceable against Seller in accordance with its
terms, except that such
<PAGE> 5
enforceability (i) may be limited by bankruptcy, insolvency, moratorium
or other similar laws affecting or relating to enforcement of creditors'
rights generally and (ii) is subject to general principles of equity.
(c) No Conflicts. Except for (i) filings under the HSR Act, if
applicable, (ii) the applicable requirements of the Exchange Act and the
Securities Act, (iii) the applicable requirements of state securities,
takeover or Blue Sky laws, (x) such notifications, filings, authorizing
actions, orders and approvals as may be required under other laws, (A) no
filing with, and no permit, authorization, consent or approval of, any
state, federal or foreign public body or authority is necessary for the
execution of this Agreement by Seller and the consummation by Seller of
the transactions contemplated hereby and (B) neither the execution and
delivery of this Agreement by Seller nor the consummation by Seller of
the transactions contemplated hereby nor compliance by Seller with any of
the provisions hereof shall (1) conflict with or result in any breach of
any provision of the certificate of incorporation, by-laws, trust or
charitable instruments (or similar documents) of Seller, (2) result in a
violation or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation
to which Seller is a party or by which he or any of his properties or
assets may be bound or (3) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Seller or any of his properties
or assets, except in the case of (2) or (3) for violations, breaches or
defaults which would not in the aggregate materially impair the ability
of Seller to perform his obligations hereunder.
5. Certain Covenants of Seller. Seller hereby covenants and agrees as
follows:
5.1 No Solicitation. Seller shall not, directly or indirectly, solicit,
encourage, participate in or initiate any inquiries or the making of any
proposal by any person or entity (other than Purchaser or any affiliate of
Purchaser) which constitutes, or may reasonably be expected to lead to, (a) any
sale of the Shares or (b) any acquisition or purchase of a material portion of
the Company's assets or any equity interest in, or any merger, consolidation or
business combination with, the Company or any of its subsidiaries; provided,
however, that the foregoing shall not apply to any directors of the Company in
their capacity as such who are also employees, officers, representatives or
agents of Seller, it being understood that the terms of the Merger Agreement
set forth any and all limitations on solicitation applicable to such persons in
their capacity as directors of the Company. If Seller receives an inquiry or
proposal with respect to the sale of Shares, then Seller shall promptly inform
Purchaser of the terms and conditions, if any, of such inquiry or proposal and
the identity of the person making it. Seller will immediately cease and cause
to be terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing.
5.2 Restriction on Transfer, Proxies and Non-Interference. Seller hereby
agrees, while this Agreement is in effect, and except as contemplated hereby,
not to (a) sell, transfer, pledge, encumber, assign or otherwise dispose of, or
enter into any contract, option or other arrangement or understanding with
respect to the sale, transfer, pledge, encumbrance, assignment or other
disposition of, any of the Shares or (b) grant any proxies, deposit any Shares
into a voting trust or enter into a voting agreement with respect to any Shares
or (c) take any
<PAGE> 6
action that would make any representation or warranty of Seller contained
herein untrue or incorrect or have the effect of preventing or disabling Seller
from performing his obligations under this Agreement.
5.3 Legending of Certificates; Nominees Shares. The Seller agrees to
submit to Purchaser contemporaneously with or promptly following execution of
this Agreement all certificates representing the Shares so that Purchaser may
note thereon a legend referring to the Option and proxy granted to it by this
Agreement. If any of the Shares beneficially owned by the Seller are held of
record by a brokerage firm in "street name" or in the name of any other nominee
(a "Nominee," and, as to such Shares, "Nominee Shares"), the Seller agrees
that, upon written notice by Purchaser requesting it, the Seller will within
five days of the giving of such notice execute and deliver to Purchaser a
limited power of attorney in such form as shall be reasonably satisfactory to
Purchaser enabling Purchaser to require the Nominee to (i) grant to Purchaser
an option and irrevocable proxy to the same effect as Sections 1 and 3 hereof
with respect to the Nominee Shares held by such Nominee, (ii) tender such
Nominee Shares in the Offer pursuant to Section 2 hereof and (iii) submit to
Purchaser the certificates representing such Nominee Shares for notation of the
above-referenced legend thereon.
5.4 Stop Transfer Order. In furtherance of this Agreement, concurrently
herewith, Seller shall and hereby does authorize the Company's counsel to
notify the Company's transfer agent that there is a stop transfer order with
respect to all of the Shares (and that this Agreement places limits on the
voting and transfer of such shares), except that such order shall not apply to
transfers to Purchaser or Acquisition.
5.5 Other Actions. Until the termination of this Agreement, the Seller
will at all times use its best efforts to prevent the Company from taking any
action in violation of the Merger Agreement.
6. Further Assurances. From time to time, at the other party's request
and without further consideration, each party hereto shall execute and deliver
such additional documents and take all such further action as may be necessary
or desirable to consummate the transactions contemplated by this Agreement,
including, without limitation, to vest in Purchaser good title to any Shares
purchased hereunder.
7. Adjustments to Prevent Dilution, Etc. In the event of a stock
dividend or distribution, or any change in the Company's Common Stock by reason
of any stock dividend, split-up, recapitalization, combination or the exchange
of shares, the term "Shares" shall be deemed to refer to and include the Shares
as well as all such stock dividends and distributions and any shares into which
or for which any or all of the Shares may be changed or exchanged. In such
event, the amount to be paid per share by Purchaser shall be proportionately
adjusted.
8. Termination. This Agreement shall terminate upon the Expiration Date.
9. Obligation to Purchase Shares. In the event that pursuant to the
Offer there is tendered a number of shares of Common Stock that together with
the Shares tendered pursuant to this Agreement equals 50.1% or more of the
voting power of the Company, and the conditions to the Offer as set forth in
the Merger Agreement are otherwise satisfied, Purchaser
<PAGE> 7
will purchase all the Shares immediately upon the purchase of the other shares
pursuant to the Offer.
10. Miscellaneous.
10.1 Entire Agreement; Assignment. This Agreement (i) constitutes the
entire agreement among the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and (ii)
shall not be assigned by operation of law or otherwise, provided that Purchaser
may assign its rights and obligations hereunder to any direct or indirect
wholly owned parent company or subsidiary of Purchaser, but no such assignment
shall relieve Purchaser of its obligations hereunder if such assignee does not
perform such obligations.
10.2 Amendments. This Agreement may not be modified, amended, altered or
supplemented, except upon the execution and delivery of a written agreement
executed by the parties hereto.
10.3 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram,
telex or telecopy, or by mail (registered or certified mail, postage prepaid,
return receipt requested) or by any courier service, such as Federal Express,
providing proof of delivery. All communications hereunder shall be delivered
to the respective parties at the following addresses:
If to the Seller:
R.R. Donnelley & Sons Company
77 W. Wacker Drive
Chicago, Illinois 60601
Attention: Monica M. Fohrman
If to Purchaser: Bowne & Co., Inc.
345 Hudson Street
New York, New York 10014
Attention: Robert M. Johnson
copy to: Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Alan G. Schwartz, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
10.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws
thereof.
<PAGE> 8
10.5 Cooperation as to Regulatory Matters. If so requested by Purchaser,
promptly after the date hereof, the Seller will use its best efforts to make
any filings which are required under the HSR Act and applicable requirements
and to seek all regulatory approvals required in connection with the
transactions contemplated hereby. The parties shall furnish to each other such
necessary information and reasonable assistance as may be requested in
connection with the preparation of filings and submissions to any governmental
agency, including, without limitation, filings under the provisions of the HSR
Act.
10.6 Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore, each of
the parties hereto agrees that in the event of any such breach the aggrieved
party shall be entitled to the remedy of specific performance of such covenants
and agreements and injunctive and other equitable relief in addition to any
other remedy to which it may be entitled, at law or in equity.
10.7 Counterparts. This Agreement may be executed in two counterparts,
each of which shall be deemed to be an original, but both of which shall
constitute one and the same Agreement.
10.8 Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
10.9 Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
10.9 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee in connection with the transactions
contemplated hereby, except for Goldman, Sachs & Co., whose fees will be paid
by Purchaser, and William Blair & Company, LLC, whose fees will be paid by the
Company.
<PAGE> 9
IN WITNESS WHEREOF, the Seller and Purchaser have caused this Agreement to
be duly executed as of the day and year first above written.
R.R. DONNELLEY & SONS COMPANY
By: /s/ Cheryl A. Francis
-------------------------------
Name: Cheryl A. Francis
Title: Executive Vice
President & Chief
Financial Officer
BOWNE & CO., INC.
By: /s/ Robert M. Johnson
-------------------------------
Name: Robert M. Johnson
Title: Chairman & Chief
Executive Officer
<PAGE> 1
EXHIBIT 7.12
CONFIDENTIALITY AND STANDSTILL AGREEMENT
This Confidentiality and Standstill Agreement (the "Agreement") is made as
of March 19, 1998 between Bowne & Co., Inc. (the "Company"), and Donnelley
Enterprise Solutions Incorporated, a Delaware corporation ("DESI"). For the
purposes of this Agreement, the term "DESI" shall be deemed to mean DESI and/or
any one or more of its divisions, as the context requires.
WHEREAS, the parties hereto desire to enter into exploratory discussions for
the sole purpose of considering whether a possible business combination or other
transaction involving DESI or any portion thereof, including any one or more of
its divisions, and the Company might be mutually beneficial; and
WHEREAS, the parties hereto acknowledge that such discussions may require
the exchange of confidential and proprietary information among the parties; and
WHEREAS, the parties hereto wish to maintain the confidential and
proprietary nature of such information,
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto agree as follows:
1. Scope of Agreement.
(a) The Company will treat, and will cause each of its affiliates to
treat, any information concerning DESI or its affiliates which is furnished to
the Company or its Representatives by or on behalf of DESI, whenever furnished
(subject to the exceptions set forth in Section 1(b) below, collectively
referred to herein as the "Evaluation Material"), confidential in accordance
with the terms of this Agreement.
(b) The terms "Evaluation Material" excludes all of the following:
(i) information which was or becomes generally available to the
public other than as a result of a disclosure by the Company of such
information;
(ii) information which was or becomes available to the Company
on a nonconfidential basis from a source other than DESI or its or
Representatives; provided that such source is not bound by a
confidentiality agreement with such other party in respect thereof; or
(iii) information which was in the possession of the Company prior
to it being furnished to the Company by or on behalf of DESI, provided
that the source of such information was not bound by a confidentiality
agreement with DESI in respect thereof.
(c) As used in this Agreement:
(i) the term "affiliate" has the meaning provided in Rule 12b-2
under the Securities Exchange Act of 1934 (the "Exchange Act") and includes
persons or entities who become affiliates after the date hereof;
(ii) the terms "own" and "ownership" include, but are not limited
to, beneficial ownership as defined in Rule 13d-3 under the Exchange Act;
<PAGE> 2
(iii) the term "person" means any entity, individual or group,
including without limitation any corporation, company, limited liability
company, group, syndicate or partnership; and
(iv) the term "Representatives" includes attorneys, accountants,
consultants, financial advisors and other agents.
2. Limited Use of Information.
The Company will use the Evaluation Material solely for the purpose of
evaluating a possible business combination transaction or other transaction
involving DESI, or any portion thereof (including any one or more of its
divisions) and the Company. The Company will safeguard such information at least
to the extent that it would protect its own proprietary and confidential
information; provided, however, that any such information may be disclosed to
the Company's Representatives who need to know such information for the purpose
of evaluating, or assisting the Company with, any such possible transaction and
who shall be informed by the Company of the confidential nature of such
information, the limited purpose for which it is being disclosed and that by
receiving such information they are agreeing to be bound by this Agreement. The
Company will upon DESI's request deliver to DESI a list of those to whom such
information has been disclosed.
3. Non Disclosure of Negotiations.
Unless required by law or unless the Company has obtained the prior written
consent of DESI, the Company will not, and will direct its Representatives not
to, disclose to any person either the fact that discussions or negotiations are
taking place concerning a possible transaction between DESI and the Company or
any of the terms, conditions or other facts with respect to any such possible
transaction, including the status thereof. If the Company, in the opinion of its
counsel, is required by law to disclose to any person information relating to
such possible transaction, it may, subject to complying with the remaining
provisions of this subsection, disclose such information to such person or
persons without liability hereunder; provided, however, that (i) the Company
shall give DESI written notice of the information to be so disclosed as far in
advance of its disclosure as is practicable, (ii) shall cooperate with DESI in
its efforts to protect the information from disclosure, and (iii) shall limit
its disclosure of such information to the minimum disclosure required by law
unless DESI agrees in writing to a greater level of disclosure.
4. Securities Law Compliance. Each party hereto acknowledges that it is
aware, and will advise its Representatives who are informed of the matters
which are the subject of this Agreement, that the United States securities
laws prohibit any person who has material, non-public information concerning a
company from purchasing or selling securities of that company or from
communicating such information to any other person under circumstances in which
it is reasonably foreseeable that such other person is likely to purchase or
sell such securities.
5. Requests from Other Persons.
In the event that the Company or any of its affiliates is requested in the
course of a legal, administrative or regulatory proceeding or investigation (by
oral questions, interrogatories, requests for information or documents,
subpoena, civil investigative demand or similar process) to disclose any
Evaluation Material, the Company will notify DESI promptly of such request(s)
and the documents requested thereby so that DESI may seek an appropriate
protective order and/or waive in writing compliance with the provisions of this
Agreement. If, in the absence of such a protective order or the receipt of such
a waiver the Company is nonetheless, in the opinion of the Company's counsel,
compelled to disclose such Evaluation Material or else stand liable for contempt
or suffer other censure or penalty from any tribunal or governmental or similar
authority, the Company may disclose such information without liability
hereunder; provided, however, that the Company shall comply with the provisions
of subsections (i), (ii) and (iii) of Section 3 hereof.
6. Return or Destruction of Evaluation Material.
<PAGE> 3
(a) All information disclosed by one party to the other party pursuant to
this Agreement shall be and remain the property of the party disclosing such
information.
(b) The Company will at any time upon the request of DESI made during the
term of this Agreement promptly redeliver to DESI all written material
containing or reflecting any Evaluation Material supplied to the Company or its
Representatives by or on behalf of DESI (whether prepared by DESI or otherwise,
and whether in the possession of the Company or any of its Representatives) and
will not retain any copies, extracts or other reproductions in whole or in part
of such written material. All documents, memoranda, notes and other writings
whatsoever (including all copies, extracts or other reproductions), prepared by
the Company or its Representatives based on the Evaluation Material shall be
destroyed, and such destruction shall be certified in writing to DESI by an
authorized officer supervising such destruction. The redelivery of such material
shall not relieve the Company's obligation of confidentiality or other
obligations hereunder.
7. Disclaimers Regarding Evaluation Material.
(a) DESI shall not make any representation or warranty herein as to the
accuracy or completeness of the Evaluation Material provided by or on behalf of
DESI.
(b) The use of the Evaluation Material by the Company or its
Representatives in a manner not inconsistent with this Agreement shall not
subject the Company or its Representatives to any liability to any other party.
8. Standstill Provisions.
The Company will not, and will direct its Representatives not to, directly
or indirectly, during the one year period commencing on the date of this
Agreement, unless in any such case specifically invited in writing to do so by
the Board of Directors of DESI:
(i) make any public announcement with respect to, or submit any
proposal for, a transaction between DESI (or any portion thereof, including
any one or more of its divisions, or any of its security holders or
affiliates) and the Company (or any of its security holders or
affiliates), unless such proposal is directed and disclosed solely to the
management of DESI and its designated Representatives, and in the case of
any such proposal from or involving parties in addition to, or other than,
the Company, DESI has given its advance written consent to the involvement
of such additional or other parties;
(ii) purchase, acquire or own, or offer or agree to purchase,
acquire or own, directly or indirectly, any voting securities or direct
or indirect rights (pursuant to an exchange, conversion, pledge or
otherwise) or options to acquire any voting securities of DESI;
(iii) make, or in way participate in, directly or indirectly, any
"solicitation" of "proxies" (as such terms are defined or used in
Regulation 14A under the Exchange Act) or become a "participant" in an
"election contest" (as such terms are defined or used in Rule 14a-11 under
the Exchange Act) with respect to DESI or seek to advise or influence any
person with respect to the voting of any voting securities of DESI;
(iv) initiate, propose or otherwise solicit shareholders for the
approval of one or more shareholder proposals with respect to DESI as
described in Rule 14a-8 under the Exchange Act or induce or attempt to
induce any other person to do so;
(v) acquire or affect the control of DESI or directly or indirectly
participate in or encourage the formation of any "group" (within the meaning
of Section 13(d)(3) of the Exchange Act) which owns or seeks to acquire
ownership of voting securities of DESI, or to acquire or affect control of
DESI;
<PAGE> 4
(vi) propose or seek to effect or negotiate with or provide
financial assistance or information to any party with respect to any form
of business combination transaction (including, without limitation, a
merger, consolidation or acquisition or disposition of significant assets
of DESI, or any of its divisions, or any other entity) with DESI or any
affiliate thereof, or any restructuring, recapitalization or similar
transaction with respect to DESI or any portion thereof including any
affiliate thereof;
(vii) encourage any employees of DESI to terminate his or her
employment; or solicit the employment of, or the engagement as a consultant
or advisor of, any employee of DESI so long as such person remains
employed by DESI.
(viii) instigate, encourage, assist or render advice to or make any
recommendation or proposal to any person to engage in any of the actions
covered by clauses (i) through (vii) of this Section 8; or
(ix) except to the extent required by law, make any public
statement (or make available to any member of the news media any
information) with respect to any of the matters covered by this Section 8,
or with respect to this Agreement.
For purposes of this Agreement, the term "voting securities" shall mean
(i) any securities which are entitled to vote upon any matters, whether such
securities are entitled to vote on such matters in all events or only upon the
occurrence of a default or other contingencies, or (ii) any options, warrants,
rights or securities which by their terms may be convertible into or
exchangeable for any security described in clause (i) of this sentence.
9. Right of Termination. Each party hereto has the right, in its sole and
absolute discretion, to reject any or all proposals and to terminate discussions
and negotiations with, or directly or indirectly involving, any other party
hereto at any time, but no such rejection or termination shall terminate this
Agreement.
10. Notices. All notices, requests or other communications required or
permitted to be delivered under this Agreement shall be in writing, delivered in
person or by registered or certified mail, return receipt requested, as follows:
(a) If to the Company:
Bowne & Co., Inc.
345 Hudson Street
New York, New York 10014
Attention: Robert M. Johnson
(b) If to DESI:
Donnelley Enterprise Solutions Incorporated
161 North Clark Street, Suite 2400
Chicago, Illinois 60601
Attention: Chief Financial Officer
Any party hereto may from time to time, by written notice given as aforesaid,
designate any other address to which notices, requests or other communications
addressed to it shall be sent.
11. Agreement Term. This Agreement shall terminate on the third
anniversary of its date; provided, however, that the provisions of Section 3
and 6 shall survive any termination in respect of any obligations that remain
unfulfilled as of the date of such termination.
12. No Waiver. No failure or delay by any party hereto in exercising any
right, power or privilege
<PAGE> 5
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise of any right, power or
privilege.
13. Remedies. Each party hereto acknowledges that money damages would
be an inadequate remedy for any breach of this Agreement and that DESI (in the
case of a breach by the Company) shall be entitled to specific performance and
injunctive or other equitable relief as a remedy for any such breach. The
Company waives any requirement for the securing or posting of any bond in
connection with any such remedy. The Company shall not take any action to
impede DESI from seeking to enforce any such equitable remedy. Such remedy
shall not be deemed to be the exclusive remedy for any breach of this
Agreement, but shall be in addition to all other remedies available at law or
equity.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Illinois, without giving
effect to the principles of conflict of laws thereof.
15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto were upon one instrument.
16. Headings. The descriptive headings of the sections of this Agreement
are solely for the convenience of the parties hereto and shall not affect the
meaning or construction of any of the provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
DONNELLEY ENTERPRISE SOLUTIONS INCORPORATED
By: William Blair & Company, L.L.C., acting as its agent
By: /s/ David Grumhaus
------------------------------
Its: Associate
------------------------------
BOWNE & CO., INC.
By: /s/ Robert Johnson
------------------------------
Its: Chairman & CEO
------------------------------
Confidentiality and Standstill Agreement dated March 19, 1998.
