EXHIBIT 1
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AGREEMENT AND PLAN OF MERGER
Among
REED ELSEVIER INC.,
REH MERGERSUB INC.
and
HARCOURT GENERAL, INC.
Dated as of October 27, 2000
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TABLE OF CONTENTS
Page
ARTICLE I THE OFFER .........................................................2
SECTION 1.1 The Offer.............................................2
SECTION 1.2 Company Action........................................3
ARTICLE II THE MERGER .......................................................4
SECTION 2.1 The Merger............................................4
SECTION 2.2 Closing; Effective Time...............................4
SECTION 2.3 Effects of the Merger.................................4
SECTION 2.4 Certificate of Incorporation; By-Laws.................5
SECTION 2.5 Directors and Officers................................5
SECTION 2.6 Conversion of Securities..............................5
SECTION 2.7 Treatment of Employee Options and Restricted Stock....6
SECTION 2.8 Appraisal Rights......................................6
SECTION 2.9 Surrender of Shares...................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................8
SECTION 3.1 Organization and Qualification; Subsidiaries..........8
SECTION 3.2 Certificate of Incorporation and By-laws..............9
SECTION 3.3 Capitalization........................................9
SECTION 3.4 Authority Relative to This Agreement.................10
SECTION 3.5 No Conflict; Required Filings and Consents...........11
SECTION 3.6 Compliance...........................................12
SECTION 3.7 SEC Filings; Financial Statements....................12
SECTION 3.8 Absence of Certain Changes or Events.................13
SECTION 3.9 Absence of Litigation................................14
SECTION 3.10 Employee Benefit Plans...............................14
SECTION 3.11 Tax Matters..........................................16
SECTION 3.12 Offer Documents; Proxy Statement.....................16
SECTION 3.13 Brokers..............................................17
SECTION 3.14 Takeover Statutes; Rights Plans......................17
SECTION 3.15 Intellectual Property................................17
SECTION 3.16 Environmental Matters................................18
SECTION 3.17 Contracts............................................18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER...........20
SECTION 4.1 Corporate Organization...............................20
SECTION 4.2 Authority Relative to This Agreement.................20
SECTION 4.3 No Conflict; Required Filings and Consents...........20
SECTION 4.4 Offer Documents; Proxy Statement.....................21
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SECTION 4.5 Brokers..............................................21
SECTION 4.6 Financing............................................22
SECTION 4.7 Operations of Purchaser..............................22
SECTION 4.8 Ownership of Shares..................................22
SECTION 4.9 Vote/Approval Required...............................22
SECTION 4.10 Subsequent Transaction...............................22
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER............................23
SECTION 5.1 Conduct of Business of the Company Pending
the Merger ..........................................23
ARTICLE VI ADDITIONAL AGREEMENTS............................................26
SECTION 6.1 Stockholders Meeting.................................26
SECTION 6.2 Proxy Statement......................................26
SECTION 6.3 Company Board Representation; Section 14(f)..........27
SECTION 6.4 Access to Information; Confidentiality...............27
SECTION 6.5 Acquisition Proposals................................29
SECTION 6.6 Employment and Employee Benefits Matters.............31
SECTION 6.7 Directors' and Officers' Indemnification and
Insurance............................................33
SECTION 6.8 Further Action; Reasonable Best Efforts..............35
SECTION 6.9 Third Party Standstill Agreements....................37
SECTION 6.10 Notification of Certain Matters......................37
SECTION 6.11 Integration Committee................................37
SECTION 6.12 Public Announcements.................................37
ARTICLE VII CONDITIONS OF MERGER............................................38
SECTION 7.1 Conditions to Obligation of Each Party to Effect
the Merger...........................................38
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER..............................38
SECTION 8.1 Termination..........................................38
SECTION 8.2 Effect of Termination................................39
SECTION 8.3 Expenses.............................................40
SECTION 8.4 Amendment............................................40
SECTION 8.5 Waiver...............................................40
ARTICLE IX GENERAL PROVISIONS...............................................40
SECTION 9.1 Non-Survival of Representations, Warranties and
Agreements...........................................40
SECTION 9.2 Notices..............................................41
SECTION 9.3 Certain Definitions..................................41
SECTION 9.4 Severability.........................................42
SECTION 9.5 Entire Agreement; Assignment.........................43
SECTION 9.6 Parties in Interest..................................43
SECTION 9.7 Governing Law........................................43
SECTION 9.8 Headings.............................................43
SECTION 9.9 Counterparts.........................................43
SECTION 9.10 Specific Performance; Jurisdiction..................43
SECTION 9.11 Performance.........................................44
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SECTION 9.12 Interpretation......................................44
SECTION 9.13 WAIVER OF JURY TRIAL................................44
Annex A - Offer Conditions
Exhibit A - Restated Certificate of Incorporation of the Company
Exhibit B - By-laws of the Company
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INDEX OF PRINCIPAL TERMS
Acquisition Proposal........................................................30
Adverse Recommendation Change...............................................31
Affected Employees..........................................................33
affiliate...................................................................43
Agreement....................................................................2
Antitrust Law...............................................................37
beneficial owner............................................................43
beneficially owned..........................................................43
Book-Entry Shares............................................................7
business day................................................................44
By-Laws.....................................................................10
Certificate of Merger........................................................5
Certificates.................................................................7
Class C Stock...............................................................10
Closing......................................................................4
Closing Date.................................................................4
Common Stock Merger Consideration............................................5
Company..................................................................2, 44
Company Common Stock.........................................................2
Company Plans...............................................................15
Company Preferred Stock.....................................................10
Company Representatives.....................................................30
Company Requisite Vote......................................................11
Company Securities..........................................................11
control.....................................................................44
controlled..................................................................44
controlled by...............................................................44
Costs.......................................................................34
DGCL 2
Disclosure Schedule..........................................................9
Dissenting Shares............................................................7
DOJ 37
Effective Time...............................................................5
Elsevier....................................................................43
employee benefit plan.......................................................15
Employee Option..............................................................6
Employment Agreements.......................................................15
Environmental Laws..........................................................19
Environmental Permits.......................................................19
ERISA.......................................................................15
Exchange Act.................................................................2
Financial Advisor............................................................3
Financing Representatives...................................................29
FTC ........................................................................37
GCX ........................................................................26
generally accepted accounting principles....................................44
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HSR Act.....................................................................12
Indemnified Parties.........................................................34
Intellectual Property.......................................................18
knowledge...................................................................44
Material Adverse Effect......................................................9
Materials of Environmental Concern..........................................19
Merger.......................................................................2
Merger Agreement.............................................................1
Merger Consideration.........................................................6
Minimum Condition............................................................1
NMG ........................................................................17
Offer........................................................................2
Offer Conditions.............................................................2
Offer Documents..............................................................3
Outside Date.................................................................2
Parent...................................................................2, 44
Parent Plans................................................................33
Paying Agent.................................................................7
person......................................................................44
Proxy Statement.............................................................17
Purchaser................................................................2, 44
Reed .......................................................................43
Reimbursement Agreement.....................................................26
Representatives.............................................................29
Restated Certificate.........................................................5
Restrictive Covenant........................................................20
Schedule 14D-9...............................................................3
Schedule TO..................................................................2
SEC .........................................................................2
SEC Reports.................................................................13
Securities Act..............................................................13
Series A Stock...............................................................2
Series A Stock Merger Consideration..........................................6
Severance Plans.............................................................15
Shares.......................................................................2
Stockholders Meeting........................................................27
Subsequent Transaction......................................................29
subsidiaries................................................................44
subsidiary..................................................................44
Surviving Corporation........................................................4
Tax Return..................................................................17
Taxes.......................................................................17
Termination Fee.............................................................41
TP Representatives..........................................................29
under common control with...................................................44
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 27, 2000 (this
"Agreement"), among REED ELSEVIER INC., a Massachusetts corporation ("Parent"),
REH MERGERSUB INC., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Purchaser"), and HARCOURT GENERAL, INC., a Delaware corporation (the
"Company").
WHEREAS, as promptly as practicable (but in no event later than five
business days after the date hereof), the Purchaser shall commence (within the
meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) an offer (the "Offer") to purchase for cash all of the
issued and outstanding shares of (i) Common Stock, par value $1.00 per share
(the "Company Common Stock"), of the Company at a price of $59.00 per share,
and (ii) Series A Cumulative Convertible Stock (the "Series A Stock" and,
together with the Company Common Stock, the "Shares") at a price of $77.29 per
share, in the case of each of clauses (i) and (ii), net to the seller in cash,
subject to the conditions set forth in Annex A hereto;
WHEREAS, the Board of Directors of the Company has (i) determined
that it is in the best interests of the Company and the stockholders of the
Company and declared it advisable to enter into this Agreement with Parent and
Purchaser providing for the merger (the "Merger") of Purchaser with and into
the Company in accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), upon the terms and subject to the conditions set forth
herein, and (ii) resolved to recommend acceptance of the Offer and adoption of
this Agreement by the stockholders of the Company; and
WHEREAS, the Board of Directors of the Company, Parent and Purchaser
have each approved this Agreement pursuant to which Purchaser will merge with
and into the Company in accordance with the DGCL upon the terms and subject to
the conditions set forth herein; and
WHEREAS, as a condition and inducement to Parent entering this
Agreement, concurrently with the execution and delivery of this Agreement,
Parent and certain significant stockholders of the Company are entering into a
Stockholder Agreement (the "Stockholder Agreement"), pursuant to which, among
other things, such stockholders have agreed to tender their Shares (including
Shares issuable upon conversion of the Class B Stock, par value $1.00 per
share, of the Company (the "Class B Stock")) in the Offer;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, Parent, Purchaser and the Company hereby
agree as follows:
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ARTICLE I
THE OFFER
SECTION 1.1 The Offer. (a) Provided that this Agreement shall not
have been terminated in accordance with Section 8.1 and no event shall have
occurred and no circumstance shall exist which would result in a failure to
satisfy the condition set forth in clause (ii)(a) of Annex A hereto, Purchaser
shall commence the Offer as soon as practicable after the date hereof, and in
any event within eight business days from the date hereof. The obligation of
Purchaser to accept for payment and pay for Shares validly tendered and not
withdrawn shall be subject only to the satisfaction or waiver by Purchaser of
the conditions or events set forth in Annex A hereto (the "Offer Conditions").
Purchaser expressly reserves the right, in its sole discretion, to waive any
such condition and make any other changes in the terms and conditions of the
Offer; provided that, unless previously approved by the Company in writing, (i)
Purchaser may not waive the Minimum Condition (as defined in Annex A) or any of
clauses (ii)(a), (e) or (f) of the Offer Conditions, (ii) Purchaser may not
extend the expiration date of the Offer beyond the initial expiration date of
the Offer except (A) as required by applicable law, (B) that if any condition
to the Offer has not been satisfied or waived (other than as a result of the
failure by Parent or Purchaser to perform any of its obligations under this
Agreement), Purchaser may, in its sole discretion, extend the expiration date
of the Offer for one or more periods (not in excess of 10 business days each)
but in no event later than the Outside Date (as defined below) or (C) as
provided hereafter in this Section 1.1(a), (iii) no change may be made which
decreases the price per Share payable in the Offer, (iv) there shall be no
change to the form of consideration payable in the Offer (other than by adding
consideration), (v) there shall be no reduction in the maximum number of Shares
to be purchased in the Offer and (vi) there shall be no imposition of any
condition to the Offer in addition to those set forth herein, there shall be no
modification or amendment to the Offer Conditions and the Offer shall not be
otherwise modified or amended, in each case, in a manner which is adverse to
holders of the Shares. On the terms and subject to the prior satisfaction or
waiver of the Offer Conditions, Parent shall provide funds to Purchaser and
Purchaser shall accept for payment and pay for Shares as soon as it is
permitted to do so under applicable law; provided that (i) at each scheduled
expiration date of the Offer, if any of the Offer Conditions shall not be
satisfied or waived, Purchaser shall, at the request of the Company, extend the
expiration date of the Offer for one or more periods (not in excess of 10
business days each) but in no event later than the Outside Date and (ii)
Purchaser shall extend the Offer for any period required by any rule,
regulation, interpretation or position of the Securities and Exchange
Commission ("the SEC") or the staff thereof applicable to the Offer. The
initial expiration date of the Offer shall be 20 business days from the
commencement of the Offer in accordance with applicable law.
As used herein, "Outside Date" shall mean the date which is 270 days
from the date hereof.
(b) As soon as reasonably practicable after the date hereof, and in
any event within eight business days from the date hereof, Purchaser and Parent
shall file their Tender Offer Statement on Schedule TO (the "Schedule TO") with
respect to the Offer with the SEC. The Schedule TO shall contain an Offer to
Purchase and a related letter of transmittal and other documents (which
Schedule TO, Offer to Purchase and other documents, together with any
supplements or amendments thereto, are referred to herein collectively as the
"Offer Documents"). Parent, Purchaser and the Company each agrees promptly to
correct any
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information provided by it for use in the Offer Documents that shall have
become false or misleading in any material respect and Parent and Purchaser
further agree to take all steps necessary to cause the Schedule TO as so
corrected to be filed with the SEC and the other Offer Documents as so
corrected to be disseminated to the stockholders of the Company, in each case
as and to the extent required by applicable federal securities laws. The
Company and its counsel shall be given a reasonable opportunity to review and
comment on the Offer Documents prior to their filing with the SEC. Parent and
Purchaser agree to provide the Company with any comments that may be received
from the SEC or its staff with respect to the Offer Documents promptly after
receipt thereof.
(c) Notwithstanding any other provision contained herein, the Offer
shall terminate upon termination of this Agreement pursuant to Section 8.1.
(d) In connection with the Offer, the Purchaser shall include in the
Offer to Purchase any information required by Sections Fourth(B)(4)(b)(vii) and
(4)(c) of the Restated Certificate (as defined in Section 2.4).
SECTION 1.2 Company Action. (a) The Company hereby approves of and
consents to the Offer and represents and warrants that subject to Section
6.5(b) hereof (i) its Board of Directors at a meeting duly called and held has
unanimously (A) determined that this Agreement and the transactions
contemplated hereby, including each of the Offer and the Merger, are advisable
and fair to and in the best interests of the holders of Shares, (B) approved
this Agreement and the transactions contemplated hereby, including each of the
Offer and the Merger, and (C) resolved to recommend that the stockholders of
the Company accept the Offer, tender their Shares to Purchaser thereunder and
adopt this Agreement; and (ii) Goldman, Sachs & Co. (the "Financial Advisor")
has delivered to the Board of Directors of the Company its written opinion (or
oral opinion to be confirmed in writing), dated as of the date hereof, that the
consideration to be received by holders of shares of Company Common Stock
(other than members of the Smith Family Group) pursuant to each of the Offer
and the Merger is fair to such holders from a financial point of view. The
Company has been authorized by the Financial Advisor to permit, subject to
prior review and consent by such Financial Advisor, 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(a).
(b) The Company shall file with the SEC, contemporaneously with the
filing of the Schedule TO pursuant to Section 1.1, a Solicitation/
Recommendation Statement on Schedule 14D-9 (together with all amendments and
supplements thereto, the "Schedule 14D-9"), containing the recommendations of
the Company's Board of Directors described in Section 1.2(a)(i) and shall
promptly mail the Schedule 14D-9 to the stockholders of the Company; provided
that the Company shall not be required to make such filing with such
recommendations or make such mailing if the Company's Board of Directors shall
have determined in good faith, after consultation with outside counsel to the
Company, that refraining from taking such action is reasonably necessary for
the Board of Directors to comply with its fiduciary duties under applicable
law. The Schedule 14D-9 and all amendments thereto shall comply in all material
respects with the Exchange Act and the rules and regulations promulgated
thereunder. The Company, Parent and Purchaser each agrees promptly to correct
any information provided by it for use in the Schedule 14D-9 that shall have
become false or misleading in any material respect and the Company further
agrees to take all steps necessary to cause the Schedule 14D-9 as so
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4
corrected to be filed with the SEC and disseminated to the stockholders of the
Company, in each case as and to the extent required by applicable federal
securities laws.
(c) In connection with the Offer, if requested in writing by
Purchaser, the Company shall as soon as reasonably practicable furnish
Purchaser with mailing labels, security position listings, any non-objecting
beneficial owner lists and any available listings or computer files containing
the names and addresses of the record holders of Shares, each as of a recent
date, and shall as soon as reasonably practicable furnish Purchaser with such
additional information (including but not limited to updated lists of
stockholders, mailing labels, security position listings and non-objecting
beneficial owner lists) and such other assistance as Parent, Purchaser or their
agents may reasonably require in communicating the Offer to the record and
beneficial holders of Shares. Subject to the requirements of law, and except
for such steps as are necessary to disseminate the Offer Documents and any
other documents necessary to consummate the Offer and the Merger, Parent and
Purchaser and each of their respective affiliates and representatives shall
hold in confidence the information contained in any of such lists, labels or
additional information, will use such information only in connection with the
Offer and the Merger and, if this Agreement is terminated, shall promptly
deliver to the Company all copies of such information. The Company agrees to
use reasonable best efforts to cooperate to enable the timely conversion of the
Class B Stock into Company Common Stock prior to the expiration of the Offer,
including without limitation, causing the Company's transfer agent to take all
actions necessary to facilitate such conversion as promptly as practicable.
ARTICLE II
THE MERGER
SECTION 2.1 The Merger. Upon the terms and subject to the conditions
of this Agreement and in accordance with the DGCL, at the Effective Time (as
defined in Section 2.2), Purchaser shall be merged with and into the Company.
As a result of the Merger, the separate corporate existence of Purchaser shall
cease and the Company shall continue as the surviving corporation of the Merger
(the "Surviving Corporation").
SECTION 2.2 Closing; Effective Time. Subject to the provisions of
Article VII, the closing of the Merger (the "Closing") shall take place in New
York City at the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue,
New York, New York, as soon as practicable, but in no event later than the
first business day after the satisfaction or waiver of the conditions set forth
in Article VII, or at such other place or at such other date as Parent and the
Company may mutually agree. The date on which the Closing actually occurs is
hereinafter referred to as the "Closing Date". At the Closing, the parties
hereto shall cause the Merger to be consummated by filing this Agreement or a
certificate of merger or a certificate of ownership and merger (the
"Certificate of Merger") with the Secretary of State of the State of Delaware,
in such form as required by and executed in accordance with the relevant
provisions of the DGCL (the date and time of the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, or such later time
as is specified in the Certificate of Merger and as is agreed to by the parties
hereto, being the "Effective Time") and shall make all other filings or
recordings required under the DGCL in connection with the Merger.
SECTION 2.3 Effects of the Merger. The Merger shall have the effects
set forth in Section 259 of the DGCL.
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SECTION 2.4 Certificate of Incorporation; By-Laws. (a) At the
Effective Time and without any further action on the part of the Company and
Purchaser, the Restated Certificate of Incorporation of the Company (as
amended, the "Restated Certificate") as in effect immediately prior to the
Effective Time shall be amended so as to read in its entirety in the form set
forth in Exhibit A hereto and, as so amended, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
therein and under the DGCL.
(b) At the Effective Time and without any further action on the part
of the Company and Purchaser, the by-laws of the Company as in effect
immediately prior to the Effective Time shall be amended so as to read in their
entirety in the form set forth in Exhibit B hereto and, as so amended, shall be
the by-laws of the Surviving Corporation until thereafter amended in accordance
with their terms or the Certificate of Incorporation of the Surviving
Corporation and as provided by applicable law.
SECTION 2.5 Directors and Officers. The directors of the Company
immediately prior to the Effective Time shall submit their resignations to be
effective as of the Effective Time. The directors of Purchaser immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and by-laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until the earlier of their
resignation or removal or their respective successors are duly elected or
appointed (as the case may be) and qualified.
SECTION 2.6 Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Purchaser, the
Company or the holders of any of the following securities:
(a) each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than any shares to be canceled
pursuant to Section 2.6(c), shares described in Section 2.6(e), or any
Dissenting Shares (as defined in Section 2.8(a))) shall be converted into the
right to receive $59.00 in cash or any higher price that may be paid pursuant
to the Offer (the "Common Stock Merger Consideration") payable to the holder
thereof, without interest, upon surrender of the certificate formerly
representing such share in the manner provided in Section 2.9, less any
required withholding taxes;
(b) each share of Series A Stock issued and outstanding immediately
prior to the Effective Time (other than any shares to be canceled pursuant to
Section 2.6(c), or any Dissenting Shares) shall be converted into the right to
receive $77.29 in cash or any higher price that may be paid pursuant to the
Offer (the "Series A Stock Merger Consideration", and together with the Common
Stock Merger Consideration, the "Merger Consideration") payable to the holder
thereof, without interest, upon surrender of the certificate formerly
representing such share in the manner provided in Section 2.9, less any
required withholding taxes;
(c) each Share held in the treasury of the Company or owned by Parent
or Purchaser immediately prior to the Effective Time, shall automatically be
canceled and retired without any conversion thereof and shall cease to exist
and no payment or distribution shall be made with respect thereto;
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(d) each share of common stock of Purchaser issued and outstanding
immediately prior to the Effective Time shall be converted into and become one
validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation; and
(e) each share of Company Common Stock held by the subsidiaries of
the Company shall not be canceled pursuant to Section 2.6(c) and shall remain
issued.
SECTION 2.7 Treatment of Employee Options and Restricted Stock(a) The
Company shall take all action necessary so that, immediately prior to the
Effective Time, each outstanding employee stock option that is, or shall
become, vested and exercisable as of the Effective Time (an "Employee Option"),
shall be canceled and the holder thereof shall be entitled to receive at the
Effective Time from the Company or as soon as practicable thereafter (but in no
event later than 10 days after the Effective Time) from the Surviving
Corporation in consideration for such cancellation an amount in cash equal to
the product of (A) the number of Shares previously subject to such Employee
Option and (B) the excess, if any, of the Common Stock Merger Consideration
over the exercise price per Share previously subject to such Employee Option,
less any required withholding taxes. If requested by Parent or deemed necessary
by the Company, the Company shall use its reasonable best efforts to obtain the
consent of the holders of Employee Options to the cancellation of such Employee
Options as provided in this Section 2.7; provided, however, that
notwithstanding anything in this Section 2.7, the failure of any holder of an
Employee Option to so consent shall not in any way affect the obligation of the
parties to effect the Merger as provided herein.
(b) Each restricted share of Company Common Stock granted pursuant to
the Company Plans which is outstanding immediately prior to the Effective Time
shall vest and become free of restrictions as of the Effective Time to the
extent provided by the terms thereof and the holder thereof shall be entitled
to receive at the Effective Time the Common Stock Merger Consideration with
respect to each such share, less any required withholding taxes.
SECTION 2.8 Appraisal Rights. (a) Notwithstanding anything in this
Agreement to the contrary, Shares that are issued and outstanding immediately
prior to the Effective Time and which are held by stockholders of the Company
who have not voted in favor of or consented to the Merger and who are entitled
to demand appraisal of such Shares pursuant to, and have delivered a written
demand for appraisal of such Shares in the time and manner provided in, Section
262 of the DGCL (the "Dissenting Shares") shall not be converted into the right
to receive the Merger Consideration, but the holders thereof shall be entitled
to receive the consideration as shall be determined pursuant to Section 262 of
the DGCL; provided, however, that if any such stockholder of the Company shall
fail to perfect or shall effectively waive, withdraw or lose the right to
appraisal and payment under the DGCL or a court of competent jurisdiction shall
determine that such holder is not entitled to the relief provided by Section
262 of the DGCL, then the right of such holder to receive the consideration as
determined pursuant to Section 262 of the DGCL shall cease and such holder's
Shares shall thereupon be deemed to have been converted, at the Effective Time,
into the right to receive the Common Stock Merger Consideration or the Series A
Stock Merger Consideration, as set forth in Section 2.6 of this Agreement,
without any interest thereon.
(b) The Company shall give Parent (i) prompt notice of any demands
for appraisal of any Shares pursuant to Section 262 of the DGCL received by the
Company, withdrawals of such demands and any other instruments served pursuant
to the DGCL and received by the Company and (ii) the opportunity to participate
in and direct all negotiations and
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7
proceedings with respect to demands for appraisal under the DGCL. The Company
shall not, except with the prior written consent of Parent or as otherwise
required by applicable law, make any payment with respect to any such demands
for appraisal or offer to settle or settle any such demands.
SECTION 2.9 Surrender of Shares. (a) Prior to the Effective Time,
Purchaser shall appoint a bank or trust company reasonably acceptable to the
Company (the "Paying Agent") to receive the Merger Consideration to which the
stockholders of the Company shall become entitled pursuant to Section 2.6. When
and as needed, Parent or Purchaser will make available to the Paying Agent
sufficient funds to make all payments pursuant to Section 2.9(b). Such funds
shall be invested by the Paying Agent as directed by Purchaser or, after the
Effective Time, the Surviving Corporation; provided that such investments shall
be in obligations of or guaranteed by the United States of America, in
commercial paper obligations rated A-1 or P-1 or better by Moody's Investors
Service, Inc. or Standard & Poor's Corporation, respectively, or in
certificates of deposit, bank repurchase agreements or banker's acceptances of
commercial banks with capital exceeding $500 million. Any net profit resulting
from, or interest or income produced by, such investments will be payable to
the Surviving Corporation or Parent, as Parent directs.
(b) As soon as reasonably practicable after the Effective Time, the
Surviving Corporation shall cause the Paying Agent to mail to each record
holder, as of the Effective Time, of (i) an outstanding certificate or
certificates which immediately prior to the Effective Time represented Shares
(the "Certificates") or (ii) Shares represented by book-entry ("Book-Entry
Shares"), a form of letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Paying Agent or, in the
case of Book-Entry Shares, upon adherence to the procedures set forth in the
letter of transmittal) and instructions for use in effecting the surrender of
the Certificates or, in the case of Book-Entry Shares, the surrender of such
Shares for payment of the Merger Consideration therefor. Upon surrender to the
Paying Agent of a Certificate or of Book-Entry Shares, together with such
letter of transmittal, duly completed and validly executed in accordance with
the instructions thereto, and such other documents as may be required pursuant
to such instructions, the holder of such Certificate or Book-Entry Shares shall
be entitled to receive in exchange therefor the Merger Consideration for each
Share formerly represented by such Certificate or Book-Entry Shares and such
Certificate or book-entry shall then be canceled. No interest shall be paid or
accrued for the benefit of holders of the Certificates or Book-Entry Shares on
the Merger Consideration payable upon the surrender of the Certificates or
Book-Entry Shares. If payment of the Merger Consideration is to be made to a
person other than the person in whose name the surrendered Certificate is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or shall be otherwise in proper form for
transfer and that the person requesting such payment shall have paid any
transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such tax either has been paid or is not applicable.
(c) All cash paid upon the surrender of a Certificate or of
Book-Entry Shares in accordance with the terms of this Article II shall be
deemed to have been paid in full satisfaction of all rights pertaining to the
Shares formerly represented by such Certificate, or Book-Entry Shares, as the
case may be. At the close of business on the day on which the Effective Time
occurs, the stock transfer books of the Company shall be closed and there shall
be no further
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8
registration of transfers on the stock transfer books of the Surviving
Corporation of the Shares that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates or Book-Entry Shares
are presented to the Surviving Corporation or the Paying Agent for transfer or
any other reason, they shall be cancelled and exchanged as provided in this
Article II.
(d) None of Parent, Purchaser, the Company or the Paying Agent shall
be liable to any person in respect of any cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If any
Certificates or Book-Entry Shares shall not have been surrendered prior to
twelve months after the Effective Time (or immediately prior to such earlier
date on which any Merger Consideration would otherwise escheat to or become the
property of any Governmental Authority), any such Merger Consideration in
respect thereof shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interest
of any person previously entitled thereto.
(e) If any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by the Surviving
Corporation, the posting by such person of a bond in such reasonable amount as
the Surviving Corporation may direct as indemnity against any claim that may be
made against it with respect to such Certificate, the Paying Agent shall pay in
respect of such lost, stolen or destroyed Certificate the Merger Consideration.
(f) Parent, the Surviving Corporation or the Paying Agent shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of Shares such amounts as Parent, the
Surviving Corporation or the Paying Agent is required to deduct and withhold
with respect to the making of such payment under the Internal Revenue Code of
1986, as amended (the "Code") or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld and paid over to the
appropriate taxing authority by Parent, the Surviving Corporation or the Paying
Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares in respect of which
such deduction and withholding was made by Parent, the Surviving Corporation or
the Paying Agent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Purchaser
that, except as set forth on the Disclosure Schedule delivered by the Company
to the Parent and Purchaser prior to the execution of this Agreement (the
"Disclosure Schedule") and except as disclosed in the SEC Reports filed prior
to the date of this Agreement (the "Filed SEC Reports"):
SECTION 3.1 Organization and Qualification; Subsidiaries. (a) The
Company and each of its subsidiaries (i) is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization and
(ii) has the requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as it is now being conducted,
except (other than in the case of clause (i) with respect to the Company) where
any such failure to be so organized, existing or in good standing or to have
such power or authority would not have a Material Adverse Effect (as defined
below). The Company and each of its subsidiaries is
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9
duly qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or operated by
it or the nature of its business or activities makes such qualification or
licensing necessary, except for any such failure to be so qualified or licensed
or in good standing which would not have a Material Adverse Effect. When used
in connection with the Company or any of its subsidiaries, the term "Material
Adverse Effect" means any change or effect that would be materially adverse to
the business, financial condition, assets or results of operations of the
Company and its subsidiaries taken as a whole, other than any change or effect
resulting from (i) changes in general economic conditions, (ii) the
announcement and performance of this Agreement and the transactions
contemplated hereby and compliance with the covenants set forth herein, (iii)
general changes or developments in the industries in which the Company and its
subsidiaries operate or (iv) changes in any tax laws or regulations or
applicable accounting regulations or principles.
(b) All material subsidiaries of the Company and their respective
jurisdictions of incorporation are identified in the SEC Reports. All of the
outstanding capital stock of, or other voting securities or ownership interests
in, each subsidiary of the Company, is owned by the Company, directly or
indirectly, free and clear of all pledges, claims, liens, charges, encumbrances
and security interests of any kind or nature whatsoever (collectively,
"Liens"), and free of any other limitation or restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other voting securities or ownership interests), and are duly
authorized, validly issued, fully paid and nonassessable. There are no
outstanding (i) securities of the Company or any of its subsidiaries
convertible into or exchangeable for shares of capital stock or other voting
securities or ownership interests in any subsidiary of the Company or (ii)
options or other rights to acquire from the Company or any of its subsidiaries,
or other obligations of the Company or any of its subsidiaries to issue, any
capital stock or other voting securities or ownership interests in, or any
securities convertible into or exchangeable for any capital stock or other
voting securities or ownership interests in, any subsidiary of the Company (the
items in clauses (i) and (ii) being referred to collectively as the "Company
Subsidiary Securities"). There are no outstanding obligations of the Company or
any of its subsidiaries to repurchase, redeem or otherwise acquire any of the
Company Subsidiary Securities.
SECTION 3.2 Certificate of Incorporation and By-laws. The Company has
heretofore furnished to Parent a complete and correct copy of the Restated
Certificate and the Amended and Restated By-Laws (the "By-Laws") of the Company
as currently in effect. The Restated Certificate 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 provisions of the
Restated Certificate or By-Laws in any material respect.
SECTION 3.3 Capitalization. The authorized capital stock of the
Company consists of (i) 150,000,000 shares of Company Common Stock, (ii)
80,000,000 shares of Class B Stock, (iii) 100,000,000 shares of Class C Stock,
par value $1.00 per share (the "Class C Stock") and (iv) 40,000,000 shares of
Preferred Stock, par value $1.00 per share (the "Company Preferred Stock"), of
which 10,000,000 shares are designated as Series A Stock. As of October 26,
2000, (i) 55,049,531 shares of Company Common Stock (excluding shares held in
the treasury of the Company) and 18,111,768 shares of Class B Stock were issued
and outstanding, all of which were validly issued, fully paid and nonassessable
and were issued free of preemptive rights, (ii) 2,276,750 shares of Company
Common Stock were held in the treasury of the Company, (iii) 775,713 shares of
Series A Stock were issued and outstanding, (iv)
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10
3,289,353 shares of Company Common Stock were reserved for issuance and
issuable upon or otherwise deliverable in connection with the exercise of
outstanding Employee Options issued pursuant to the Company Plans (as defined
in Section 3.10), (v) 18,111,768 shares of Company Common Stock were reserved
for issuance upon the conversion of the Class B Stock and (vi) 1,016,184 shares
of Company Common Stock were reserved for issuance upon the conversion of the
Series A Stock. There are no outstanding stock appreciation rights or other
rights that are linked to the price of Company Common Stock granted under any
Company Plan that were not granted in tandem with a related Employee Option. No
shares of Company Common Stock are owned by any subsidiary of the Company. The
Company has delivered to Parent a true and complete list, as of the close of
business on October 23, 2000, of all Employee Options and all other rights to
purchase or receive Company Common Stock (collectively, the "Company Stock
Issuance Rights") granted under the Company Plans, the number of shares subject
to each such Employee Option or Company Stock Issuance Right, the grant dates
and exercise prices of each such Employee Option or, as applicable, Company
Stock Issuance Right and the names of the holder thereof. Except as set forth
above, as of the close of business on October 26, 2000, no shares of capital
stock of, or other equity or voting interests in, the Company, or, to the
extent issued or granted by the Company, options, warrants or other rights to
acquire any such stock or securities were issued, reserved for issuance or
outstanding. Since October 26, 2000, no options, warrants, or other rights to
purchase shares of Company Common Stock or Company Preferred Stock or other
equity or voting interests in the Company have been granted and no shares of
Company Common Stock or Company Preferred Stock or other equity or voting
interests in the Company have been issued, except (i) for shares issued
pursuant to the exercise of Employee Options outstanding on the date of this
Agreement, or (ii) for the conversion of shares of Series A Stock or Class B
Stock into shares of Company Common Stock. There are no bonds, debentures,
notes or other indebtedness of the Company or any of its subsidiaries, and,
except as set forth above, no securities or other instruments or obligations of
the Company or any of its subsidiaries, the value of which is based upon or
derived from any capital or voting stock of the Company having the right to (or
convertible into, or exchangeable for, securities having the right to vote)
vote on any matters on which stockholders of the Company or any of its
subsidiaries may vote. Except (i) as set forth above, (ii) as a result of the
exercise of Employee Options, (iii) as a result of or in connection with the
conversion of Series A Stock into Company Common Stock as provided for in the
Restated Certificate or (iv) as a result of or in connection with the
conversion of Class B Stock into Company Common Stock as provided for in the
Restated Certificate, (A) there are not outstanding or authorized any (I)
shares of capital stock or other voting securities of the Company, (II)
securities of the Company convertible into or exchangeable for shares of
capital stock or voting securities of the Company or (III) options, warrants or
other rights to acquire from the Company, and no obligation of the Company to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company
(collectively, "Company Securities"), (B) there are no outstanding obligations
of the Company to repurchase, redeem or otherwise acquire any Company
Securities and (C) there are no other options, calls, warrants or other rights,
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of the Company or any of its subsidiaries to which
the Company or any of its subsidiaries is a party.
SECTION 3.4 Authority Relative to This Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by the Company and the consummation by the
<PAGE>
11
Company of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the transactions so contemplated (other than, with respect to the
Merger, the adoption of this Agreement by the holders of a majority in voting
power of the outstanding shares of each of the Company Common Stock and the
Class B Stock each voting separately as a class, if and to the extent required
by applicable law (the "Company Requisite Vote"), and the filing with the
Secretary of State of the State of Delaware of the Certificate of Merger as
required by the DGCL). This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery hereof by Parent and Purchaser, constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing. The Board of Directors of the Company at a meeting duly
called and held at which all directors of the Company were present, duly and
unanimously has approved this Agreement and the transactions contemplated
hereby and approved, if and to the extent such approval is required to effect a
conversion of all of the Class B Stock pursuant to the Stockholders Agreement,
the conversion of all of the Class B Stock into Company Common Stock pursuant
to Article Fourth, Section A.III(e) of the Restated Certificate. Subject to the
applicability of Section 253 of the DGCL, the only vote of the stockholders of
the Company required to adopt this Agreement is the Company Requisite Vote.
SECTION 3.5 No Conflict; Required Filings and Consents. (a) The
execution, delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof by the Company do not and will not (i) conflict with or
violate the Restated Certificate or By-Laws of the Company, (ii) assuming that
all consents, approvals and authorizations contemplated by clauses (i), (ii),
(iii) and (iv) of subsection (b) below have been obtained and all filings
described in such clauses have been made, conflict with or violate any statute,
law, rule, regulation, ordinance, order, judgment or decree applicable to the
Company or any of its subsidiaries or by which its or any of their respective
properties or assets are bound or (iii) conflict with, or result in any breach
or violation of or constitute a default (or an event which with notice or lapse
of time or both would become a default) or result in the loss of a benefit
under, or give rise to any right of termination, cancellation, amendment or
acceleration of, or result in the creation of any Lien in or upon any of the
properties or assets of the Company or any of its subsidiaries under, or give
rise to any increased, additional, accelerated or guaranteed rights or
entitlements under any provision of any agreement or other instrument binding
upon the Company or any of its subsidiaries or any license, franchise, permit,
certificate, approval or other similar authorization affecting, or relating to
the assets or business of the Company and its subsidiaries, except, in the case
of clauses (ii) and (iii), for any such conflict, violation, breach, default or
other occurrence which would not be reasonably expected to have, individually
or in the aggregate, a Material Adverse Effect.
(b) The execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby by the
Company do not and will not require any consent, approval, authorization or
permit of, action by, filing with or notification to, any governmental or
regulatory authority, domestic, foreign, or supranational except for (i)
applicable requirements, if any, of the Exchange Act and the rules and
regulations promulgated thereunder, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR
<PAGE>
12
Act"), and state securities, takeover and Blue Sky laws, (ii) the applicable
requirements of the New York Stock Exchange, (iii) the filing with the
Secretary of State of the State of Delaware of the Certificate of Merger as
required by the DGCL, (iv) the applicable requirements of any applicable
Antitrust Law (as defined below) and (v) any such consent, approval,
authorization, permit, action, filing or notification the failure of which to
make or obtain would not (A) reasonably be expected to materially delay the
Company from performing its obligations under this Agreement or (B) be
reasonably expected to have a Material Adverse Effect.
SECTION 3.6 Compliance. (a) Neither the Company nor any of its
subsidiaries is, nor since January 1, 1999 has been, in violation of any law,
rule, regulation, statute, order, judgment or decree applicable to the Company
or any of its subsidiaries or by which its or any of their respective
properties or assets are bound, except for any such violation which would not
reasonably be likely to have a Material Adverse Effect, (b) the Company and its
subsidiaries have all permits, licenses, authorizations, exemptions, orders,
consents, approvals and franchises from governmental and regulatory agencies
required to conduct their respective businesses as now being conducted, and
there has occurred no violation of, default under or event giving to others the
right of termination, amendment or cancellation of any such permits, licenses,
authorizations, exemptions, orders, consents, approvals and franchises, except
for any such permit, license, authorization, exemption, order, consent,
approval or franchise, the absence of which would not reasonably be likely to
have a Material Adverse Effect and (c) none of the Company or any of its
subsidiaries has received, since January 1, 1997, a notice or other written
communication alleging or identifying a possible violation of any statute, law,
ordinance, rule, regulation, judgment, order or decree of any governmental
entity applicable to its business or operations, except for any such notices,
communications or violations which would not reasonably be expected to have a
Material Adverse Effect.
SECTION 3.7 SEC Filings; Financial Statements. (a) The Company has
filed all forms, reports, statements, schedules and other documents required to
be filed with the SEC (collectively, the "SEC Reports") since October 31, 1997,
each of which, when filed, and as finally amended, complied as to form in all
material respects with the applicable requirements of the Securities Act of
1933, as amended (the "Securities Act") and the rules and regulations
promulgated thereunder, or the Exchange Act and the rules and regulations
promulgated thereunder, each as in effect on the date so filed or amended, as
the case may be. None of the SEC Reports contained, when filed (or, if amended
or superseded by a filing prior to the date hereof, on the date of such
filing), and each such SEC Report filed subsequent to the date hereof will not
contain, when filed, any untrue statement of a material fact or omitted or will
omit, when filed, to state a material fact required to be stated or
incorporated by reference therein, necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. No subsidiary of the Company is required to file any forms,
reports, statements, schedules or other documents with the SEC.
(b) The audited consolidated financial statements of the Company
(including any related notes thereto) for the fiscal years ended October 31,
1998 and October 31, 1999 included in the Company's Annual Report on Form 10-K
for the fiscal year ended October 31, 1999 filed with the SEC have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes thereto) and fairly present in all material respects the
consolidated financial position of the Company and its subsidiaries at the
respective dates thereof and the consolidated statements of operations, cash
flows and changes in stockholders' equity for the periods indicated. The
<PAGE>
13
unaudited consolidated financial statements of the Company (including any
related notes thereto) for the nine months ended July 31, 2000 included in the
Company's quarterly report on Form 10-Q for the nine months ended July 31, 2000
filed with the SEC have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto) and fairly present
in all material respects the consolidated financial position of the Company and
its subsidiaries as of the date thereof and the consolidated statements of
operations and cash flows for the periods indicated (subject to normal year-end
audit adjustments).
(c) There are no liabilities or obligations of the Company or any of
its subsidiaries required to be disclosed on a balance sheet prepared in
accordance with generally accepted accounting principles, whether accrued,
contingent, absolute, determined, determinable or otherwise, and there is no
existing condition, situation or set of circumstances that would reasonably be
expected to result in such a liability other than: (i) liabilities or
obligations disclosed and provided for in the SEC Reports filed prior to the
date hereof, (ii) liabilities or obligations that would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
and (iii) liabilities and obligations under this Agreement.
SECTION 3.8 Absence of Certain Changes or Events. Since July 31,
2000, except as contemplated by this Agreement, the Company and its
subsidiaries have conducted their business in the ordinary course consistent
with past practice and, since such date, there has not been (i) any change,
event or occurrence which has had or would reasonably be expected to have a
Material Adverse Effect, (ii) prior to the date of this Agreement, any
declaration, setting aside or payment of any dividend on, or other distribution
(whether in cash, stock or property) in respect of, any of the Company's or any
of its subsidiaries' capital stock, except for dividends by a wholly owned
subsidiary of the Company to its parent, (iii) prior to the date of this
Agreement, any purchase, redemption or other acquisition of any shares of
capital stock or any other securities of the Company or any of its subsidiaries
or any options, warrants, calls or rights to acquire such shares or other
securities, (iv) prior to the date of this Agreement, any split, combination or
reclassification of any of the Company's or any of its subsidiaries' capital
stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of capital
stock or other securities of the Company or any of its subsidiaries, (v) (x)
any granting by the Company or any of its subsidiaries to any current or former
director, officer, employee or consultant (other than third party consultants)
of any increase in compensation, bonus or other benefits or any such granting
of any type of compensation or benefits to any current or former director,
officer, employee or consultant (other than third party consultants) not
previously receiving or entitled to receive such type of compensation or
benefit, except for increases of cash compensation and other immaterial changes
in benefits (except for changes in benefits provided to officers other than as
the result of immaterial changes made to Company Plans that are generally
applicable to the employees of the Company or any of its subsidiaries, which
changes are not specifically directed at or do not disproportionately affect
such officers) in each case (1) in the ordinary course of business consistent
with past practice or (2) required under any agreement or benefit plan in
effect as of December 31, 1999, (y) any granting to any current or former
director, officer, employee or consultant (other than third party consultants)
of the right to receive any severance or termination pay, or increases therein,
or (z) any entry by the Company or any of its subsidiaries into, or any
amendment of, any Severance Plan, Company Plan or Employment Agreement (each as
defined below), (vi) any payment of any benefit or the grant or amendment of
any award (including in respect of stock options, stock appreciation rights,
performance units, restricted stock or other
<PAGE>
14
stock-based or stock-related awards or the removal or modification of any
restrictions in any Severance Plan, Company Plan or Employment Agreement or
awards made thereunder) except as required to comply with any applicable law or
any Severance Plan, Company Plan or Employment Agreement existing on such date,
(vii) any damage or destruction, whether or not covered by insurance, that
individually or in the aggregate would reasonably be expected to result in a
Material Adverse Effect, (viii) any material change in financial accounting
principles by the Company or any of its subsidiaries, except insofar as may
have been required by a change in generally accepted accounting principles or
SEC accounting regulations or guidelines or applicable law, (ix) on or prior to
the date of this Agreement, any material election with respect to taxes by the
Company or any of its subsidiaries or any settlement or compromise of any
material tax liability or refund of the Company or any of its subsidiaries (x)
on or prior to the date of this Agreement, any material change in tax
accounting principles by the Company or any of its subsidiaries, except insofar
as may have been required by a change in generally accepted accounting
principles, SEC accounting regulations or guidelines or applicable law, or (xi)
any material write-off or write-down by the Company or any of its subsidiaries
of any of the material assets of the Company or any of its subsidiaries.
SECTION 3.9 Absence of Litigation. There are no suits, claims,
actions, proceedings or investigations pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its subsidiaries
or any of their respective properties that, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect. As of the date
hereof, neither the Company nor any of its subsidiaries nor any of their
respective properties is or are subject to any order, writ, judgment,
injunction, decree or award of any governmental entity or arbitrator, or to the
knowledge of the Company, investigation, proceeding, notice of violation, order
of forfeiture or complaint by any governmental entity involving the Company or
any of its subsidiaries that individually or in the aggregate would reasonably
be likely to have a Material Adverse Effect.
SECTION 3.10 Employee Benefit Plans. Except as would not,
individually or in the aggregate, have a Material Adverse Effect:
(a) Section 3.10 of the Disclosure Schedule contains 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")), and each other employee plan, program, agreement or arrangement
(including, without limitation, all director benefit plans, and all severance
guidelines, plans, policies, programs and practices ("Severance Plans")), and
each other plan or program providing benefits in the event of termination of
employment or a change in control or providing retention or "stay" bonuses, and
each plan or program providing for the issuance of stock options or restricted
shares to employees or directors or for employees or directors to acquire any
stock, and including any other plan or program providing for equity-based
compensation or providing for any bonuses to employees or directors and each
vacation or sick pay policy, and fringe benefit plan, including any such plan
which provides medical, life insurance or other benefits to any former
employees or to any beneficiary or dependent of any such former employee
(collectively, including the Severance Plans, the "Company Plans"), and each
compensation, severance, employment, change in control, retention bonus or
similar agreement (collectively, the "Employment Agreements") in existence as
of the date hereof for any employees (and former employees) and directors (and
former directors) of the Company and its subsidiaries.
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15
(b) With respect to each Company Plan, the Company has made available
to Parent a current, accurate and complete copy thereof and, to the extent
applicable, (i) any related trust agreement or other funding instrument, (ii)
the most recent determination letter, (iii) any summary plan description or
other written communications by the Company or any of its subsidiaries to their
employees concerning the extent of the benefits provided under a Company Plan
and (iv) for the most recent year (A) the Form 5500 and attached schedules, (B)
audited financial statements and (C) actuarial valuation reports.
(c) (i) Each Company Plan has been established and administered in
all respects in accordance with its terms and in compliance with the applicable
provisions of ERISA, the Code, and other applicable laws, rules and
regulations, (ii) each Company Plan which is intended to be qualified within
the meaning of Code section 401(a) has received a favorable determination
letter as to its qualification and nothing has occurred, whether by action or
failure to act, that would cause the loss of such qualification (iii) no plan
which is subject to Title IV of ERISA which is a Company Plan or a plan of any
entity treated as a single employer with the Company pursuant to Code section
414(b) or (c) (a "Common Control Entity") has been terminated within the five
year period prior to the date hereof, (iv) no "reportable event" (as such term
is defined in ERISA Section 4043) with respect to which notice has not been
waived, "prohibited transaction" (as such term is defined in ERISA section 406
and Code section 4975) that is not exempt or "accumulated funding deficiency"
(as such term is defined in ERISA section 302 and Code section 412 (whether or
not waived)) has occurred with respect to any Company Plan and (v) other than
the Company Plans, there is no "employee benefit plan" (within the meaning of
section 3(3) of ERISA) of any other entity for which the Company or any Common
Control Entity is reasonably likely to have any liability.
(d) Neither the Company nor any Common Control Entity participates in
or has any liability to any multiemployer plan (within the meaning of ERISA
section 4001(a)(3)) and neither the Company nor any Common Control Entity has
incurred any withdrawal liability under Title IV of ERISA.
(e) With respect to each Company Plan, no actions, suits or claims
(other than routine claims for benefits in the ordinary course) are pending or,
to the knowledge of the Company, threatened.
(f) Schedule 3.10(f) contains a true and complete list of each
collective bargaining agreement to which the Company or any of its subsidiaries
is a party. Except as set forth on Schedule 3.10(f), none of the employees or
former employees of the Company or any of its subsidiaries is represented by
any collective bargaining agent or worker collective. Schedule 3.10(f)
indicates the date, if any, as of which any agreement with any collective
bargaining representative or worker collective expires.
(g) Except as set forth on Schedule 3.10(g)(i), the consummation of
the transactions contemplated by this Agreement will not, either alone or upon
the occurrence of any additional or subsequent events, result in any payment or
benefit under any Company Plan or Employment Agreement which would be an
"excess parachute payment" within the meaning of Section 280G(b)(1) of the
Code. Except as set forth on Schedule 3.10(g)(ii), no Company Plan or
Employment Agreement provides for the payment of any amount intended to make
any employee whole for any excise tax imposed under Code Section 4999(a).
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16
(h) The Company has delivered to Parent a schedule setting forth a
list of each stock option outstanding as of October 23, 2000 and each
restricted share for which restrictions have not, as of October 23, 2000,
lapsed.
SECTION 3.11 Tax Matters. Except for matters which would not
individually or in the aggregate have a Material Adverse Effect, the Company
and each of its subsidiaries, and any consolidated, combined, unitary or
aggregate group for tax purposes of which the Company or any of its
subsidiaries is or has been a member, has timely filed all Tax Returns (as
defined below) required to be filed by it in the manner provided by law, has
paid all Taxes (as defined below) shown thereon to be due and has provided
adequate reserves in its financial statements for any Taxes that have not been
paid, whether or not shown as being due on any Tax Returns. There is no claim,
audit, action, suit, proceeding, or investigation now pending or threatened
against or with respect to the Company or any of its subsidiaries in respect of
Taxes, except for matters which would not individually or in the aggregate have
a Material Adverse Effect. No adjustment that would increase the Tax liability,
or reduce any Tax asset, of the Company or any of its subsidiaries in a manner
that would have a Material Adverse Effect has been made, proposed or threatened
in writing by a taxing authority (whether in connection with an audit or
otherwise). The Company and each of its subsidiaries have complied with all
applicable laws with respect to the withholding of Tax, including without
limitation requirements relating to the submission of withheld amounts to
appropriate taxing authorities, except to the extent such noncompliance would
not individually or in the aggregate have a Material Adverse Effect. The
Company and its subsidiaries have no liability for any Taxes imposed on any
other persons as a result of being party to any agreement or having any
obligation to indemnify other persons except for liabilities which would not
individually or in the aggregate have a Material Adverse Effect. The
representations set forth in the private letter ruling issued by the Internal
Revenue Service to the Company with respect to the Company's distribution to
its stockholders of substantially all of its stock of The Neiman Marcus Group,
Inc. ("NMG") and the representations made by the Company in its request (and
any supplements thereto) for such private letter ruling, were true, correct and
complete in all material respects as of October 22, 1999. For purposes of this
Agreement, "Taxes" shall mean any taxes of any kind, including but not limited
to those on or measured by or referred to as income, gross receipts, capital,
sales, use, ad valorem, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, value added,
property or windfall profits taxes, customs, duties or similar fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any
governmental authority, domestic or foreign. For purposes of this Agreement,
"Tax Return" shall mean any return, report or statement required to be filed
with any governmental authority with respect to Taxes, including any schedule
or attachment thereto or amendment thereof.
SECTION 3.12 Offer Documents; Proxy Statement. Neither the Schedule
14D-9, nor any of the information specifically supplied in writing by the
Company for inclusion in the Offer Documents, shall, at the respective times
such Schedule 14D-9, the Offer Documents or any amendments or supplements
thereto are filed with the SEC, first published, sent or given to the
stockholders of the Company and at the time Shares are purchased pursuant to
the Offer, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. Neither the proxy statement to be sent to the
stockholders of the Company in connection with the Stockholders Meeting (as
defined in Section 6.1) nor the information statement to be sent to such
stockholders, as appropriate
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17
(such proxy statement or information statement, as amended or supplemented, is
herein referred to as the "Proxy Statement"), shall, at the date the Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
such stockholders, at the time of the Stockholders Meeting, if any, and at the
Effective Time, be false or misleading with respect to any material fact, or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they are made, not false or misleading or necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Stockholders Meeting which has become false or misleading.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to any information supplied by Parent or Purchaser or any of their
respective representatives which is contained in or incorporated by reference
in the Schedule 14D-9 or the Proxy Statement. The Schedule 14D-9, as amended or
supplemented, and the Proxy Statement will comply in all material respects as
to form with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder.
SECTION 3.13 Brokers. No broker, finder, investment banker or other
intermediary (other than the Financial Advisor, a copy of whose engagement
agreement has been provided to Parent) is entitled to any brokerage, finder's
or other fee or commission in connection with the transactions contemplated by
this Agreement from the Company or any of its affiliates in connection with the
transactions contemplated by this Agreement.
SECTION 3.14 Takeover Statutes; Rights Plans. No "fair price",
"moratorium", "control share acquisition" or other similar antitakeover statute
or regulation enacted under state or federal laws in the United States (with
the exception of Section 203 of the DGCL) applicable to the Company is
applicable to the Offer or the Merger or the other transactions contemplated
hereby. As of the date of this Agreement, the Company does not have any
stockholder rights plan in effect. Assuming the accuracy of the representations
and warranties of Parent and Purchaser set forth in Section 4.8, the action of
the Board of Directors of the Company in approving the Offer, the Merger and
this Agreement (and the transactions provided for herein) is sufficient to
render inapplicable to the Offer, the Merger and this Agreement (and the
transactions provided for herein) the restrictions on "business combinations"
(as defined in Section 203 of the DGCL) set forth in Section 203 of the DGCL.
SECTION 3.15 Intellectual Property. (a) Except as would not have a
Material Adverse Effect, (i) the Company and its subsidiaries own, or are
validly licensed or otherwise have the right to use all patents, inventions,
copyrights, software, trademarks, service marks, domain names, trade dress,
trade secrets and all other intellectual property rights of any kind or nature
("Intellectual Property") used in their business as currently conducted, (ii)
such Intellectual Property does not infringe, misappropriate or otherwise
violate the Intellectual Property of any third party; (iii) none of the Company
or any of its subsidiaries has received any written charge, complaint, claim,
demand or notice alleging any such infringement, misappropriation or other
violation (including any claim that the Company or any of its subsidiaries must
license or refrain from using any Intellectual Property of any third party),
and (iv) to the Company's knowledge no other third party has infringed upon,
misappropriated or otherwise violated any Intellectual Property of the Company
or any of its subsidiaries. The Company and its subsidiaries make reasonable
best efforts to protect and maintain their material Intellectual Property.
(b) Except as would not have a Material Adverse Effect, the Company
and its subsidiaries own, lease, or are validly licensed or otherwise have the
right to use all hardware
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18
and software and any other necessary components which make up the information
technology systems (the "IT Systems") which the Company and its subsidiaries
use as of the date hereof to carry out their respective businesses as currently
conducted. Except as would not have a Material Adverse Effect, (i) to the
knowledge of the Company, neither the IT Systems nor any component of the IT
Systems, infringes, misappropriates or otherwise violates the Intellectual
Property of any third party, and (ii) the IT Systems have sufficient capacity
to satisfy the needs of the business of the Company as currently conducted.
SECTION 3.16 Environmental Matters. (a) Except as would not
reasonably be likely to have a Material Adverse Effect: (i) the Company and
each of its subsidiaries comply with all applicable Environmental Laws (as
defined below), and possess and comply with all applicable Environmental
Permits (as defined below) required under such laws to operate as it presently
operates; (ii) there are no Materials of Environmental Concern (as defined
below) or other facts, events, conditions or set of circumstances at any
property currently or previously owned, leased or operated by the Company or
any of its subsidiaries that are reasonably likely to result in liability of
the Company or any subsidiary under any applicable Environmental Law; and (iii)
neither the Company nor any of its subsidiaries has received any written
notification alleging that it is liable for, or request for information
pursuant to section 104(e) of the Comprehensive Environmental Response,
Compensation and Liability Act or similar state statute, concerning any release
or threatened release of Materials of Environmental Concern at any location.
(b) For purposes of this Agreement, the following terms shall have
the meanings assigned below:
"Environmental Laws" shall mean all foreign, Federal, state, or local laws
(including common law), statutes, regulations, rules, judgments, orders,
ordinances, codes, or decrees relating to the protection of the
environment, including, without limitation, the quality of the ambient
air, soil, surface water or groundwater, in effect as of the date of this
Agreement.
"Environmental Permits" shall mean all permits, licenses, registrations,
and other authorizations required under applicable Environmental Laws.
"Materials of Environmental Concern" shall mean any hazardous, acutely
hazardous, or toxic substance or waste or any other words of similar
import defined and regulated as such under Environmental Laws, including
without limitation the federal Comprehensive Environmental Response,
Compensation and Liability Act and the federal Resource Conservation and
Recovery Act.
(c) Neither the Company nor any of its subsidiaries own, lease or
operate any properties located in New Jersey or Connecticut.
SECTION 3.17 Contracts. (a) Except for any loan or credit agreement,
bond, debenture, note, mortgage, indenture, guarantee, lease or other contract,
commitment, agreement, instrument, arrangement, understanding, obligation,
undertaking, permit, concession, franchise or license (each, including all
amendments thereto, a "Contract") filed as exhibits to the SEC Reports, as of
the date hereof there are no Contracts that are required to be filed as an
exhibit to any SEC Reports under the Exchange Act and the rules and regulations
promulgated thereunder.
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19
Except for Contracts filed in unredacted form as exhibits to the Filed SEC
Reports, Section 3.17 of the Disclosure Schedule sets forth a true and complete
list of:
(i) all Contracts to which the Company or any of its affiliates is a
party, or that purport to be binding upon the Company or any of
its affiliates that contain a covenant (a "Restrictive
Covenant") materially restricting the ability of the Company or
any of its subsidiaries (or which, following the consummation of
the Merger, could materially restrict the ability of Parent or
any of its subsidiaries, including the Company and its
subsidiaries) to compete in any business that is material to the
Company and its subsidiaries, taken as a whole, or Parent and
its subsidiaries, taken as a whole, or with any person or in any
geographic area, except for any such Contract that may be
canceled without penalty by the Company or any of its
subsidiaries upon notice of 60 days or less;
(ii) all material joint venture and partnership agreements (excluding
information technology contracts); and
(iii) as of the date hereof, all loan agreements, credit agreements,
notes, debentures, bonds, mortgages, indentures and other
Contracts pursuant to which any indebtedness of the Company or
any of its subsidiaries is outstanding or may be incurred and
all guarantees of or by the Company or any of its subsidiaries
of any indebtedness of another person (except for such
indebtedness or guarantees of indebtedness the aggregate
principal amount of which does not exceed $5 million).
None of the Company or any of its subsidiaries is in violation of or default
(with or without notice or lapse of time or both) under, or has waived or
failed to enforce any rights or benefits under, any Contract to which it is a
party or by which it or any of its properties or assets is bound, and, to the
knowledge of the Company or such subsidiary, no other party to any of its
Contracts is in violation or default (with or without notice or lapse of time
or both) under, or has waived or failed to enforce any rights or benefits
under, and there has occurred no event giving to others any right of
termination, amendment or cancellation of, with or without notice or lapse of
time or both, any such Contract except, in each case, for violations, defaults,
waivers or failures to enforce benefits that individually or in the aggregate
would not be expected to result in a Material Adverse Effect. Except as
identified in writing by the Company to Parent prior to the date of this
Agreement, the Company has delivered or made available to Parent or its
representatives true and complete copies of all Contracts listed on Section
3.17 of the Company Disclosure Schedule.
(b) The Company is and has been in substantial compliance since
November 1, 1999, with the Amended and Restated Intercompany Services Agreement
dated November 1, 1999 between the Company and NMG (the "Intercompany Services
Agreement") and, as of the date hereof, there are no suits or claims pending,
or to the knowledge of the Company threatened against it, by NMG arising out
the Intercompany Services Agreement.
(c) The Lease Resolution Agreement dated as of October 27, 2000 among
the Company, Richard A. Smith and Nancy Lurie Marks (the "Family Agreement")
has been duly
<PAGE>
20
and validly authorized, executed and delivered by the Company and constitutes
and will constitute, as at the date of the expiration of the Offer and the
Effective Time a legal, valid and binding obligation of the parties thereto and
is enforceable and will be enforceable, as of the date of the expiration of the
Offer and the Effective Time, against the parties thereto in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER
Parent and Purchaser hereby, jointly and severally, represent and
warrant to the Company that:
SECTION 4.1 Corporate Organization. Each of Parent and Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is incorporated and has the requisite
corporate power and authority to own, operate or lease its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing or in good standing or to have such power or
authority would not prevent or materially delay the consummation of the
transactions contemplated hereby. Parent beneficially owns all of the
outstanding capital stock of Purchaser.
SECTION 4.2 Authority Relative to This Agreement. Each of Parent and
Purchaser has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. The execution, delivery and performance
of this Agreement by each of Parent and Purchaser and the consummation by each
of Parent and Purchaser of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action (including by the
Boards of Directors of Parent and Purchaser and, prior to the Effective Time,
by Parent as the sole stockholder of Purchaser) and no other corporate
proceedings on the part of Parent or Purchaser (including shareholder actions)
are necessary to authorize this Agreement or to consummate the transactions so
contemplated (other than the filing with the Secretary of State of the State of
Delaware of the Certificate of Merger as required by the DGCL). This Agreement
has been duly executed and delivered by Parent and Purchaser and, assuming due
authorization, execution and delivery hereof by the Company, constitutes a
legal, valid and binding obligation of each such corporation enforceable
against such corporation in accordance with its terms, subject to the effects
of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws relating to or affecting creditors' rights generally,
general equitable principles (whether considered in a proceeding in equity or
at law) and an implied covenant of good faith and fair dealing.
SECTION 4.3 No Conflict; Required Filings and Consents. (a) The
execution, delivery and performance of this Agreement by Parent and Purchaser
do not and will not (i) conflict with or violate the respective certificates or
articles of incorporation or by-laws of Parent or Purchaser, (ii) assuming that
all consents, approvals and authorizations contemplated by clauses (i), (ii)
and (iii) of subsection (b) below have been obtained and all filings described
in such clauses have been made, conflict with or violate any law, rule,
regulation, order, judgment
<PAGE>
21
or decree applicable to Parent or Purchaser or by which either of them or their
respective properties are bound or (iii) result in any breach or violation of
or constitute a default (or an event which with notice or lapse of time or both
would become a default) or result in the loss of a material benefit under, or
give rise to any right of termination, cancellation, material amendment or
material acceleration of, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit or other instrument or obligation to which
Parent or Purchaser is a party or by which Parent or Purchaser or any of their
respective properties are bound, except, in the case of clauses (ii) and (iii),
for any such conflict, violation, breach, default or other occurrence which
would not prevent or materially delay the consummation of the transactions
contemplated hereby.
(b) The execution, delivery and performance of this Agreement by
Parent and Purchaser and the consummation of the Offer and the Merger by
Purchaser do not and will not require any consent, approval, authorization or
permit of, action by, filing with or notification to, any governmental or
regulatory authority, except (i) for applicable requirements, if any, of the
Exchange Act and the rules and regulations promulgated thereunder, the HSR Act
and state securities, takeover and Blue Sky laws, (ii) the applicable
requirements of the New York Stock Exchange, London Stock Exchange and
Amsterdam Stock Exchange, (iii) the filing with the Secretary of State of the
State of Delaware of the Certificate of Merger as required by the DGCL, (iv)
the applicable requirements of any applicable Antitrust Law or investment laws
relating to foreign ownership and (v) any such consent, approval,
authorization, permit, action, filing or notification the failure of which to
make or obtain would not prevent or materially delay the consummation of the
transactions contemplated hereby.
SECTION 4.4 Offer Documents; Proxy Statement. The Offer Documents, as
filed pursuant to Section 1.1, will not, at the time such Offer Documents (or
any amendments or supplements thereto) are filed with the SEC or are first
published, sent or given to the stockholders of the Company and at the time
Shares are purchased pursuant to the Offer contain any untrue statement of a
material fact or omit to state any material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The information specifically supplied in writing by Parent for
inclusion in the Proxy Statement shall not, on the date the Proxy Statement (or
any amendments or supplements thereto) is first mailed to the stockholders of
the Company, at the time of the Stockholders Meeting, if any, and at the
Effective Time, contain any statement which is false or misleading with respect
to any material fact, or omit to state any material fact required to be stated
therein or necessary in order to make the statements made therein, in the light
of the circumstances under which they were made, not false or misleading or
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Stockholders Meeting which has become false
or misleading. Notwithstanding the foregoing, Parent and Purchaser make no
representation or warranty with respect to any information supplied by the
Company or any of its representatives which is contained in or incorporated by
reference in any of the Offer Documents or Proxy Statement. The Offer shall
comply in all material respects with the Exchange Act and the rules and
regulations promulgated thereunder. The Offer Documents, as amended and
supplemented, will comply in all material respects as to form with the
requirements of the Exchange Act and the rules and regulations promulgated
thereunder.
SECTION 4.5 Brokers. No broker, finder or investment banker (other
than Morgan Stanley Dean Witter, ABN Amro and Cazenove is entitled to any
brokerage, finder's or
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22
other fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by and on behalf of Parent or
Purchaser.
SECTION 4.6 Financing. Parent and Purchaser will have available to
them, upon consummation of the Offer and at the Effective Time, immediately
available funds necessary to consummate the transactions contemplated by this
Agreement and to pay all related fees and expenses.
SECTION 4.7 Operations of Purchaser. Purchaser has been formed solely
for the purpose of engaging in the transactions contemplated hereby and prior
to the Effective Time will have engaged in no other business activities and
will have incurred no liabilities or obligations other than as contemplated
herein.
SECTION 4.8 Ownership of Shares. As of the date of this Agreement,
Parent, Purchaser or their respective affiliates do not own (directly or
indirectly, beneficially or of record) any Shares and none of Parent, Purchaser
or their respective affiliates hold any rights to acquire any Shares except
pursuant to this Agreement.
SECTION 4.9 Vote/Approval Required. No vote of the holders of any
class or series of capital stock of Reed International P.L.C., Elsevier NV,
Parent, Purchaser or any of their affiliates is necessary to approve this
Agreement, the Merger or the Offer or the financing thereof (including under
the rules of any stock exchange on which their shares are listed). None of Reed
International P.L.C., Elsevier NV, Parent, Purchaser nor any of their
affiliates is required to obtain the advice of any works council or workers
council or similar body in connection with this Agreement, the Merger or the
Offer or the transactions contemplated hereby or the financing thereof.
SECTION 4.10 Subsequent Transaction. Parent has furnished the Company
with true and correct copies of all agreements, understandings and
interpretations relating to the Subsequent Transaction (collectively, the
"Subsequent Transaction Agreements").
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23
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 Conduct of Business of the Company Pending the Merger.
The Company covenants and agrees that, during the period from the date hereof
until the Effective Time, except as contemplated by this Agreement, as
disclosed in the SEC Reports filed prior to the date of this Agreement or in
Section 5.1 of the Disclosure Schedule or as required by law, or unless
Purchaser shall otherwise agree in writing, the business of the Company and its
subsidiaries shall be conducted in its ordinary course of business consistent
with past practice and the Company and its subsidiaries shall use their
reasonable best efforts to comply with all applicable laws, rules and
regulations and, to the extent consistent therewith, use their reasonable best
efforts to preserve substantially intact their business organizations, and to
preserve their present relationships with customers, suppliers, employees,
licensors, licensees, distributors, authors and other content providers and
other persons with which they have business relations. Without limiting the
generality of the foregoing, between the date of this Agreement and the
Effective Time, except as otherwise contemplated by this Agreement, as set
forth in Section 5.1 of the Disclosure Schedule or as required by law, neither
the Company nor any of its subsidiaries shall without the prior written consent
of Parent (it being understood that Parent will determine whether or not to
give such consent based on its reasonable business judgment):
(a) amend or otherwise change the certificate of incorporation or
by-laws or equivalent organizational documents of the Company and its
subsidiaries;
(b) issue, deliver, sell, pledge, dispose of or encumber any shares
of capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital
stock, or any other ownership interest (including but not limited to stock
appreciation rights or phantom stock), of the Company or any of its
subsidiaries (except (A) for the issuance of shares of Common Stock
issuable in accordance with the terms of Employee Options issued and
outstanding as of the date hereof, (B) for the conversion of shares of
Series A Stock or Class B Stock into shares of Common Stock, (C) for the
grant of Employee Options (and issuances of Common Stock pursuant thereto)
in the ordinary course of business in order to attract new employees or
(D) in connection with the dividend reinvestment plan of the Company
existing on the date hereof);
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock (except for (i)any dividend or distribution by
a wholly-owned subsidiary of the Company, (ii) regular quarterly dividends
of the Company in an amount not to exceed $0.21 per share of Common Stock
and regular quarterly dividends of the Company in an amount not to exceed
$0.189 per share of Class B Stock or (iii) quarterly dividends on the
Series A Stock as provided for in the Restated Certificate);
(d) (i) purchase, redeem or otherwise acquire any shares of its
capital stock or any other securities of the Company or any of its
subsidiaries or any options, warrants, calls or rights to acquire any such
shares or other securities (other than in connection with the dividend
reinvestment plan of the Company existing on the date hereof in accordance
with past practice) or (ii) reclassify, combine, split or subdivide any
capital stock or other
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24
securities of the Company or any of its subsidiaries (except in connection
with the conversion of shares of Class B Stock or Series A Stock into
shares of Common Stock);
(e) (i) directly or indirectly, acquire or agree to acquire (by
merger, consolidation or acquisition of stock or assets or otherwise) (A)
any interest in a corporation, partnership or other business organization
or division thereof or any assets constituting a business, including
assets related to individual works, or (B) except in the ordinary course
of business consistent with past practice, any other assets, (ii) directly
or indirectly sell, lease, license, sell and leaseback, mortgage, encumber
or otherwise dispose of, (a) any of its individual works or assets related
thereto, (b) any other assets (other than assets intended for sale to
customers in the ordinary course of business or consumed in the ordinary
course of business), having an aggregate fair market value in excess of $5
million; other than in the case of clauses (a) and (b) pursuant to
existing contracts or commitments, (iii) other than in the ordinary course
of business consistent with past practice, enter into, renew, amend or
terminate any contract or agreement which is or would be material to the
Company and its subsidiaries taken as a whole or (iv) issue or authorize
any material new capital expenditures other than in accordance with the
capital expenditure schedule set forth as Section 5.1(e) of the Disclosure
Schedule;
(f) (i) repurchase, prepay or incur any indebtedness or guarantee any
indebtedness of another Person or issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of
the Company or any of its subsidiaries, guarantee any debt securities of
another Person, enter into any "keep well" or other agreement to maintain
any financial statement condition of another Person or enter into any
arrangement having the economic effect of any of the foregoing, other than
under existing debt facilities in the ordinary course of business
consistent with past practice for working capital purposes or other
purposes permitted under this Section 5.1, or (ii) make any loans,
advances or capital contributions to, or investments in, any other Person,
other than those (A) set forth in Section 5.1(f) of the Disclosure
Schedule or (B) made to or in the Company or any direct or indirect wholly
owned subsidiary of the Company;
(g) except as required by law, (i) pay, discharge, settle or satisfy
any material claims (including claims of stockholders), liabilities or
obligations (whether absolute, accrued, asserted or unasserted, contingent
or otherwise), except (A) in the ordinary course of business consistent
with past practice or (B) as required by their terms as in effect on the
date of this Agreement, (ii) waive, release, grant or transfer any right
of material value other than in the ordinary course of business consistent
with past practice or (iii) waive any material benefits of, or agree to
modify in any respect materially adverse to the Company, or fail to
enforce, or consent to any matter with respect to which its consent is
required under, any material confidentiality agreement (other than
standstill provisions) to which the Company or any of its subsidiaries is
a party;
(h) except as contemplated by Section 6.6 or except to the extent
provided under any Company Plan or Employment Agreement, increase the
compensation or fringe benefits of any of its directors, officers or
employees, except for increases for employees of the Company or its
subsidiaries (other than directors and officers except as provided in
Schedule 5.1(h)) in the ordinary course of business consistent with past
practice, or grant any severance or termination pay not provided for under
any Company Plan or Employment Agreement or enter into any employment,
consulting or severance
<PAGE>
25
agreement or arrangement with any present or former director, officer or
other employee of the Company or any of its subsidiaries, or establish,
adopt, enter into or amend in any material respect or terminate any
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy, guideline, arrangement or practice for the benefit of any
directors, officers or employees, except as required by applicable law;
(i) enter into any agreement containing any provision or covenant
materially limiting in any respect the ability of the Company or any of
its subsidiaries or, assuming the consummation of the transactions
contemplated herein, Parent or any of its affiliates, to (i) sell any
products or services of or to any other Person, (ii) engage in any line of
business or (iii) compete with any Person;
(j) make any significant change in any accounting principles, except
as may be appropriate to conform to changes in statutory or regulatory
accounting rules or generally accepted accounting principles or regulatory
requirements with respect thereto;
(k) accelerate the payment, right to payment or vesting of any bonus,
severance, profit sharing, retirement, deferred compensation, stock
option, insurance or other compensation or benefits;
(l) other than in the ordinary course of business consistent with
past practice, make any tax election or enter into settlement or
compromise of any tax liability that in either case is material to the
business of the Company and its subsidiaries as a whole;
(m) (a) agree to any modification, amendment, or waiver of any
provision of (i) the Amended and Restated Reimbursement and Security
Agreement (the "Reimbursement Agreement") dated as of January 26, 1999
between the Company and GC Companies, Inc. ("GCX") or (ii) the
Intercreditor Agreement dated as of January 26, 1999 among BankBoston,
N.A., the Company and GCX, without Parent's consent, which consent shall
not be unreasonably withheld; or (B) settle or compromise any claim made
by GCX, or any other person, or any liability or obligation of the Company
or its subsidiaries relating to GCX, any of its properties or relating to
any other matter arising in any reorganization, recapitalization
liquidation or bankruptcy proceeding of GCX, without Parent's consent,
which consent shall not be unreasonably withheld (provided that the
Company may directly or indirectly make payments to any third party (which
in the aggregate will not exceed $1 million), or take any emergency or
temporary action, in order to preserve the assets or operations associated
with any GCX obligations for which the Company is liable). Further, the
Company agrees to assert and defend, consistent with advice of counsel,
all rights it may have with respect to any matter affecting GCX, and use
its reasonable best efforts, consistent with advice of counsel, to
mitigate any losses, obligations or claims relating to GCX or its
properties including any guarantee of leases or any other obligations of
GCX; provided, however, that Parent consents to the implementation of the
Company's agreement dated October 13, 2000 with DJM Asset Management and
W/S Discount Acquisition II, LLC. In addition, the Company shall promptly
notify Parent (but in no event later than 48 hours) of any material
development or change with respect to any matters related to GCX after the
date hereof and shall thereafter keep Parent informed in all respects as
to the status of any such material developments or changes.
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26
(n) authorize or agree to take any of the actions described in
Sections 5.1(a) through 5.1(m).
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Stockholders Meeting. (a) As soon as reasonably
practicable following consummation of the Offer, the Company, acting through
its Board of Directors, shall, if required in accordance with applicable law
and the Company's Restated Certificate and By-Laws, (i) duly call, give notice
of, convene and hold a meeting of its stockholders for the purpose of adopting
this Agreement (the "Stockholders Meeting") and (ii) use its reasonable best
efforts to obtain the necessary adoption of this Agreement by the stockholders
of the Company. At the Stockholders Meeting, Parent and Purchaser shall cause
all Shares then beneficially owned by them and their subsidiaries and
controlled affiliates to be voted in favor of adoption of this Agreement.
(b) Notwithstanding the foregoing, in the event that Purchaser shall
acquire at least 90% of the outstanding shares of each of the Company Common
Stock and the Class B Stock (if any shares thereof are then outstanding),
Parent and Purchaser agree, subject to Article VII, 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
stockholders of the Company, in accordance with Section 253 of the DGCL.
(c) Notwithstanding anything to the contrary contained in this
Agreement, the Company shall not be required to hold the Stockholders Meeting
if the Offer is not consummated.
SECTION 6.2 Proxy Statement. If required by applicable law, as soon
as reasonably practicable following Parent's request, the Company shall file
with the SEC under the Exchange Act and the rules and regulations promulgated
thereunder, and shall use its reasonable best efforts to have cleared by the
SEC, the Proxy Statement with respect to the Stockholders Meeting. Parent,
Purchaser and the Company will cooperate with each other in the preparation of
the Proxy Statement. Without limiting the generality of the foregoing, each of
Parent and Purchaser will furnish to the Company the information relating to it
required by the Exchange Act and the rules and regulations promulgated
thereunder to be set forth in the Proxy Statement. The Company agrees to use
its reasonable best efforts to respond as soon as reasonably practicable to any
comments made by the SEC with respect to the Proxy Statement and any
preliminary version thereof filed by it and cause such Proxy Statement to be
mailed to the stockholders of the Company as soon as reasonably practicable.
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27
SECTION 6.3 Company Board Representation; Section 14(f). (a) If
requested by Parent, the Company shall, as soon as reasonably practicable
following payment for the purchase of Shares pursuant to the Offer, and from
time to time thereafter, use its best efforts to cause a majority of directors
of the Company to consist of persons designated or elected by Parent (such
actions to include increasing the size of the Board of Directors or securing
the resignations of incumbent directors or both). At such times, if requested
by Parent, the Company will use its best efforts to cause persons designated by
Purchaser to constitute a majority of the members of (i) each committee of the
Board of Directors of the Company, (ii) each board of directors of each
domestic subsidiary of the Company and (iii) each committee of each such board,
in each case only to the extent permitted by law and as specifically designated
by Parent.
(b) The Company's obligations to cause Parent's designees to be
elected or appointed to its Board of Directors shall be subject to Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. The Company
shall as soon as reasonably practicable (subject to the provision of
information by Parent and Purchaser) take all actions required pursuant to
Section 14(f) and Rule 14f-1 in order to fulfill its obligations under this
Section 6.3 and shall include in the Schedule 14D-9 or a separate Rule 14f-1
information statement provided to the stockholders of the Company 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 6.3. Parent or Purchaser will supply to the Company as soon as
reasonably practicable and be solely responsible for any information with
respect to either of them and their nominees, officers, directors and
affiliates required by Section 14(f) and Rule 14f-1.
(c) In addition to any vote of the Board of Directors of the Company
required by law or the Restated Certificate or the By-Laws, following the
election or appointment of Purchaser's designees pursuant to this Section 6.3
and prior to the Effective Time, any amendment of this Agreement or the
Restated Certificate or By-Laws, any termination of this Agreement by the
Company, any extension by the Company of the time for the performance of any of
the obligations or other acts of Parent or Purchaser hereunder, any extension
or alteration of the Effective Time or any waiver or assertion of any of the
Company's rights hereunder or any term or condition of this Agreement or the
Restated Certificate or By-Laws or any action by the Company hereunder which
adversely affects holders of Shares other than Parent or Purchaser, and any
other consent or action by the Board of Directors of the Company with respect
to this Agreement, will require the concurrence of a majority of the directors
of the Company then in office who are directors as of the date of this
Agreement and who voted to approve this Agreement or are designated by a
majority of the directors of the Company who are directors on the date of this
Agreement and who voted to approve this Agreement; provided that,
notwithstanding Section 6.3(a), the number of such directors shall be not less
than three; provided, further, that, if the number of such directors shall be
reduced below three for any reason, such remaining directors shall be entitled
to designate persons to fill such vacancies so that there will continue to be
three such directors and such persons shall be deemed for purposes of this
Section 6.3(c) to have been directors as of the date of this Agreement.
SECTION 6.4 Access to Information; Confidentiality. (a) From the date
hereof to the Effective Time, upon reasonable prior written notice, and subject
to applicable law, the Company (i) shall, and shall cause its subsidiaries,
officers, directors and employees to, afford the officers, employees, counsel,
accountants, financial representatives and other authorized representatives
(the "Representatives") of Parent and representatives of the financial
institutions providing financing and their counsel, accountants and other
representatives (collectively, the
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28
"Financing Representatives") and Representatives of any Person which has
entered into an agreement with Parent with respect to purchasing certain assets
and subsidiaries of the Company from Parent after consummation of the Merger
(such Representatives, the "TP Representatives" and the transaction
contemplated by such agreement, the "Subsequent Transaction") reasonable
access, during normal business hours, to their respective properties, books,
contracts and records and, during such period, shall furnish promptly to Parent
all information concerning their respective businesses, properties and
personnel as may reasonably be requested in connection with the transactions
contemplated by this Agreement, including the financing and the Subsequent
Transactions; (ii) subject to applicable law relating to the exchange of
information, furnish and cause its subsidiaries to furnish, to Parent, Parent's
Representatives, the Financing Representatives and the TP Representatives such
financial and operating data and other information relating to the Company or
any of its subsidiaries as such persons may reasonably request; and (iii)
instruct the employees, counsel and financial advisors of the Company and its
subsidiaries to cooperate with Parent, Parent's Representatives, the Financing
Representatives and the TP Representatives in connection with the foregoing;
provided that the foregoing shall not require any such entity to permit any
inspection, or to disclose any information, that in its reasonable judgment
would result in the disclosure of any trade secrets of third parties or violate
any such entity's obligations with respect to confidentiality if such entity
shall have attempted to obtain the consent of such third party to such
inspection or disclosure. Any investigation pursuant to this Section shall be
conducted in such manner as to not unreasonably interfere with the conduct of
the business of the Company or its subsidiaries. No investigation pursuant to
this Section 6.4 shall affect or be deemed to modify any representation or
warranty made by the Company. All requests for information made pursuant to
this Section 6.4 shall be directed to an executive officer of the Company or
such Person as may be designated by such officers.
(b) The Company acknowledges that Parent may need to cause an
information memoranda to be prepared and used in connection with consummation
of certain financing transactions, and agrees to use its reasonable best
efforts to furnish Parent with reasonable access to, and to cause the
cooperation of, all personnel reasonably requested by Parent to assist in
arranging, consummating and obtaining any such financing, and using its
reasonable best efforts to cause its management to participate in such meetings
with third parties as Parent may reasonably request; provided that Parent shall
provide the Company with drafts of any such information memoranda reasonably in
advance of any proposed circulation thereof. In addition, the Company agrees to
(i) request its accountants, at Parent's request and expense, to consent to the
inclusion of their report or reports in, and to issue a comfort letter on
customary terms in connection with, any information memoranda relating to such
financing and (ii) at the reasonable request of Parent, (A) enter into such
agreements and use reasonable best efforts to deliver such officers
certificates and opinions as are customary in such a financing and as are, in
the good faith determination of the persons executing such certificates or
opinions, accurate and (B) pledge, grant security interests in and otherwise
grant liens on its assets pursuant to such agreements; provided that no
obligation of the Company under any such agreement, pledge or grant shall be
effective until the Effective Time.
(c) Each of Parent and Purchaser will hold and treat and will cause
its officers, employees, auditors and other authorized representatives to hold
and treat in confidence all documents and information concerning the Company
and its subsidiaries furnished to Parent or Purchaser in connection with the
transactions contemplated in this Agreement in accordance with the
Confidentiality Agreement, dated June 28, 2000, between the Company and Reed
Elsevier
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29
PLC, which Confidentiality Agreement shall remain in full force and effect in
accordance with its terms.
SECTION 6.5 Acquisition Proposals. (a) The Company agrees that (i) it
and its officers, directors and employees shall not, (ii) its subsidiaries and
its subsidiaries' officers and directors shall not and (iii) it shall use
reasonable best efforts to ensure that its and its subsidiaries' agents and
representatives ("Company Representatives") shall not, (A) directly or
indirectly, initiate, solicit or knowingly encourage or facilitate any
inquiries or the making of any proposal or offer with respect to (i) any tender
offer or exchange offer, (ii) merger, consolidation, share exchange, business
combination, sale of substantially all of the assets, reorganization,
recapitalization, liquidation, dissolution or other similar transaction
involving the Company or any of its subsidiaries whose assets, individually or
in the aggregate, constitute more than 20% of the consolidated assets or the
earning power of the Company or (iii) any acquisition or purchase, direct or
indirect, of more than 20% of the consolidated assets of the Company and its
subsidiaries or more than 20% of any class of equity or voting securities of
the Company or any of its subsidiaries whose assets, individually or in the
aggregate, constitute more than 20% of the consolidated assets or earning power
of the Company (other than the transactions contemplated by this Agreement)
(any such proposal or offer being hereinafter referred to as an "Acquisition
Proposal") or (B) directly or indirectly, continue, enter into or engage in any
negotiations or discussions concerning, any Acquisition Proposal, furnish any
information relating to the Company or any of its subsidiaries or provide
access to the properties, books and records or any confidential information or
data of the Company or any of its subsidiaries to, any Person relating to an
Acquisition Proposal. Notwithstanding the foregoing, nothing contained in this
Agreement shall prevent the Company or its Board of Directors from (i) taking
and disclosing to its stockholders a position contemplated by Rule 14d-9 and
Rule 14e-2(a) promulgated under the Exchange Act (or any similar communication
to stockholders in connection with the making or amendment of a tender offer or
exchange offer) or from making any legally required disclosure to stockholders
with regard to an Acquisition Proposal, (ii) prior to the purchase of any
Shares pursuant to the Offer, providing access to properties, books and records
and providing information or data in response to a request therefor by a Person
who has made an unsolicited bona fide written Acquisition Proposal if the Board
of Directors receives from the Person so requesting such information an
executed confidentiality agreement on terms substantially similar to those
contained in the Confidentiality Agreement (except for such changes
specifically necessary in order for the Company to be able to comply with its
obligations under this Agreement and it being understood that the Company may
enter into a confidentiality agreement without a standstill provision or with a
standstill provision less favorable to the Company if it waives or similarly
modifies the standstill provision in the Confidentiality Agreement) (provided
that all such written information is also provided on a prior or substantially
concurrent basis to Parent), or (iii) prior to the purchase of any Shares
pursuant to the Offer, engaging in any negotiations or discussions with any
Person who has made an unsolicited bona fide written Acquisition Proposal; if
and only to the extent that in connection with the foregoing clauses (ii) and
(iii), (1) the Board of Directors of the Company shall have determined in good
faith, after consultation with its legal counsel and financial advisors, that
such actions would reasonably be expected to lead to a Superior Proposal (as
defined below), and (2) the Board of Directors of the Company determines in
good faith after consultation with outside legal counsel that such action is
necessary in order for the directors to comply with their fiduciary duties
under applicable law. The Company agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations
with any Persons conducted heretofore with respect to any Acquisition Proposal
and will use its reasonable best efforts to cause any such Person (or its
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30
agents or advisors) in possession of confidential information about the Company
or any of its subsidiaries that was furnished by or on behalf of the Company to
return or destroy all such information. The Company shall also notify Parent
promptly (but in no event later than 24 hours) after receipt of any Acquisition
Proposal or any indication of interest in making an Acquisition Proposal after
the date hereof, which notice shall include the identity of the Person making
such Acquisition Proposal or indication and the material terms and conditions
of such Acquisition Proposal or indication (including any subsequent material
amendment or modification to such terms and conditions). The Company shall keep
Parent informed in all material respects of the status and details of any such
Acquisition Proposal.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall (i) withdraw (or modify in a manner adverse to Parent or
Purchaser) or propose publicly to withdraw (or modify in a manner adverse to
Parent or Purchaser) the recommendation or declaration of advisability by the
Board of Directors or any such committee of this Agreement, the Offer or the
Merger, or recommend, or propose publicly to recommend, the approval or
adoption of any Acquisition Proposal (other than an Acquisition Proposal made
by Parent), (each such action being referred to herein as an "Adverse
Recommendation Change") (it being understood and agreed that a communication by
the Board of Directors of the Company to the stockholders of the Company
pursuant to Rule 14d-9(e)(3) of the Exchange Act (or any similar communication
to the stockholders of the Company in connection with the commencement of a
tender offer or exchange offer containing the substance of the communication
pursuant to such Rule 14d-9(e)(3) shall not be deemed to constitute an Adverse
Recommendation Change), unless the Board of Directors or a committee thereof
determines in good faith, based on such matters as it deems appropriate, after
consulting with legal counsel, that such action is necessary for the Board of
Directors to comply with its fiduciary duties under applicable law, (ii) adopt
or approve, or propose publicly to adopt or approve, any Acquisition Proposal,
(iii) cause or permit the Company to enter into any letter of intent,
memorandum of understanding, agreement in principle, acquisition agreement,
merger agreement, option agreement, joint venture agreement, partnership
agreement or similar agreement which is intended to, or is reasonably likely to
lead to, any Acquisition Proposal (other than a confidentiality agreement
referred to in Section 6.5(a)) or (iv) agree or resolve to take any of the
actions prohibited by clauses (i), (ii) or (iii) of this sentence.
Notwithstanding anything in this Section 6.5 to the contrary, if, at any time
prior to the purchase of any Shares pursuant to the Offer, the Company's Board
of Directors determines in good faith, after consultation with its financial
advisors and outside counsel, in response to an Acquisition Proposal that was
unsolicited and that did not otherwise result from a breach of Section 6.5(a),
that such proposal is a Superior Proposal, the Company or its Board of
Directors may terminate this Agreement pursuant to Section 8.1(d)(iii) hereof;
provided, however, that the Company shall not terminate this Agreement pursuant
to Section 8.1(d)(iii) hereof, and any purported termination pursuant to
Section 8.1(d)(iii) hereof shall be void and of no force or effect, unless (i)
the Company prior to or concurrently with such termination pays to Parent the
fee payable pursuant to Section 8.2(b) and enters into a definitive agreement
concerning the Superior Proposal; (ii) the Company shall have complied in all
material respects with this Section 6.5(a), (iii) the Company shall have given
Parent at least three business days written prior notice of its intention to
terminate the Agreement, attaching a description of all material terms and
conditions of the Superior Proposal to such notice together with the most
current draft of an agreement relating to such Superior Proposal (it being
understood and agreed that any amendment to the amount or form of consideration
of the Superior Proposal shall require a new notice and a new three business
day period), (iv) during such three business days or greater period, the
Company engages in good faith negotiations with Parent with respect to such
changes
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as Parent may propose to the terms of the Merger and this Agreement, and (v)
Parent does not make prior to such termination of this Agreement a definitive
and binding offer to enter into a definitive agreement which the Board of
Directors of the Company determines, in good faith after consultation with its
financial advisors, is at least as favorable to the stockholders of the Company
as the Superior Proposal (it being understood that neither the delivery of a
notice of a Superior Proposal in accordance with this Section 6.5(b) nor any
subsequent public announcement thereof shall in of themselves constitute an
Adverse Recommendation Change or a breach of clause (ii), (iii) or (iv) of the
first sentence of this Section 6.5(b)).
The term "Superior Proposal" means any bona fide written Acquisition
Proposal not solicited by or on behalf of the Company or any of its
subsidiaries made by a third party that the Board of Directors of the Company
determines in its good faith judgment (after consultation with a financial
advisor of nationally recognized reputation) would, if consummated, be superior
from a financial point of view to the stockholders of the Company, taking into
account, among other things, any changes to the terms of this Agreement
proposed by Parent in response to such Superior Proposal (provided that, for
purposes of this definition of "Superior Proposal," the term Acquisition
Proposal shall have the meaning assigned to such term in this Section 6.5,
except that the reference to "more than 20%" in the definition of "Acquisition
Proposal" shall be deemed to be a reference to "a majority").
SECTION 6.6 Employment and Employee Benefits Matters. (a) As of the
Effective Time, the obligations of the Company and its subsidiaries under each
Company Plan and Employment Agreement shall continue as obligations of the
Surviving Corporation and its subsidiaries, respectively.
(b) On and after the Effective Time, Parent shall cause the Surviving
Corporation and its subsidiaries to pay promptly or provide when due all
compensation and benefits earned through or prior to the Effective Time as
provided pursuant to the terms of any Company Plan, (and expressly assume the
obligations thereunder). Parent and the Company agree that the Surviving
Corporation and its subsidiaries shall pay promptly or provide when due all
compensation and benefits required to be paid pursuant to the terms of any
Employment Agreement (and expressly assume the obligations thereunder).
(c) Without limiting any additional rights that any employee may have
under any Employment Agreement or Company Plan, Parent shall cause the
Surviving Corporation and each of its subsidiaries, for a period commencing at
the Effective Time and ending on the first anniversary thereof (or such longer
period provided for in any such Employment Agreement or Company Plan), to
maintain the severance-related provisions of existing Company Plans and to
provide 100% of the cash severance payments required thereunder, reduced by any
severance payments otherwise required under existing severance and employment
agreements or applicable law, to any Affected Employee (as defined below)
terminated during that twelve-month period (or such longer period provided for
in any such Employment Agreement or Company Plan) (unless no such reduction is
permitted or provided for).
(d) Without limiting any additional rights that any employee may have
under any Employment Agreement or Company Plan, Parent shall cause the
Surviving Corporation and each of its subsidiaries, for the period commencing
at the Effective Time and ending on the first anniversary thereof, to maintain
for any individual who is actively employed by the Company or any of its
subsidiaries immediately prior to the Effective Time (the "Affected Employees")
(other than employees covered by a collective bargaining agreement)
(i)compensation levels
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(such term to include salary, bonus opportunities and commissions) that in the
aggregate are no less favorable, (ii) Company Plans that in the aggregate are
no less favorable, and (iii) Severance Plans that are no less favorable, than
the overall compensation levels and Company Plans, and the Severance Plans,
respectively, such Affected Employees are entitled to immediately prior to the
Effective Time, and employees covered by collective bargaining agreements shall
be provided with such benefits as shall be required under the terms of any
applicable collective bargaining agreement; provided, however, subject to the
foregoing, that nothing herein shall prevent the amendment or termination of
any Company Plan or interfere with the Surviving Corporation's right or
obligation to make such changes as are necessary to conform with applicable
law. Without limiting any additional rights that any employee may have under
any Employment Agreement or Company Plan after the expiration of such one-year
period, Parent shall provide Affected Employees (other than those covered by
collective bargaining agreements) with employee benefits, in the aggregate,
that are no less favorable in the aggregate than those employee benefits
provided to similarly situated employees of the Parent or its subsidiaries;
provided that, notwithstanding any of the provisions set forth above, nothing
herein shall require the establishment, amendment or continuation of any stock
option, restricted stock, stock purchase, employee stock ownership or any other
equity-based plan or program and the value of benefits of any such program
shall not be included for purposes of determining whether (i), (ii) or (iii)
above in the aggregate is "no less favorable".
(e) Affected Employees shall be given credit for all service with the
Company and its subsidiaries, to the same extent as such service was credited
for such purpose by the Company, under each employee benefit plan, program or
arrangement, including the vacation policies, of Parent or its subsidiaries in
which such Affected Employees are eligible to participate (the "Parent Plans")
for all purposes; provided, however, that no such service shall be credited for
purposes of determining benefit accruals with respect to any defined benefit
pension plan except for any plan formerly maintained by the Company to the
extent such service is recognized under such plan or any successor thereof.
With respect to each Parent Plan that is a "welfare benefit plan" (as defined
in Section 3(1) of ERISA), the Parent or its subsidiaries shall (a) cause there
to be waived any pre-existing condition or eligibility limitations and (b) to
the extent administratively feasible, give effect, in determining any
deductible and maximum out-of-pocket limitations, to claims incurred and
amounts paid by, and amounts reimbursed to, Affected Employees under similar
plans maintained by the Company and its subsidiaries immediately prior to the
Closing Date.
(f) With respect to any accrued but unused vacation time to which any
Affected Employee is entitled pursuant to the vacation policy applicable to
such Affected Employee immediately prior to the Closing Date, Parent and its
subsidiaries shall assume the liability for such accrued vacation and allow
such Affected Employee to use such accrued vacation in accordance with the
provisions of the applicable vacation policy. Notwithstanding the foregoing,
such assumption and allowance for accrued but unused vacation time accrued
before January 1, 2000 shall only take place if such accrued but unused
vacation time has been documented in the applicable personnel files and records
related to such Affected Employee.
(g) The Company shall take all action necessary to provide for full
vesting of the account balances of all Affected Employees after one year of
service under the Harcourt Savings Plan
(h) The Company will amend the Harcourt Inc. Severance Pay Plan, the
Harcourt General Inc. Manager/Director Change of Control Severance Plan and the
Harcourt General Inc.
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Employee Change of Control Severance Plan, and any other severance plan program
or policy of the Company or its subsidiaries not previously made available to
Parent, if such Plan can be unilaterally amended by the Company, in such manner
as may be reasonably necessary to provide that no severance or termination
benefits would be payable thereunder solely as a result of the Merger or the
Subsequent Transaction.
SECTION 6.7 Directors' and Officers' Indemnification and Insurance.
(a) Without limiting any additional rights that any employee may have under any
Employment Agreement or Company Plan, from the Effective Time through the sixth
anniversary of the date on which the Effective Time occurs, Parent shall, or
shall cause the Surviving Corporation to, indemnify and hold harmless each
present (as of the Effective Time) and former officer or director of the
Company and its subsidiaries (the "Indemnified Parties"), against all claims,
losses, liabilities, damages, judgments, fines and reasonable fees, costs and
expenses, including, without limitation, attorneys' fees and disbursements
(collectively, "Costs"), incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to (i) the fact that the
Indemnified Party is or was an officer or director of the Company or any of its
subsidiaries and (ii) acts or omissions occurring at or prior to the Effective
Time (including, without limitation, this Agreement and the transactions and
actions contemplated hereby), whether asserted or claimed prior to, at or after
the Effective Time, provided that such indemnifications shall be subject to any
limitation imposed from time to time under applicable law. Each Indemnified
Party will be entitled to advancement of reasonable expenses incurred in the
defense of any claim, action, suit, proceeding or investigation from Parent or
the Surviving Corporation within ten business days of receipt by Parent from
the Indemnified Party of a request therefor; provided that any person to whom
expenses are advanced provides an undertaking, if and only to the extent
required by the DGCL, to repay such advances if it is ultimately determined
that such person is not entitled to indemnification.
(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 6.7, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify the Surviving
Corporation thereof; provided, however, that any Indemnified Party's failure to
promptly notify the Surviving Corporation upon learning of any such claim,
action, suit, proceeding or investigation shall only reduce such Indemnified
Party's rights under paragraph (a) of this Section 6.7 to the extent such
failure to notify materially prejudices the Surviving Corporation's ability to
defend such claim, action, suit, proceeding or investigation. In the event of
any such claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), (i) the Surviving Corporation shall have
the right, from and after the Effective Time, to assume the defense thereof
(with counsel engaged by the Surviving Corporation to be reasonably acceptable
to the relevant Indemnified Party) and the Surviving Corporation shall not be
liable to such Indemnified Party for any legal expenses of other counsel or any
other expenses subsequently incurred by such Indemnified Party in connection
with the defense thereof, (ii) such Indemnified Party will cooperate in the
defense of any such matter and (iii) the Surviving Corporation shall not be
liable for any settlement effected without its prior written consent; provided
that the Surviving Corporation shall not have any obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law. The Surviving Corporation shall not, except with
the consent of any Indemnified Party, enter into any settlement that does not
include as an unconditional term thereof the giving by the Person or
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Persons making, asserting or conducting such claim, action suit, proceeding or
investigation to such Indemnified Party an unconditional release from all
liability with respect to such claim, action, suit, proceeding or investigation
if such claim, action, suit, proceeding or investigation is indemnifiable
pursuant to Section 6.7. Notwithstanding the right of the Surviving Corporation
to assume and control the defense of such claim, action, suit, proceeding or
investigation, such Indemnified Party shall have the right to employ separate
counsel and to participate in the defense of such claim, action, suit,
proceeding or investigation, and the Surviving Corporation shall bear the
reasonable fees, costs and expenses of such separate counsel and shall pay such
reasonable fees, costs and expenses promptly after receipt of an invoice from
such Indemnified Party if (i) the use of counsel chosen by the Surviving
Corporation to represent such Indemnified Party would present such counsel with
a conflict of interest, (ii) the Indemnifying Party shall not have employed
counsel reasonably acceptable to such Indemnified Party within a reasonable
period of time after notice of the relevant claim, action, suit, proceeding or
investigation or (iii) such Indemnified Party shall have been advised by
counsel that there may be legal defenses available to it which are different
from or in addition to those available to the Surviving Corporation.
(c) The Certificate of Incorporation and by-laws of the Surviving
Corporation shall contain provisions no less favorable with respect to
indemnification, advancement of expenses and exculpation of former or present
directors and officers than are presently set forth in the Certificate of
Incorporation and by-laws of the Company, which provisions shall not be
amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
of any such individuals.
(d) Without limiting any additional rights that any employee may have
under any written Employment Agreement, Parent shall, or shall cause the
Surviving Corporation to maintain, at no expense to the beneficiaries, in
effect for six years from the Effective Time the current policies of the
directors' and officers' liability insurance maintained by the Company
(provided that Parent or the Surviving Corporation may substitute therefor
policies of at least the same coverage containing terms and conditions which
are not materially less advantageous to any beneficiary thereof) with respect
to acts or omissions occurring at or prior to the Effective Time, provided that
if the aggregate annual premium for such insurance at any time during such
period shall exceed 200% of the per annum rate of premium paid by the Company
as of the date hereof for such insurance, then Parent shall, or shall cause its
subsidiaries to, provide only such coverage as shall then be available at any
annual premium equal to 200% of such rate.
(e) Notwithstanding anything herein to the contrary, if any claim,
action, suit, proceeding or investigation (whether arising before, at or after
the Effective Time) is made against any Indemnified Party, on or prior to the
sixth anniversary of the Effective Time, the provisions of this Section 6.7
shall continue in effect until the final disposition of such claim, action,
suit, proceeding or investigation.
(f) This covenant is intended to be for the benefit of, and shall be
enforceable by, each of the Indemnified Parties and their respective heirs and
legal representatives. The indemnification provided for herein shall not be
deemed exclusive of any other rights to which an Indemnified Party is entitled,
whether pursuant to law, contract or otherwise.
(g) In the event that the Surviving Corporation or Parent or any of
their respective successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger or (ii)
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transfers or conveys all or a majority of its properties and assets to any
person, then, and in each such case, proper provision shall be made so that the
successors and assigns of the Surviving Corporation or Parent, as the case may
be, shall succeed to the obligations set forth in this Section 6.7.
SECTION 6.8 Further Action; Reasonable Best Efforts. (a) Subject to
the terms and conditions of this Agreement, each party will use its reasonable
best efforts to take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the Offer, the Merger, the Subsequent Transaction and
the other transactions contemplated by this Agreement. In furtherance and not
in limitation of the foregoing, each party hereto agrees, and Parent agrees to
use its reasonable best efforts to cause any third party to the Subsequent
Transaction, (i) to make an appropriate filing of a Notification and Report
Form pursuant to the HSR Act and any other applicable Antitrust Law with
respect to the transactions contemplated hereby, including the Subsequent
Transaction, as promptly as practicable after the date hereof, (ii) to supply
as promptly as practicable any additional information and documentary material
that may be requested pursuant to the HSR Act and any other applicable
Antitrust Law and (iii) to use, subject to Section 6.8(b) and (c), its
reasonable best efforts to take all other actions necessary, proper or
advisable to cause the expiration or termination of the applicable waiting
periods under the HSR Act and any other applicable Antitrust Law as soon as
practicable.
(b) Each of Parent, Purchaser and the Company shall, in connection
with the efforts referenced in Section 6.8(a) to obtain all requisite approvals
and authorizations for the transactions contemplated by this Agreement
including, but not limited to, the Offer, the Merger and the Subsequent
Transaction under the HSR Act or any other Antitrust Law, use its reasonable
best efforts to, and Parent shall use its reasonable best efforts to cause any
third party to the Subsequent Transaction to, subject to applicable law, (i)
cooperate in all respects with each of the other parties hereto and each of the
parties to the Subsequent Transaction in connection with any filing or
submission and in connection with any investigation or other inquiry, including
any proceeding initiated by a private party (including sharing copies of any
such filings or submissions reasonably in advance of the filing or submission
thereof); (ii) each of the other parties hereto and each of the parties to the
Subsequent Transaction informed of any communication received by such party
from, or given by such party to, the Federal Trade Commission (the "FTC"), the
Antitrust Division of the Department of Justice (the "DOJ") or any other U.S.
or foreign governmental authority ("Governmental Authority") and of any
communication received or given in connection with any proceeding by a private
party, in each case regarding any of the transactions contemplated hereby,
including the Subsequent Transaction; and (iii) permit each of the other
parties hereto and each of the parties to the Subsequent Transaction to review
in advance any communication intended to be given by it to, and consult with
the other parties in advance of any meeting or conference with, the FTC, the
DOJ or any such other Governmental Authority or, in connection with any
proceeding by a private party, with any other person, and to the extent
permitted by the FTC, the DOJ or such other applicable Governmental Authority
or other person, give the other parties the opportunity to attend and
participate in such meetings and conferences. For purposes of this Agreement,
"Antitrust Law" means the Sherman Act, as amended, the Clayton Act, as amended,
the HSR Act, the Federal Trade Commission Act, as amended, and all other
federal, state and foreign, statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines and other laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade or lessening of competition through
merger or acquisition.
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(c) In furtherance and not in limitation of the covenants of the
parties contained in Sections 6.8(a) and (b), if any objections are asserted
with respect to the transactions contemplated hereby, including the Subsequent
Transaction, under any Antitrust Law or if any suit is instituted (or
threatened to be instituted) by the FTC, the DOJ or any other applicable
Governmental Authority or any private party challenging any of the transactions
contemplated hereby, including the Subsequent Transaction, as violative of any
Antitrust Law or which would otherwise prohibit or materially impair or
materially delay the consummation of the transactions contemplated hereby,
including the Subsequent Transaction, each of Parent, Purchaser and the Company
shall use its reasonable best efforts to resolve any such objections or suits
so as to permit consummation of the transactions contemplated by this
Agreement, including the Subsequent Transaction, including, without limitation,
in order to resolve such objections or suits which, in any case if not
resolved, could reasonably be expected to prohibit or materially impair or
delay the consummation of the transactions contemplated hereby, including the
Subsequent Transaction, beyond the Outside Date, selling, holding separate or
otherwise disposing of or conducting its business in a manner which would
resolve such objections or suits or agreeing to sell, hold separate or
otherwise dispose of or conduct its business in a manner which would resolve
such objections or suits or permitting the sale, holding separate or other
disposition of, any of its assets or the assets of its subsidiaries or the
conducting of its business in a manner which would resolve such objections or
suits, provided, however, that nothing in this Agreement shall require Parent
or Purchaser or any of Parent's subsidiaries to agree to or take any action or
limitation referred to in this paragraph (c) which would reasonably be expected
to have either (i) a Parent Material Adverse Effect or (ii) a Material Adverse
Effect on the Company. When used in connection with Parent, Purchaser or any of
Parent's other subsidiaries, the term "Parent Material Adverse Effect" means
any change or effect that would reasonably be expected to be materially adverse
to the business, financial condition, assets or results of operations of
Parent, Purchaser and any of Parent's other affiliates taken as a whole.
(d) Subject to the obligations under Section 6.8(c), in the event
that any administrative or judicial action or proceeding is instituted (or
threatened to be instituted) by a Governmental Authority or private party
challenging any transaction contemplated by this Agreement, including the
Subsequent Transaction, each of Parent, Purchaser and the Company shall
cooperate in all respects with each other and any third party who is party to
the Subsequent Transaction to the extent any such action or proceeding
principally involves assets to be acquired by such third party in the
Subsequent Transaction and use its respective reasonable best efforts to
defend, contest and resist any such action or proceeding and to have vacated,
lifted, reversed or overturned any decree, judgment, injunction or other order,
whether temporary, preliminary or permanent, that is in effect and that
prohibits, prevents or restricts consummation of the transactions contemplated
by this Agreement.
(e) Without limiting the covenants contained in Section 6.8(a), to
the extent reasonably requested by Parent, the Company will use its reasonable
best efforts to take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary, proper or advisable to facilitate the Subsequent
Transaction; provided that no action or conduct that causes the Company or its
subsidiaries to incur meaningful costs or liabilities will be required under
this Section 6.8(e).
(f) Parent shall not agree to any modification, amendment or waiver
of any provision of any Subsequent Transaction Agreement in any manner adverse
to the Company. Further, Parent agrees to assert and defend consistent with the
advice of counsel all rights, and
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perform and comply with all obligations, it may have under any Subsequent
Transaction Agreement with respect to compliance with any Antitrust Law.
(g) Notwithstanding the foregoing or any other provision of this
Agreement, nothing in this Section 6.8 shall limit a party's right to terminate
this Agreement pursuant to Section 8.1(b) so long as such party has up to then
complied in all material respects with its obligations under this Section 6.8.
SECTION 6.9 Third Party Standstill Agreements. During the period from
the date of this Agreement until the Effective Time or earlier termination of
this Agreement, the Company shall not terminate, amend, modify or waive any
provision of any confidentiality or standstill agreement relating to the making
of an Acquisition Proposal to which it or any of its subsidiaries is a party
(other than any involving Parent or its subsidiaries), unless, in response to a
Person who on an unsolicited basis has given a good faith indication of
interest in making an Acquisition Proposal, the Company's Board of Directors
shall have determined in good faith, after consultation with outside counsel to
the Company, that such action is necessary for the Board of Directors to comply
with its fiduciary duties under applicable law (in which event such
termination, amendment, modification or waiver shall be made only to the extent
such termination, amendment, modification or waiver enables an Acquisition
Proposal to be submitted to the Company and thereafter pursued and effected).
Subject to the immediately preceding sentence, during such period, the Company
agrees to use reasonable efforts to enforce, to the fullest extent permitted
under applicable law, the provisions of any such agreements, including seeking
injunctions to prevent any breaches of such agreements and to enforce
specifically the terms and provisions thereof in any court of the United States
or any state thereof having jurisdiction.
SECTION 6.10 Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent and Purchaser shall give prompt notice to
the Company, of the occurrence, or failure to occur, of any event, which
occurrence or failure to occur would be likely to cause any representation or
warranty contained in this Agreement to be untrue in any material respect at
any time from the date of this Agreement to the Effective Time, in either case
which would reasonably be expected to cause any of the conditions set forth in
paragraph (c) of Annex A hereto to fail to be satisfied. Each of the Company
and Parent shall give prompt notice to the other party of any notice or other
communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated by
this Agreement. This Section 6.10 shall not constitute a covenant or agreement
for the purpose of Section 8.1(e)(i) or paragraph (d) of Annex A hereto.
SECTION 6.11 Integration Committee. Promptly after the date hereof,
subject to applicable law, Parent will establish an Integration Committee
chaired by an officer of Parent which will be composed of such employees of
Parent and the Company as selected by Parent (subject to the agreement of the
relevant employee) and such committee will be responsible for proposing
alternatives and recommendations to Parent regarding the matters and issues
arising in connection with the integration of the two companies and their
respective businesses, assets and organizations.
SECTION 6.12 Public Announcements. Each of the Company, Parent and
Purchaser agrees that no public release or announcement concerning the
transactions contemplated hereby shall be issued by any party without the prior
written consent of the Company and Parent (which consent shall not be
unreasonably withheld or delayed), except as
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such release or announcement may be required by law or the rules or regulations
of any applicable United States or foreign securities exchange, in which case
the party required to make the release or announcement shall use its reasonable
best efforts to allow each other party reasonable time to comment on such
release or announcement in advance of such issuance, it being understood that
the final form and content of any such release or announcement, to the extent
so required, shall be at the final discretion of the disclosing party.
ARTICLE VII
CONDITIONS OF MERGER
SECTION 7.1 Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction or waiver at or prior to the Effective Time of the
following conditions:
(a) if required by the DGCL, this Agreement shall have been adopted
by the affirmative vote of the stockholders of the Company by the requisite
vote in accordance with the Company's Restated Certificate and the DGCL;
(b) no statute, rule, regulation, executive order, decree, ruling,
injunction or other permanent order shall have been enacted, entered,
promulgated or enforced by any court of competent jurisdiction or other
governmental body located or having jurisdiction within the United States, any
foreign state, county, city or other provincial subdivisions which prohibits,
restrains or enjoins the consummation of the Merger; provided however, that
prior to invoking this condition each party agrees to comply with Section 6.8;
and
(c) Purchaser shall have purchased Shares pursuant to the Offer.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time, notwithstanding approval thereof by the stockholders of the Company:
(a) prior to the purchase of any Shares pursuant to the Offer, by
mutual written consent of Parent, Purchaser and the Company;
(b) by Parent or the Company if any court of competent jurisdiction
or other governmental body located or having jurisdiction within the United
States, any foreign country or any domestic or foreign state, county, city or
other provincial subdivisions (other than any such court or governmental body
having jurisdiction outside the United States in a territory in which no
significant assets, properties or rights of either the Company and its
subsidiaries or Parent and its affiliates are located and whose statutes,
rules, regulations, executive orders, decrees, rulings, injunctions or other
orders would not be reasonably expected to have a Material Adverse Effect or
Parent Material Adverse Effect ("Non-Material Jurisdictions")) shall have
issued a final order, decree or ruling or taken any other final action
restraining, enjoining or
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otherwise prohibiting the Offer or the Merger and such order, decree, ruling or
other action is or shall have become final and nonappealable;
(c) by Parent if, due to an occurrence or circumstance which resulted
in a failure to satisfy any of the Offer Conditions, Purchaser shall have (i)
not purchased Shares pursuant to the Offer and the Offer shall have expired or
been terminated or (ii) failed to pay for Shares pursuant to the Offer on or
prior to the Outside Date; provided that the right to terminate this Agreement
pursuant to this Section 8.1(c) shall not be available to Parent if the failure
by Parent or Purchaser to perform any of its obligations under this Agreement
(including Purchaser's failure to purchase or pay for Shares pursuant to the
terms and conditions of the Offer) results in the failure of the Offer to be
consummated;
(d) by the Company (i) if (A) Purchaser fails to commence the Offer
as provided in Section 1.1 or (B) there shall have been a breach of any
representation, warranty, covenant or agreement on the part of Parent or
Purchaser contained in this Agreement which materially adversely affects
Parent's or Purchaser's ability to consummate (or materially delays
commencement or consummation of) the Offer or the Merger, and (x) in the case
of any such representation or warranty, there is no reasonable possibility that
such breach can be cured prior to the Outside Date and (y) in the case of any
such covenant or agreement, such breach cannot be and has not been cured prior
to the earlier of (I) 10 business days following notice of such breach and (II)
the expiration date of the Offer as it may be extended pursuant hereto;
provided that the Company shall not have the right to terminate this Agreement
pursuant to this Section 8.1(d)(i) if the Company is then in material breach of
any of its covenants or agreements contained in this Agreement, (ii) if (A)
Purchaser fails to pay for Shares pursuant to the Offer on or prior to the
Outside Date or (B) Purchaser shall have not purchased Shares pursuant to the
Offer and the Offer shall have expired or been terminated; provided that the
right to terminate this Agreement pursuant to this Section 8.1(d)(ii) shall not
be available to the Company if the failure by the Company to perform any of its
obligations under this Agreement results in the failure of the Offer to be
consummated, or (iii) prior to the purchase of any Shares pursuant to the
Offer, in accordance with, and subject to the terms and conditions of, Section
6.5(b); or
(e) by Parent prior to the purchase of Shares pursuant to the Offer
if (i) there shall have been a breach of any representation, warranty, covenant
or agreement on the part of the Company contained in this Agreement such that
the conditions set forth in clause (c) or clause (d) of Annex A would not be
satisfied and (x) in the case of any such representation or warranty, there is
no reasonable possibility that such breach can be cured prior to the Outside
Date and (y) in the case of any such covenant or agreement, such breach cannot
be or has not been cured prior to the earlier of (A) 10 business days following
notice of such breach and (B) the expiration date of the Offer as it may be
extended pursuant hereto; provided that Parent shall not have the right to
terminate this Agreement pursuant to this Section 8.1(e)(i) if Parent or
Purchaser is then in material breach of any of its covenants or agreements
contained in this Agreement, or (ii) in the event an Adverse Recommendation
Change has occurred in accordance with Section 6.5(b).
SECTION 8.2 Effect of Termination. (a) In the event of the
termination of this Agreement pursuant to Section 8.1, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto, except as set forth in Section 6.4(c), this Section 8.2, Section 8.3
and Article 9; provided, however, that nothing herein shall relieve any party
from liability for any breach hereof.
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(b) In the event that this Agreement is terminated by the Company
pursuant to Section 8.1(d)(iii) or by Parent pursuant to Section 8.1(e)(ii),
then the Company shall pay $180,000,000 to Parent (the "Termination Fee"), at
or prior to the time of termination in the case of a termination pursuant to
Section 8.1(d)(iii) or within two business days after such termination in the
case of a termination pursuant to Section 8.1(e)(ii), payable by wire transfer
of same day funds. In the event that this Agreement is terminated by Parent
pursuant to Section 8.1(c) (solely due to the failure to satisfy the Minimum
Condition or the conditions set forth in paragraphs (c) or (d) of Annex A) and
(x) after the date of this Agreement and prior to such termination, there shall
have been made and publicly announced or publicly communicated to the Company's
shareholders an Acquisition Proposal (which shall not have been withdrawn in
good faith) and (y) concurrently with or within twelve (12) months of the date
of such termination the Company enters into a definitive agreement with respect
to an Acquisition Proposal (which is subsequently consummated) or an
Acquisition Proposal is consummated, then the Company shall pay to Parent the
Termination Fee within two business days of the consummation of the Acquisition
Proposal (provided that, for purposes of this sentence, the term Acquisition
Proposal shall have the meaning assigned to such term in Section 6.5, except
that the reference to "more than 20%" in the definition of "Acquisition
Proposal" shall be deemed to be a reference to "a majority").
SECTION 8.3 Expenses. Except as otherwise specifically provided
herein, each party shall bear its own expenses in connection with this
Agreement and the transactions contemplated hereby.
SECTION 8.4 Amendment. Subject to Section 6.3(c), this Agreement may
be amended by the parties hereto by action taken by or on behalf of their
respective Boards of Directors at any time prior to the Effective Time;
provided, however, that, after adoption of this Agreement by the stockholders
of the Company, no amendment may be made which by law requires the further
approval of the stockholders of the Company without such further approval. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
SECTION 8.5 Waiver. Subject to Section 6.3(c), at any time prior to
the Effective Time, any party hereto may (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties of
the other parties contained herein or in any document delivered pursuant hereto
and (iii) subject to the requirements of applicable law, waive compliance with
any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing signed by the
party or parties to be bound thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 8.1, as the case may be, except that the agreements set
forth in Article II, Section 6.6, Section 6.7, Section 6.12 and Article IX
shall survive the Effective Time and those set forth in Section 6.4(b), Section
6.12, Section 8.2, Section 8.3 and Article IX shall survive termination of this
Agreement.
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SECTION 9.2 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 given upon receipt) by delivery in person, by
facsimile or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
if to Parent or Purchaser:
Reed Elsevier Inc.
275 Washington Street
Newton, MA 02458
Attention: Henry Z. Horbaczewski, Esq.
Facsimile: (617) 558-4649
with an additional copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: Joseph Rinaldi, Esq.
Facsimile: 212-450-4800
if to the Company:
Harcourt General, Inc.
27 Boylston Street
Chestnut Hill, Massachusetts 02467
Attention: Eric Geller, Esq.
Facsimile: (617) 278-5567
with an additional copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: John G. Finley, Esq.
Facsimile: 212-455-2502
SECTION 9.3 Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliate" of a person means a person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first mentioned person; for the avoidance of
confusion it is hereby stipulated that the affiliates of Parent consist of Reed
International P.L.C., an English public limited company ("Reed"), Elsevier NV,
a Netherlands public limited company ("Elsevier") and the affiliates of either
Reed or Elsevier or of Reed and Elsevier jointly.
(b) "beneficial owner" with respect to any Shares means a person who
shall be deemed to be the beneficial owner of such Shares (i) which such person
or any of its affiliates or associates (as defined in Rule 12b-2 under the
Exchange Act) beneficially
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owns, directly or indirectly, (ii) which such person or any of its affiliates
or associates (as such term is defined in Rule 12b-2 of the Exchange Act) has,
directly or indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant to
any agreement, arrangement or understanding or upon the exercise of
consideration rights, exchange rights, warrants or options, or otherwise, or
(B) the right to vote pursuant to any agreement, arrangement or understanding
or (iii) which are beneficially owned, directly or indirectly, by any other
persons with whom such person or any of its affiliates or associates has any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of any Shares (and the term "beneficially owned" shall have
a corresponding meaning);
(c) "business day" means any day on which the principal offices of
the SEC in Washington, D.C. are open to accept filings or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in Amsterdam, The Netherlands; London, England;
New York, New York; or Boston, Massachusetts;
(d) "control" (including the terms "controlled", "controlled by" and
"under common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management policies of a person, whether through the ownership of stock, as
trustee or executor, by contract or credit arrangement or otherwise;
(e) "generally accepted accounting principles" shall mean the
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board, in each case, as applicable, as of the time of the
relevant financial statements referred to herein;
(f) "knowledge" (i) with respect to the Company means the actual
knowledge of any of the persons set forth in Section 9.3(f) of the Disclosure
Schedule under the heading "Company" and (ii) with respect to Parent or
Purchaser means the actual knowledge of any of the persons set forth in Section
9.3(f) of the Disclosure Schedule under the headings "Parent" or "Purchaser".
(g) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, other
entity or group (as defined in Section 13(d)(3) of the Exchange Act); and
(h) "subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Parent or any other person means any corporation, partnership,
joint venture or other legal entity of which the Company, the Surviving
Corporation, Parent or such other person, as the case may be (either alone or
through or together with any other subsidiary), owns, directly or indirectly,
more than 50% of the stock or other equity interests the holder of which is
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity.
SECTION 9.4 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so
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long as the economic or legal substance of the transactions contemplated hereby
is not affected in any manner adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the fullest extent possible.
SECTION 9.5 Entire Agreement; Assignment. This Agreement, the
Stockholder Agreement and the confidentiality agreement referred to in Section
6.4 constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and undertakings, both
written and oral, among the parties, or any of them, with respect to the
subject matter hereof. This Agreement shall not be assignable without the
consent of the other party hereto, except that Parent may transfer or assign to
one or more affiliates its rights under this Agreement, but no such transfer or
assignment will relieve Parent of its obligations hereunder.
SECTION 9.6 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement, other than with respect to the provisions of Section
6.7 which shall inure to the benefit of the persons or entities benefiting
therefrom who are intended to be third-party beneficiaries thereof.
SECTION 9.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware.
SECTION 9.8 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect
in any way the meaning or interpretation of this Agreement.
SECTION 9.9 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 9.10 Specific Performance; Jurisdiction. The parties agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement in any
court of the United States located in the State of Delaware or in any Delaware
state court, this being in addition to any other remedy to which such party is
entitled at law or in equity. In addition, solely for the purpose of the
transactions contemplated by this Agreement, each of the parties hereto (i)
consents to submit itself to the personal jurisdiction of any Federal court
located in the State of Delaware or any Delaware state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement, (ii) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
(iii) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than
a Federal or state court sitting in the State of Delaware and (iv) consents to
service being made through the
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notice procedures set forth in Section 9.2. Solely for the purpose of the
transactions contemplated by this Agreement, each of Parent and Purchaser
hereto irrevocably designates and appoints The Corporation Trust Company at
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801 as its
duly appointed agent for service of process in the State of Delaware, for any
suit or proceeding in connection with this Agreement or the transactions
contemplated hereby.
SECTION 9.11 Performance. Reed Elsevier PLC agrees to take all action
necessary to cause Parent, Purchaser or the Surviving Corporation, as
applicable, to perform all of its respective agreements, covenants and
obligations under this Agreement and whenever this Agreement requires Purchaser
to take any action, such requirement shall be deemed to include an undertaking
of Parent and Reed Elsevier PLC to cause Purchaser to take such action.
SECTION 9.12 Interpretation. When reference is made in this Agreement
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for convenience of reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation." This Agreement shall
be construed without regard to any presumption or rule requiring construction
or interpretation against the party drafting or causing any instrument to be
drafted.
SECTION 9.13 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
<PAGE>
45
IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
REED ELSEVIER INC.
By: /s/ Henry Z. Horbaczewski
----------------------------------------
Name: Henry Z. Horbaczewski
Title: Senior Vice President
REH MERGERSUB INC.
By: /s/ Henry Z. Horbaczewski
----------------------------------------
Name: Henry Z. Horbaczewski
Title: Senior Vice President
HARCOURT GENERAL, INC.
By: /s/ John R. Cook
----------------------------------------
Name: John R. Cook
Title: Senior Vice President and
Chief Financial Officer
For the purpose of Section 9.11 only:
REED ELSEVIER PLC
By: /s/ Henry Z. Horbaczewski
----------------------------------------
Name: Henry Z. Horbaczewski
Title: Attorney-In-Fact
<PAGE>
ANNEX A
Offer Conditions
The capitalized terms used in this Annex A have the meanings set
forth in the Agreement to which this Annex A is attached, except that the term
"Merger Agreement" shall be deemed to refer to the Agreement to which this
Annex A is attached.
Notwithstanding any other provision of the Offer, but subject to the
terms and conditions of the Merger Agreement, Purchaser shall not be required
to accept for payment or, subject to any applicable rules and regulations of
the SEC, including Rule 14e-1(c) under the Exchange Act (relating to
Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for any Shares tendered pursuant
to the Offer, and may postpone the acceptance for payment or, subject to the
restriction referred to above, payment for any Shares tendered pursuant to the
Offer (whether or not any Shares have theretofore been purchased or paid for)
and may terminate or amend the Offer in accordance with the Merger Agreement
if, (i) at the expiration of the Offer as it may be extended pursuant to the
provisions of the Merger Agreement, a number of shares of Company Common Stock
which, together with any Shares owned, directly or indirectly, by Parent or
Purchaser, or any subsidiary or controlled affiliate thereof, representing
(determined on a fully-diluted basis), on the date of purchase, at least a
majority in voting power of the Company Common Stock shall not have been
validly tendered and not properly withdrawn prior to the expiration of the
Offer (the "Minimum Condition") or (ii) at any time on or after the date of the
Merger Agreement and at or prior to the acceptance for payment of Shares, any
of the following conditions occurs or has occurred:
(a) there shall have been entered any order, preliminary or permanent
injunction, decree, judgment or ruling in any action or proceeding before
any court of competent jurisdiction or governmental, administrative or
regulatory authority or agency, or any statute, rule or regulation,
enacted, entered, enforced, promulgated, amended or issued that is
applicable to Parent, Purchaser, the Company, or any third party who is
party to the Subsequent Transaction or any subsidiary of Parent, such
third party, or the Company or the Offer or the Merger, by any legislative
body, court, government or governmental, administrative or regulatory
authority or agency which (I) makes illegal or otherwise restrains or
prohibits the making of the Offer in accordance with the Merger Agreement
or the consummation of the Offer or the Merger, (II) prohibits or limits
in any material respect the ownership or operation by (A) the Company,
Parent, or any of their respective affiliates of a material portion of the
business or assets of the Company and its subsidiaries, taken as a whole,
or (B) any third party who is party to the Subsequent Transaction or any
of its affiliates of a material portion of the business or assets to be
acquired by such third party in the Subsequent Transaction; or requires
any such person to dispose of or hold separate any material portion of the
business or assets of the Company and its subsidiaries, taken as a whole,
or Parent and its subsidiaries, taken as a whole, as result of the Offer,
to the extent any such prohibition, limitation or requirement would
reasonably be expected to have either a Material Adverse Effect on the
Company or a Parent Material Adverse Effect, (III) prohibits the ownership
or operation of a portion of the business of the Company or its
subsidiaries, taken as a whole, by Parent or Purchaser, to the extent any
such prohibition would reasonably be expected to have either a Material
Adverse Effect on the Company or a Parent Material Adverse Effect or (IV)
other than in Non-Material Jurisdictions, imposes material limitations on
the ability of Parent or Purchaser to acquire or hold or to exercise full
rights of ownership of the
18
<PAGE>
Shares, including voting rights with respect to all matters properly
presented to stockholders of the Company;
(b) there shall have occurred (I) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange
(other than suspensions or limitations triggered by price fluctuations on
a trading day) for a period in excess of three hours (excluding
suspensions or limitations resulting solely from physical damage or
interference with such exchange not related to market conditions) or (II)
a declaration of a banking moratorium in the United States or any
suspension of payments in respect of banks in the United States or Europe;
(c) (i) any representation or warranty of the Company contained in
the Agreement that is qualified as to Material Adverse Effect shall not be
true and correct; (ii) any representation or warranty of the Company in
the Agreement that is not so qualified shall not be true and correct in
all material respects, in each case as of the date of consummation of the
Offer as though made on or as of such date (other than representations and
warranties that by their terms address matters only as of another
specified date, which shall be true and correct only as of another
specified date), except where the failure of such representations and
warranties referred to in clause (ii) to be so true and correct,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Material Adverse Effect on the Company; or (iii) except
to the extent disclosed in the Disclosure Schedules or the Filed SEC
Reports, since the date of the Merger Agreement, any change or event shall
have occurred that has had or is reasonably likely to have a Material
Adverse Effect on the Company;
(d) the Company shall have failed to perform in any material respect
any material obligation or to comply in any material respect with any
material agreement or material covenant of the Company to be performed or
complied with by it under the Merger Agreement;
(e) the Merger Agreement shall have been terminated in accordance
with its terms or the Offer shall have been terminated with the consent of
the Company;
(f) any (i) approvals, clearances or waiting periods under the HSR
Act applicable to the purchase of Shares pursuant to the Offer, the Merger
or the Subsequent Transaction shall not have been obtained, expired or
been terminated or (ii) any other requisite or advisable approvals,
clearances or waiting periods under any other material Antitrust Law
applicable to the purchase of Shares pursuant to the Offer, the Merger or
the Subsequent Transaction shall not have been obtained, expired or been
terminated; or
(g) all shares of Class B Stock shall not have been converted into
shares of Company Common Stock in accordance with the terms of the
Stockholder Agreement.
which, in the reasonable judgment of Purchaser with respect to each and every
matter referred to above and regardless of the circumstances giving rise to any
such condition, makes it inadvisable to proceed with the Offer or with such
acceptance for payment of or payment for Shares or to proceed with the Merger.
A-2
<PAGE>
The foregoing conditions are for the sole benefit of Purchaser and
may be asserted by Purchaser regardless of the circumstances giving rise to any
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 (subject to the terms of the
Merger Agreement). 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.
