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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934)
(Amendment No. )
ARTISTIC GREETINGS INCORPORATED
(Name of Issuer)
ARTISTIC GREETINGS INCORPORATED
(Name of Person Filing Statement)
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TITLE CUSIP NUMBER
- -------------------------------------------- --------------------------------------------
Common Stock
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(Title and CUSIP Number of Class of Securities)
ARTISTIC GREETINGS INCORPORATED
ONE KOMER CENTER
P.O. BOX 1999
ELMIRA, NEW YORK 14902-1999
(212) 735-4500
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of the Person Filing Statement)
This statement is filed in connection with (check the appropriate box):
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a. /X/ The filing of solicitation materials or an information statement subject to
Regulation 14A, Regulation 14C or Rule 13e-3 (c) under the Securities Exchange Act
of 1934.
b. / / The filing of a registration statement under the Securities Act of 1933.
c. / / A tender offer.
d. / / None of the above.
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Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: /X/
CALCULATION OF FILING FEE
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Transaction Amount of Filing Fee
Valuation*
$33,307,414 $6,662
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* Solely for purposes of calculating the filing fee and computed pursuant to
Section 13(e)(3) of the Securities Exchange Act of 1934, as amended, and
Rule 0-11(b)(1) thereunder, the transaction value equals the total amount of
funds required to purchase all shares of the class of Common Stock pursuant
to the merger described in the Proxy Statement.
/X/ Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount Previously Paid: $6,662
Form or Registration No.: Schedule 14A Proxy Statement
Filing Party: Artistic Greetings Incorporated
Date Filed: January 26, 1998
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This Rule 13e-3 Transaction Statement (the "Statement") relates to the
merger and the asset sale by Artistic Greetings Incorporated, a Delaware
corporation (the "Company"), described in its proxy statement, dated [ ],
1998 (the "Proxy Statement"), whereby AGI Acquisition Co. ("Newco"), a Delaware
corporation and a wholly owned subsidiary of MDC Communications Corporation
("MDC"), an Ontario, Canada corporation, will merge with and into the Company,
pursuant to which (a) the Company will be the surviving corporation and will
become a wholly owned subsidiary of MDC and (b) each outstanding share of common
stock, par value $0.10 per share, of the Company (other than stock of the
Company owned by the Company, MDC or any of their respective subsidiaries) will
be converted into the right to receive $5.70 in cash, without interest.
Contemporaneously therewith, the Company will sell certain assets relating to
the personalized product and catalog businesses of the Company (the "P&C
Businesses") to Artistic Direct Incorporated, a New York corporation ("ADI").
The following cross reference sheet below is being supplied pursuant to
General Instruction F to Schedule 13E-3 and shows the location of the
information required to be included in response to the items of this Statement
in the Proxy Statement on Schedule 14A (the "Schedule 14A") filed by the Company
with the Securities and Exchange Commission (the "Commission") on the date
hereof. The information set forth in the Schedule 14A is hereby expressly
incorporated herein by reference and the responses to each item herein are
qualified in their entirety by the corresponding responses in the Schedule 14A.
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CROSS-REFERENCE SHEET
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SCHEDULE 13E-3 ITEMS LOCATION OF SCHEDULE 13E-3 ITEMS IN SCHEDULE 14A
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Item l(a) INTRODUCTION
Item l(b) SUMMARY
Item l(c) PRICE RANGE OF SHARES
Item l(d) Not Applicable
Item l(e) Not Applicable
Item l(f) *
Item 2 INTRODUCTION
Item 2(a) Not Applicable
Item 2(b) Not Applicable
Item 2(c) Not Applicable
Item 2(d) Not Applicable
Item 2(e) Not Applicable
Item 2(f) Not Applicable
Item 2(g) Not Applicable
Item 3(a)(1) Not Applicable
Item 3(a)(2) Not Applicable
Item 3(b)(i) Not Applicable
Item 3(b)(ii) SPECIAL FACTORS--Background of the Merger; THE ASSET PURCHASE AGREEMENT
Item 4(a) INTRODUCTION; SPECIAL FACTORS--Background of the Merger; THE MERGER AGREEMENT; THE ASSET
PURCHASE AGREEMENT; THE STOCKHOLDERS AGREEMENT; SPECIAL FACTORS--Plans for the Company after
the Merger
Item 4(b) INTRODUCTION; SPECIAL FACTORS--Background of the Merger; THE MERGER AGREEMENT; THE ASSET
PURCHASE AGREEMENT; THE STOCKHOLDERS AGREEMENT; SPECIAL FACTORS--Plans for the Company after
the Merger
Item 5(a) SPECIAL FACTORS--Plans for the Company after the Merger; THE MERGER AGREEMENT
Item 5(b) SPECIAL FACTORS--Plans for the Company after the Merger; THE ASSET PURCHASE AGREEMENT
Item 5(c) Not Applicable
Item 5(d) Not Applicable
Item 5(e) Not Applicable
Item 5(f) Not Applicable
Item 5(g) Not Applicable
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SCHEDULE 13E-3 ITEMS LOCATION OF SCHEDULE 13E-3 ITEMS IN SCHEDULE 14A
- -------------------- --------------------------------------------------------------------------------------------
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Item 6 SOURCE AND AMOUNTS OF FUNDS; EXPENSES
Item 7(a) SPECIAL FACTORS--Background of the Merger; SPECIAL FACTORS--Plans for the Company After the
Merger
Item 7(b) SPECIAL FACTORS--Background of the Merger
Item 7(c) SPECIAL FACTORS--Background of the Merger
Item 7(d) SPECIAL FACTORS--Plans for the Company After the Merger; CERTAIN FEDERAL INCOME TAX
CONSEQUENCES
Item 8(a) SPECIAL FACTORS--Background of the Merger; SPECIAL FACTORS--Opinion of Financial Advisor;
SPECIAL FACTORS--Interests of Certain Persons
Item 8(b) SPECIAL FACTORS--Background of the Merger; SPECIAL FACTORS--Opinion of Financial Advisor;
SPECIAL FACTORS--Interests of Certain Persons
Item 8(c) INTRODUCTION--Voting at the Special Meeting; RIGHTS OF OBJECTING STOCKHOLDERS
Item 8(d) SPECIAL FACTORS--Background of the Merger; SPECIAL FACTORS--Certain Effects of the
Consummation of the Merger
Item 8(e) SPECIAL FACTORS--Background of the Merger; SPECIAL FACTORS--Certain Effects of the
Consummation of the Merger
Item 8(f) Not Applicable
Item 9 SPECIAL FACTORS--Opinion of Financial Advisor
Item 10 SPECIAL FACTORS--Interests of Certain Persons
Item 11 THE MERGER AGREEMENT; THE STOCKHOLDERS AGREEMENT; THE ASSET PURCHASE AGREEMENT
Item 12(a) SPECIAL FACTORS--Interests of Certain Persons; THE STOCKHOLDERS AGREEMENT
Item 12(b) SUMMARY; SPECIAL FACTORS--Background of the Merger
Item 13(a) RIGHTS OF OBJECTING STOCKHOLDERS
Item 13(b) Not Applicable
Item 13(c) Not Applicable
Item 14(a) SELECTED CONSOLIDATED FINANCIAL DATA; INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Item 14(b) Not Applicable
Item 15(a) SPECIAL FACTORS--Interest of Certain Persons
Item 15(b) SPECIAL FACTORS--Background of the Merger; SPECIAL FACTORS--Interest of Certain Persons;
SOURCE AND AMOUNT OF FUNDS; EXPENSES
Item 16 THE PROXY STATEMENT
Item 17 *
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* The Item is located in this Schedule 13E-3 only.
3
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ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) Artistic Greetings Incorporated is a Delaware corporation that has its
principal executive offices at One Komer Center, P.O. Box 1999, Elmira, New York
14902-1999.
(b) The Company's common stock, par value $0.10 per share (the "Shares"). The
Board of Directors of the Company has fixed the close of business on
[ ], 1998 as the record date (the "Record Date") for the determination
of stockholders entitled to notice of, and to vote at, the special meeting of
stockholders (the "Special Meeting"). Accordingly, only holders of record of the
Shares at the close of business on the Record Date will be entitled to vote at
the Special Meeting. At the close of business on the Record Date, there were
[ ] Shares outstanding and entitled to vote, held by approximately
[ ] stockholders of record.
(c) The Shares are listed on The Nasdaq Stock Market ("Nasdaq"). The information
appearing under the caption "PRICE RANGE OF SHARES" in the Proxy Statement is
incorporated herein by reference.
(d) Not applicable.
(e) Not applicable.
(f) Since the commencement of the Company's second full fiscal year preceding
the date of this Schedule 13e-3, the Company has purchased 500,000 Shares on May
30, 1997 at a price of $5.00 per share, pursuant to the exercise of a previously
granted put right.
ITEM 2. IDENTITY AND BACKGROUND.
This statement is filed by the Company, who is the issuer of the class of
equity securities which is the subject of the Rule 13e-3 transaction.
ITEM 3. PAST CONTRACTS, TRANSACTIONS OR NEGOTIATIONS.
(a) Not applicable.
(b)(i) Not applicable.
(b)(ii) The information appearing under the captions "SPECIAL
FACTORS--Background of the Merger" and "THE ASSET PURCHASE AGREEMENT" in the
Proxy Statement is incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information appearing under the captions "INTRODUCTION;" "SPECIAL
FACTORS--Background of the Merger," "THE MERGER AGREEMENT," "THE ASSET PURCHASE
AGREEMENT," "THE STOCKHOLDERS AGREEMENT" and "SPECIAL FACTORS--Plans for the
Company after the Merger" in the Proxy Statement is incorporated herein by
reference.
(b) The information appearing under the captions "INTRODUCTION," "SPECIAL
FACTORS--Background of the Merger," "THE MERGER AGREEMENT," "THE ASSET PURCHASE
AGREEMENT," "THE STOCKHOLDERS AGREEMENT" and "SPECIAL FACTORS--Plans for the
Company after the Merger" in the Proxy Statement is incorporated herein by
reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a) The information appearing under the captions "SPECIAL FACTORS--Plans for the
Company after the Merger" and "THE MERGER AGREEMENT" in the Information
Statement is incorporated herein by reference.
4
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(b) The information appearing under the captions "SPECIAL FACTORS--Plans for the
Company after the Merger" and "THE ASSET PURCHASE AGREEMENT" in the Information
Statement is incorporated herein by reference.
(c)-(g) Not applicable.
ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION.
(a)-(d) The information appearing under the caption "SOURCE AND AMOUNTS OF
FUNDS; EXPENSES" in the Proxy Statement is incorporated herein by reference.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a) The information appearing under the captions "SPECIAL FACTORS--Background of
the Merger" and "SPECIAL FACTORS--Plans for the Company After the Merger" in the
Proxy Statement is incorporated herein.
(b) The information appearing under the caption "SPECIAL FACTORS--Background of
the Merger" in the Proxy Statement is incorporated herein by reference.
(c) The information appearing under the caption "SPECIAL FACTORS--Background of
the Merger" in the Proxy Statement is incorporated herein by reference.
(d) The information appearing under the captions "SPECIAL FACTORS--Plans for the
Company After the Merger" and "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" in the
Proxy Statement is incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a)-(b) The information appearing under the captions "SPECIAL
FACTORS--Background of the Merger," "SPECIAL FACTORS--Opinion of Financial
Advisor" and "SPECIAL FACTORS--Interests of Certain Persons" is incorporated
herein by reference.
(c) The information appearing under the captions "INTRODUCTION--Voting at the
Special Meeting" and "RIGHTS OF OBJECTING STOCKHOLDERS" in the Proxy Statement
is incorporated herein by reference.
(d)-(e) The information appearing under the captions "SPECIAL
FACTORS--Background of the Merger" and "SPECIAL FACTORS--Certain Effects of the
Consummation of the Merger" in the Proxy Statement is incorporated herein by
reference.
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a)-(c) The information appearing under the caption "SPECIAL FACTORS--Opinion of
Financial Advisor" in the Proxy Statement is incorporated herein by reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a)-(b) The information appearing under the caption "SPECIAL FACTORS--Interests
of Certain Persons" in the Proxy Statement is incorporated herein by reference.
5
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ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
The information appearing under the captions "THE MERGER AGREEMENT," "THE
STOCKHOLDERS AGREEMENT" and "THE ASSET PURCHASE AGREEMENT" in the Proxy
Statement is incorporated herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
(a) The information appearing under the captions "SPECIAL FACTORS--Interests of
Certain Persons" and "THE STOCKHOLDERS AGREEMENT" in the Proxy Statement is
incorporated herein by reference.
(b) The information appearing under the captions "SUMMARY" and "SPECIAL FACTORS
- --Background of the Merger" in the Proxy Statement is incorporated herein by
reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information appearing under the captions "RIGHTS OF OBJECTING
STOCKHOLDERS" in the Proxy Statement is incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) The information appearing (i) under the caption "SELECTED CONSOLIDATED
FINANCIAL DATA" in the Proxy Statement and (ii) in the financial statements
included in the Annual Report on Form 10-K for the year ended December 31, 1996
and the Quarterly Reports on Form 10-Q for the periods ended March 31, 1997,
June 30, 1997 and September 30, 1997 is incorporated herein by reference.
(b) Not applicable.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) The officers and employees of the Company will perform tasks which would be
expected to arise in connection with the transaction. The information appearing
under the caption "SPECIAL FACTORS-- Interest of Certain Persons" in the Proxy
Statement is incorporated herein by reference.
(b) The information appearing under the captions "SPECIAL FACTORS--Background of
the Merger," "SPECIAL FACTORS--Interest of Certain Persons" and "SOURCE AND
AMOUNT OF FUNDS; EXPENSES" in the Proxy Statement is incorporated herein by
reference.
ITEM 16. ADDITIONAL INFORMATION.
Reference is hereby made to the Proxy Statement, which is referenced hereto
as Exhibit (d), and incorporated in its entirety herein by reference.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a) NationsCredit Commercial Corporation Commitment Letter.
(b) Opinion of PaineWebber Incorporated.
(c)(1) Agreement and Plan of Merger, dated December 21, 1997.
(c)(2) Stockholders Agreement, dated December 21, 1997.
(c)(3) Asset Purchase Agreement, dated December 21, 1997.
(d) Proxy Statement, dated [ ], 1998, incorporated by reference to
Schedule 13E-3.
(e) Text of Section 262 of the General Corporation Law of the State of Delaware.
6
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Dated: [ ], 1998
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ARTISTIC GREETINGS INCORPORATED
By: /s/ STUART KOMER
-----------------------------------------
Name: Stuart Komer
Title: Chairman of the Board
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7
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Exhibit (a)
[Letterhead of NationsCredit Commercial Funding]
December 19, 1997
Mr. Thomas C. Wyckoff
President
Artistic Direct Incorporated
One Komer Center,
P.O. Box 1999
Elmira, NY 14902
PHONE # - (607) 735-4555
Dear Tom:
We are pleased to confirm our willingness to extend secured financing
to Artistic Direct Incorporated, along the parameters outlined below:
1. PURPOSE: The proceeds of the facility shall be used to repay
your existing lender, provide acquisition financing for the purchase of certain
assets of Artistic Greetings, Inc., and for general working capital.
2. BORROWER: Artistic Direct Incorporated.
3. MAXIMUM FACILITY AMOUNT: $8,000,000, with all advances subject
to advance rates on the revolving and term loans.
4. LOAN SUBLIMITS: Within the Maximum Facility Amount the following
loan sublimits shall apply:
A. Inventory $2,000,000
B. Equipment: $ 885,000
(other than computer equipment)
C. Computer Equipment: $ 300,000
D. Real Property: $3,200,000
E. Credit Accommodations: $1,000,000
F. Customer Lists: $ 650,000
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5. GUARANTIES: The loans shall be guarantied by Mr. Thomas C.
Wyckoff, limited to $5,000,000, and payable after 6 months' notice.
6. REVOLVING LOANS BASED UPON THE FOLLOWING ADVANCE RATES:
A. Accounts Advance Rate - 85% of Borrower's acceptable and eligible
accounts receivable within 90 days from invoice date, and provided that the
dilution percentage does not exceed 5%.
B. Inventory Advance Rates - The lesser of 35% against acceptable
and eligible raw materials and finished goods inventory valued at the lower
of cost or market, or 85% of the appraised orderly liquidation value of the
acceptable and eligible raw materials and finished goods inventory.
7. TERM LOANS:
A. Equipment Term Loan - The lesser of $885,000 or 95% of the
appraised auction sale value of Borrower's acceptable and eligible
equipment. The equipment advance is to be amortized in 84 equal monthly
installments.
B. Computer Equipment Term Loan - The lesser of $285,000 and 95% of
the appraised auction sale value of Borrower's acceptable and eligible
computer equipment, to be amortized over 36 months.
NationsCredit shall, at its option, reappraise Borrower's machinery &
equipment and computers 18 months after the effective date of the loan
agreement. In the event the then-current loans against the machinery &
equipment and computers exceed 85% of the appraised auction sale value,
NationsCredit will amortize the amount of such excess over the following
three months, in addition to the normal amortization.
C. Customer Lists Term Loan - The lesser of $650,000 and 100% of the
appraised knockdown liquidation value of the eligible customer lists, not
to exceed 25% of the appraised fair market value. The customer list is to
be amortized in 84 equal monthly installments.
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D. Real Estate/Real Property Term Loan - The lesser of $3,200,000 or
50% of the appraised quick sale value of the real property located at 1580
and 1576 Lake Street, 110-120 and 146-150 Water Street, and 308, 317,
401-409 William Street, Elmira, NY. The real estate advance is to be
amortized in 84 equal monthly installments.
8. CREDIT ACCOMMODATIONS (INCLUDING LETTERS OF CREDIT AND BANKER'S
ACCEPTANCES): As part of the Maximum Facility Amount, Lender shall,
subject to the availability criteria set forth above, provide letters of
credit, banker's acceptances and other credit accommodations for the
account of Borrower either by issuing them, or by causing other financial
institutions to issue them supported by Lender's guaranty or
indemnification. When providing Letters of Credit ("LC's") for the
purchase of eligible inventory, we shall require a margin of 65% of the
cost of the inventory, plus duty and freight, which margin shall be
implemented by reserving against availability under the Maximum Facility
Amount. Standby LC's for purposes approved by us will require a 100%
margin implemented in the same manner. All applicable bank and opening
charges shall be in addition to our fee, and charged to Borrower's loan
account.
9. INTEREST RATE: The revolving loans and term loans shall bear
interest at .875% per annum plus the Prime Rate. For this purpose, the
Prime Rate is defined as the "prime rate" as quoted in THE WALL STREET
JOURNAL as the base rate on corporate loans posted by at least 75% of the
nation's 30 largest banks. The Prime Rate is not necessarily the lowest
rate charged by major banks. Collections shall be credited 4 business days
after Lender has received advice of such collections at its account
designated in the Loan Agreement.
10. FEES: NationsCredit shall receive the following fees, in
addition to interest, for making the credit facility available to the
Borrower:
A. A Closing Fee of 1.00% of the Maximum Facility Amount of
which one-half shall be payable and fully earned upon issuance of this
Commitment Letter (the "Commitment Letter Fee") and one-half shall be
payable and fully earned on the Closing Date.
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B. An Annual Facility Fee of .75% of the Maximum Facility Amount
earned at closing, payable on each anniversary of the closing date.
C. A Minimum Borrowing Fee will be calculated if the average annual
loan balance is below $4,000,000 (the "Minimum Loan Amount"). We shall
receive a fee equal to the difference between the actual annual average
loan balance and the Minimum Loan Amount, multiplied by the annual interest
rate, and payable annually.
D. An Unused Line Fee of .50% per annum of the excess of the Maximum
Facility Amount over the average monthly balance of loans outstanding,
payable monthly.
E. A Servicing Fee of $750 for each month or part thereof during the
term of the Loan Agreement, in consideration of Lender's administration and
other services for each month (or part thereof), payable monthly.
F. An Early Termination Fee, if the credit facility is terminated
prior to the end of the term, of 3.00% of the Maximum Facility Amount
during the first year of the term, 2.00% of the Maximum Facility Amount
during the second and third year of the term, and 1.50% of the Maximum
Facility Amount thereafter.
G. A Credit Accommodation Fee of 1.25% per annum of the face amount
of each open Credit Accommodation, payable monthly on the first day of each
month, plus all other fees and costs charged by the issuer thereof.
11. COLLATERAL: All obligations under this facility will be secured
by:
A. A first and only security interest in all of Borrower's tangible
and intangible personal property, including, without limitation, all now
owned or hereafter acquired accounts, chattel paper, instruments,
documents, inventory, equipment and other goods, investment property and
general intangibles (including trademarks, trade names, patents,
copyrights, goodwill and customer lists), all proceeds and products of all
of the foregoing, and all books and records relating to all of the
foregoing. Notwithstanding the foregoing, the New York State Development
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Corp. AND/OR City of Elmira may have a subordinate security interest on the
fixed assets provided that any such security interest will be subject to a
complete standstill with respect to exercise of rights on the collateral.
B. A first priority perfected Mortgage or Trust Deed on Borrower's
real property located at 1580 and 1575 Lake Street, 110-120 Main Street,
146-150 Water Street, and 308, 317 and 409 William Street, all in Elmira,
NY.
12. TERM: 4 years.
13. OTHER TERMS AND CONDITIONS: The credit facility will be subject
to the following additional terms and conditions:
A. Execution and delivery to NationsCredit of legal documentation
prepared by our counsel, including but not limited to a loan and security
agreement having covenants, representations, warranties and defaults
acceptable to NationsCredit (the "Loan Agreement") and such financing
statements, mortgages, trust deeds, guaranties, landlord waivers, mortgagee
waivers, warehouse agreements, intercreditor and subordination agreements,
if any, third party consents, evidence of adequate insurance properly
endorsed, title insurance, opinions of counsel and other documentation
satisfactory in form and substance to NationsCredit and its counsel.
B. No material adverse change in Borrower's business, operations or
prospects, financial or otherwise, or in the condition of the collateral,
shall have occurred from the date of the most recent financial information
submitted to NationsCredit, or the field examinations to be conducted by
NationsCredit, to the closing date.
C. Lockbox and blocked bank account for all collections or proceeds
of collateral.
D. Borrower shall have unused loan availability of not less than
$400,000 at closing, after the application of the loan proceeds as
proposed, and provided that Borrower, at closing, has no accounts payable
more than 120 days past due, and no past due taxes.
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E. Delivery of monthly financial statements certified by an officer
of Borrower and annual financial statements prepared in accordance with
generally accepted accounting principles and certified by Borrower's
independent certified public accountants, acceptable to NationsCredit.
F. Receipt in form and substance satisfactory to NationsCredit of:
(i) an auction value appraisal of Borrower's machinery and equipment, (ii)
an orderly liquidation value appraisal of Borrower's inventory, and (iii) a
fair market and knockdown liquidation value appraisal of Borrower's
customer lists, all at Borrower's expense, and prepared by independent
appraisers acceptable to NationsCredit.
G. NationsCredit shall have received and approved the results of (i)
Phase One environmental studies of all of Borrower's real property
collateral showing that such property complies with all current and federal
environmental laws and that no remediation is required, and (ii) Phase Two
studies, or other studies or tests, if so indicated by the Phase One
studies, all at Borrower's expense and prepared by environmental testing
firms acceptable to NationsCredit.
H. Receipt and approval by NationsCredit of the reviewed 9/30/97
financial statements for Borrower, showing no material change from the
internal financial statements presented to NationsCredit for the same time
period.
I. Receipt by Borrower of no less than $3,150,000 in cash of which
at least $1,150,000 shall consist of cash equity contributions and the
balance of which shall consist of subordinated loans, all upon terms and
conditions acceptable to NationsCredit.
J. Additional conditions if credit facility is used to purchase
assets or stock of another company:
(a) Receipt and approval by NationsCredit of cash flow
projection statements prepared by Borrower on a monthly basis, for the
eighteen-month period after closing and pro forma balance sheets with
adjusting entries, in form and substance satisfactory to
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NationsCredit based upon mutually agreed assumptions, and certified by
an officer of the Borrower, showing that (a) the proposed financing
will provide sufficient funds for the acquisition of certain assets
and liabilities of Artistic Greetings, Inc. from a Third Party (the
"Acquisition"); (b) the Borrower (i) will be solvent immediately after
initial funding and have a minimum tangible net worth of $750,000;
(ii) will have reasonably sufficient capital to engage in its business
following the initial funding; and (iii) will not incur debts beyond
its ability to pay such debts as they mature.
(b) Receipt by NationsCredit of a collateral assignment of all
representations, warranties and undertakings made by the seller in
connection with the Acquisition.
(c) Compliance with all bulk sales laws applicable to the
Acquisition at or prior to the closing of the Acquisition or
satisfactory indemnification from Seller to Buyer therefor, assigned
to NationsCredit in a manner acceptable to NationsCredit.
(d) Payment in full of all of seller's obligations at or prior
to the closing of the Acquisition.
(e) Payment in full of all of Borrower's obligations to seller
prior to the closing of the Acquisition, or subordination of all such
obligations to Borrower's obligations to NationsCredit in a manner
satisfactory to NationsCredit. Without limiting the foregoing,
Borrower's obligations to seller may only be satisfied with the
proceeds of NationsCredit's advances to Borrower, under terms and
conditions satisfactory to NationsCredit.
(f) NationsCredit's review of and satisfaction with the
structure, terms and conditions of the asset purchase agreement.
K. NationsCredit to obtain satisfactory background check on Thomas
C. Wyckoff.
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L. Satisfactory credit reference from Borrower's present lender.
M. The financing agreement shall contain a financial covenant that
Borrower may not have a negative cash flow in excess of $250,000 in any
calendar quarter after closing. In the event this covenant is violated,
NationsCredit shall reduce the loan against customer lists by $200,000.
Cash flow shall be defined as net income plus depreciation and amortization
less debt service and capital expenditures.
N. Prior to closing, Borrower shall deliver to NationsCredit pro
forma financial statements excluding the checks business for the fiscal
year ended 12/31/96 and projected financial statements for the fiscal years
ending 12/31/97 and 12/31/98 prepared by Arthur Andersen LLP. Such
statements shall not be materially different than those statements
previously provided to NationsCredit by Borrower.
O. Borrower is required to obtain credit insurance on Novus and
Humane Society of the U.S. in order for these to be considered eligible
receivables. Such credit insurance shall be assigned to NationsCredit.
P. New York State Development Corp. (the "State") will agree to a
complete standstill with respect to exercising its rights on the
collateral.
14. DUE DILIGENCE: You have provided us and our field examiners with
all financial information, projections, budgets, business plans, cash flow(s)
and availability projections and other information that we have requested. You
will make available to our field examiners, credit analysts and counsel all
books and records and other information requested by them during the course of
their due diligence investigation of Borrower.
15. EXPENSES: You will reimburse us for all costs and expenses paid
or incurred by us in connection with your account (before and after closing)
including but not limited to legal and closing expenses (including fees and
disbursements of our in-house and outside counsel), filing and search fees,
title insurance, appraisals, fees for any environmental surveys,
<PAGE>
-9-
field examination expenses, and prevailing per diem field examination and credit
analyst charges. We will charge $675 per person per day for our field examiners
and credit analysts in the field and in the office, plus travel, hotel and all
other out-of-pocket expenses. Your reimbursement obligation under this
paragraph shall apply whether or not the proposed financing is closed.
16. DEPOSITS: We have incurred, and we are continuing to incur,
various expenses in connection with this transaction, and you agree to reimburse
us for all of such expenses. You have already deposited $25,000 with us
concurrently with our delivery to you of our letter of interest dated October
29, 1997. In addition, you agree to make additional deposits with us to the
extent we believe them to be necessary to cover existing and anticipated
expenses. If you fail to comply with the provisions contained in this letter,
or if you elect not to proceed with the financing transaction described in this
letter, (i) we will refund to you the unused balance, if any, of such expense
deposits or (ii) you shall reimburse us for the amount, if any, by which such
expenses exceed such deposits.
If you are in agreement with the terms of this letter, please sign
this letter in the space provided below. Except as provided above in connection
with expense deposits and as provided below, this letter shall be of no force or
effect unless you return to us, on or before December 23, 1997, a copy of this
letter signed by you, together with the commitment fee (which shall be deemed
earned upon our issuance of this letter) in the amount of $40,000 (but as to
which $20,000 shall be paid together with your execution of this letter and
$20,000 shall be paid no later than January 15, 1998). In addition, this letter
shall be of no further force or effect if the financing transaction described
herein does not close on or before March 31, 1998. In any event, we shall be
entitled to retain the commitment fee (which is non-refundable) and you shall be
liable for all expenses which we have or will incur in accordance with this
transaction.
This letter supersedes and replaces our letter to you dated October
29, 1997.
This letter is solely for your benefit and is not to be relied upon by
any third parties.
<PAGE>
-10-
Once again, thank you for your interest in obtaining financing from
NationsCredit. We welcome the opportunity to work with you and your colleagues
on this transaction.
Very truly yours,
NATIONSCREDIT COMMERCIAL CORPORATION
COMMERCIAL FUNDING DIVISION
By /s/ Michael D. Gullo
------------------------------
Its VICE PRESIDENT
Agreed to this 19th day
of December, 1997
Artistic Direct Incorporated
By /s/ Thomas C. Wyckoff
----------------------------
Its PRESIDENT
<PAGE>
Exhibit (b)
January 26, 1997
CONFIDENTIAL
The Special Committee of the Board of Directors
Artistic Greetings Incorporated
One Komer Center
Elmira, NY 14902
Ladies and Gentlemen:
Artistic Greetings Incorporated (the "Company") has
entered into an Agreement and Plan of Merger (the "Agreement") with AGI
Acquisition Co. ("Newco") and MDC Communications Corp. ("Parent") dated
December 21, 1997, pursuant to which Newco shall be merged with and into the
Company (the "Merger"). At the Effective Time (as defined in the Agreement)
of the Merger, each outstanding share of common stock, par value $0.10 per
share of the Company (the "Company Common Stock"), other than shares held in
the Company's treasury, will be converted into the right to receive $5.70 in
cash (the "Merger Consideration").
You have asked us whether or not, in our opinion, the
proposed Merger Consideration to be received by the shareholders of the
Company, other than American Greetings Corporation ("American Greetings"), is
fair to the shareholders of the Company, other than American Greetings, from
a financial point of view.
In arriving at the opinion set forth below, we have,
among other things:
(1) Reviewed the Company's Annual Reports, Forms 10-K and related
financial information for the three fiscal years ended December
31, 1996, the Company's Forms 10-Q and the related unaudited
financial information for the nine months ended September 30,
1996 and 1997;
(2) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets and
prospects of the
<PAGE>
-2-
Company which were furnished to us by the Company;
(3) Conducted discussions with members of senior management of the
Company concerning its businesses and prospects;
(4) Reviewed the historical market prices and trading activity for
the Company Common Stock and compared them with that of certain
other publicly traded companies which we deemed to be relevant;
(5) Compared the results of operations of the Company with that of
certain other companies which we deemed to be relevant;
(6) Reviewed the Merger Consideration premium to the historical
market prices of the Company Common Stock and compared them to
historical transaction stock premiums paid by acquirors in
transactions of similar value;
(7) Reviewed the Agreement; and
(8) Reviewed such other financial studies and analyses and performed
such other investigations and took into account such other
matters as we deemed necessary, including our assessment of
general economic, market and monetary conditions.
In preparing our opinion, we have relied on the accuracy
and completeness of all information that was publicly available, supplied or
otherwise communicated to us by or on behalf of the Company, and we have not
assumed any responsibility to independently verify such information. With
respect to the financial forecasts (the "Projections") examined by us, we
have assumed, with your consent, that they were reasonably prepared on bases
reflecting the best available estimates and good faith judgments of the
Company's management as to the future performance of the Company at the time
of such preparation. PaineWebber Incorporated noted that the Projections
provided by the Company's management (i) for the Fiscal Year Ended December
31, 1997 were significantly higher than the actual results for
<PAGE>
-3-
the twelve month period ended September 30, 1997; (ii) had been prepared
approximately eight months prior to delivery of the Opinion; and (iii) had not
been updated since that time. We have not undertaken, and have not been
provided with, an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of the Company and have assumed that (i)
the purchase method of accounting will be used, and (ii) all material assets and
liabilities (contingent or otherwise, known or unknown) of the Company are as
set forth in the consolidated financial statements.
Our Opinion is directed to the Special Committee of the
Board of Directors of the Company and does not constitute a recommendation to
any shareholder of the Company as to how any such shareholder should vote on
the Merger. This opinion does not address the relative merits of the Merger
and any other transactions or business strategies that may have been
discussed by the Special Committee of the Board of Directors of the Company
as alternatives to the Merger or the decision of the Special Committee of the
Board of Directors of the Company to proceed with the Merger. In addition,
we were not requested to, and have not, expressed any opinion as to the
fairness, from a financial point of view, of that sale of certain assets and
liabilities of the non-check businesses of the Company. Our opinion is based
on economic, monetary and market conditions on the date hereof.
In rendering this opinion, we have not been engaged to
act as an agent or fiduciary of, and the Special Committee of the Board of
Directors of the Company has expressly waived any duties or liabilities we
may otherwise deemed to have had to, the Company's equity holders or any
other third party.
In the ordinary course of its business, PainWebber
Incorporated may trade the securities of the Company and Parent for its own
account and for the accounts of customers and, accordingly, may at any time
hold long or short positions in such securities.
PaineWebber Incorporated is currently acting as financial
advisor to the Special Committee of the Board of Directors of the Company in
connection with the Merger and will receive a fee in connection with
rendering of this opinion and upon the consummation of the Merger.
<PAGE>
-4-
On the basis of, and subject to the foregoing, we are of
the opinion that, as of the date hereof, the proposed Merger Consideration to
be received by the shareholders of the Company, other than American
Greetings, pursuant to the Merger is fair to the shareholders of the Company,
other than American Greetings, from a financial point of view.
This opinion has been prepared at the request of and for
the information of the Special Committee of the Board of Directors of the
Company in connection with the Merger and shall not be reproduced,
summarized, described or referred to, provided to any person or otherwise
made public or used for any other purpose without the prior written consent
of PaineWebber Incorporated; provided, however, that this letter may be
reproduced in full in the Proxy Statement relating to the Merger.
Very truly yours,
PAINEWEBBER INCORPORATED
<PAGE>
Exhibit (c)(1)
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MDC COMMUNICATIONS CORPORATION,
AGI ACQUISITION CO.
AND
ARTISTIC GREETINGS INCORPORATED
DATED AS OF DECEMBER 21, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER
Section 1.01. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Section 1.02. Effective Time . . . . . . . . . . . . . . . . . . . . . . . . .2
Section 1.03. Certificate of Incorporation and By-Laws of Surviving
Corporation. . . . . . . . . . . . . . . . . . . . . . . . . .2
Section 1.04. Directors and Officers of Surviving Corporation. . . . . . . . .2
Section 1.05. Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Section 1.06. Further Assurances . . . . . . . . . . . . . . . . . . . . . . .3
Section 1.07. Conversion of Shares . . . . . . . . . . . . . . . . . . . . . .4
Section 1.08. Stock Options. . . . . . . . . . . . . . . . . . . . . . . . . .4
Section 1.09. Stockholders' Meeting; Proxy Statement.. . . . . . . . . . . . .5
Section 1.10. Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . .6
Section 1.11. Payment for Shares . . . . . . . . . . . . . . . . . . . . . . .6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO
Section 2.01. Organization . . . . . . . . . . . . . . . . . . . . . . . . . .8
Section 2.02. Authority Relative to This Agreement . . . . . . . . . . . . . .9
Section 2.03. No Violations, Etc.. . . . . . . . . . . . . . . . . . . . . . .9
Section 2.04. Proxy Statement. . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.05. Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.06. Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.01. Organization and Qualification . . . . . . . . . . . . . . . . 11
Section 3.02. Authority Relative to This Agreement . . . . . . . . . . . . . 11
Section 3.03. No Violations, Etc.. . . . . . . . . . . . . . . . . . . . . . 12
Section 3.04. Board Recommendation . . . . . . . . . . . . . . . . . . . . . 13
Section 3.05. State Antitakeover Statutes. . . . . . . . . . . . . . . . . . 13
Section 3.06. Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.07. Proxy Statement. . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.08. Finders or Brokers . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.09. SEC Filings. . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.10. Financial Statements . . . . . . . . . . . . . . . . . . . . . 15
Section 3.11. Absence of Undisclosed Liabilities . . . . . . . . . . . . . . 15
Section 3.12. Absence of Changes or Events . . . . . . . . . . . . . . . . . 16
Section 3.13. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.14. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.15. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.16. Compliance with Law. . . . . . . . . . . . . . . . . . . . . . 18
-i-
<PAGE>
PAGE
Section 3.17. Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.18. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.19. Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.20. Related Party Transactions . . . . . . . . . . . . . . . . . . 22
Section 3.21. Real Property. . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.22. Environmental Matters. . . . . . . . . . . . . . . . . . . . . 22
Section 3.23. Intellectual Property. . . . . . . . . . . . . . . . . . . . . 23
ARTICLE IV
COVENANTS
Section 4.01. Conduct of Business of the Company . . . . . . . . . . . . . . 25
Section 4.02. Other Potential Bidders. . . . . . . . . . . . . . . . . . . . 28
Section 4.03. Access to Information. . . . . . . . . . . . . . . . . . . . . 29
Section 4.04. Commercially Reasonable Efforts; Other Actions . . . . . . . . 30
Section 4.05. Public Announcements . . . . . . . . . . . . . . . . . . . . . 31
Section 4.06. Notification of Certain Matters. . . . . . . . . . . . . . . . 31
Section 4.07. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.08. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.09. Resignation of Directors . . . . . . . . . . . . . . . . . . . 32
Section 4.10. Asset Purchase Agreement . . . . . . . . . . . . . . . . . . . 32
ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF PARENT,
NEWCO AND THE COMPANY
Section 5.01. Conditions to Obligations of Parent, Newco and the Company . . 33
Section 5.02. Conditions to Obligations of Parent and Newco. . . . . . . . . 33
Section 5.03. Conditions to Obligations of Company . . . . . . . . . . . . . 34
ARTICLE VI
TERMINATION; AMENDMENT, WAIVER
Section 6.01. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 6.02. Effect of Termination. . . . . . . . . . . . . . . . . . . . . 36
Section 6.03. Certain Payments . . . . . . . . . . . . . . . . . . . . . . . 37
Section 6.04. Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 6.05. Extension; Waiver. . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VII
DEFINITIONS
Section 7.01. Terms Defined in This Agreement. . . . . . . . . . . . . . . . 39
-ii-
<PAGE>
PAGE
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Waiver of Compliance; Consents . . . . . . . . . . . . . . . . 40
Section 8.02. Survivability; Investigations. . . . . . . . . . . . . . . . . 40
Section 8.03. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.04. Assignment; No Third Party Beneficiaries.. . . . . . . . . . . 41
Section 8.05. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.06. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.07. Severability . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.08. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.09. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 42
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-1
Exhibits
Exhibit 1 . . . . . . . . . . . . . . . . . . . . Asset Purchase Agreement
Exhibit 2 . . . . . . . . . . . . . . . . . . . . . Stockholders Agreement
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of December 21, 1997 (the
"Agreement"), by and among MDC Communications Corporation, an Ontario
corporation ("Parent"), AGI Acquisition Co., a Delaware corporation ("Newco"),
which is an indirect wholly owned Subsidiary of Parent, and Artistic Greetings
Incorporated, a Delaware corporation (the "Company"). Newco and the Company are
hereinafter sometimes collectively referred to as the "Constituent
Corporations."
RECITALS
WHEREAS, the Board of Directors of the Company (the "Board") has, in light
of and subject to the terms and conditions set forth herein, (i) determined that
the Merger (as defined below) is fair to the stockholders of the Company and in
the best interests of such stockholders and (ii) approved and adopted this
Agreement and the transactions contemplated hereby (including the transactions
contemplated by the Asset Purchase Agreement (as defined herein)) and resolved
to recommend approval and adoption by the stockholders of the Company of this
Agreement and the Asset Purchase Agreement;
WHEREAS, contemporaneously herewith, the Company is entering into an Asset
Purchase Agreement, dated as of even date herewith, with Artistic Direct
Incorporated (together with any other asset purchase agreement substantially in
the form of Exhibit 1 hereto and providing for the payment of cash consideration
of at least $9 million and the assumption of the Assumed Liabilities (as defined
therein), the "Asset Purchase Agreement"), pursuant to which the Company has
agreed to sell (the "Asset Sale") certain assets relating to the personalized
product and catalog businesses of the Company (the "P&C Business") for the
consideration set forth therein and the assumption of certain liabilities
relating to the P&C Business, on the terms and conditions more fully described
therein; and
WHEREAS, the Board of Directors and the shareholders of Newco have, in
light of and subject to the terms and conditions set forth herein, approved and
adopted this Agreement and the transactions contemplated hereby.
<PAGE>
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NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.01. THE MERGER. (a) In accordance with the provisions of this
Agreement and the Delaware General Corporation Law (the "Delaware Act"), at the
Effective Time (as hereinafter defined), Newco shall be merged (the "Merger")
with and into the Company, and the Company shall be the surviving corporation
(hereinafter sometimes called the "Surviving Corporation") and shall continue
its corporate existence under the laws of the State of Delaware. The name of
the Surviving Corporation shall be "the Company". At the Effective Time the
separate existence of Newco shall cease.
(b) The Merger shall have the effects on Newco and the Company as
constituent corporations of the Merger as provided under the Delaware Act.
Section 1.02. EFFECTIVE TIME. The Merger shall become effective at the
time of filing of, or at such later time specified in, a certificate of merger,
in the form required by and executed in accordance with the Delaware Act, with
the Secretary of State of the State of Delaware in accordance with the
provisions of the Delaware Act (the "Certificate of Merger"). The date and time
when the Merger shall become effective is herein referred to as the "Effective
Time."
Section 1.03. CERTIFICATE OF INCORPORATION AND BY-LAWS OF SURVIVING
CORPORATION. The Certificate of Incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be amended as of the Effective
Time so that Article Four of such Certificate is amended to read in its entirety
as follows: "The total number of shares of stock which the Corporation shall
have authority to issue is 1,000 shares, all of one class of Common Stock having
a par value of $.01 per share, and each share of Common Stock shall be entitled
to one vote on all matters as to which such stock is entitled to vote.". As so
amended, the Certificate of Incorporation of the Company shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided therein
<PAGE>
-3-
or by law. The By-Laws of Newco, as in effect immediately prior to the
Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided therein, by the Certificate of Incorporation or
by law.
Section 1.04. DIRECTORS AND OFFICERS OF SURVIVING CORPORATION. The
directors of Newco immediately prior to the Effective Time will be the initial
directors of the Surviving Corporation, and the officers of the Company
immediately prior to the Effective Time will be the initial officers of the
Surviving Corporation, in each case until their successors are elected and
qualified.
Section 1.05. CLOSING. (a) Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to the provisions of Section 6.01, and subject to satisfaction or
waiver of the provisions of Article V hereof, the closing (the "Closing") of
this Agreement shall take place at the offices of Simpson Thacher & Bartlett,
425 Lexington Avenue, New York, New York, at 10:00 a.m. local time as soon as
practicable but no later than the second business day after the satisfaction or
waiver of the conditions set forth in Sections 5.01, 5.02 and 5.03 hereof, or at
such other place, time and date as the parties may mutually agree. The date and
time of such Closing are herein referred to as the "Closing Date." For purposes
of this Agreement "business day" shall mean any day except Saturday, Sunday and
any day which shall be in New York City a legal holiday or a day on which
banking institutions in New York or Toronto are authorized or required by law or
other government action to close.
(b) At the Closing, Parent, Newco and the Company shall cause a
Certificate of Merger to be executed and filed with the Secretary of State of
the State of Delaware as provided in the Delaware Act, and shall take any and
all other lawful actions and do any and all other lawful things to cause the
Merger to become effective.
Section 1.06. FURTHER ASSURANCES. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Constituent Corporations acquired
or to be acquired by the Surviving Corporation as a result of, or in connection
with,
<PAGE>
-4-
the Merger or otherwise to carry out this Agreement, the officers and directors
of the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of each of the Constituent Corporations or otherwise, all
such deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of each of the Constituent Corporations or otherwise, all
such other actions and things as may be necessary or desirable to vest, perfect
or confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
Section 1.07. CONVERSION OF SHARES. (a) Each share (a "Share") of Common
Stock, par value $.10 per share (the "Common Stock"), of the Company issued and
outstanding immediately prior to the Effective Time (other than (i) Shares held
in the Company's treasury, (ii) Shares held by Parent, Newco or any other
subsidiary of Parent and (iii) Dissenting Shares (as defined in Section 1.10
hereof)) shall, at the Effective Time, by virtue of the Merger and without any
action on the part of Newco, the Company or the holder thereof, be cancelled and
extinguished and be converted into the right to receive, pursuant to Section
1.11, $5.70 per Share in cash (the "Merger Consideration"), payable to the
holder thereof, without interest thereon, upon the surrender of the certificate
formerly representing such Share, less any required withholding of taxes;
PROVIDED that, in the event the aggregate cash consideration net of fees,
expenses and other direct costs (including any break-up or termination fee and
liquidated damages, if any) received by the Company pursuant to the Asset
Purchase Agreement exceeds $9,000,000, the Merger Consideration with respect to
each such Share shall be increased to include the pro rata portion of the amount
by which such consideration exceeds $9,000,000. At the Effective Time, each
outstanding share of the common stock, par value $.01 per share, of Newco shall
be converted into a share of common stock, par value $.01 per share, of the
Surviving Corporation.
(b) Each Share held in the treasury of the Company and each Share held by
Parent, Newco or any subsidiary of Parent, or the Company immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on the
part of Newco, the Company or the holder thereof, be cancelled, retired and
cease to exist and no payment shall be made with respect thereto.
Section 1.08. STOCK OPTIONS. (a) Prior to the consummation of the Merger,
the Board shall use its best efforts
<PAGE>
-5-
to cause the terms of all outstanding stock options heretofore granted under any
stock option plan of the Company (collectively, the "Stock Plans") to be
adjusted to provide that, at the Effective Time, each stock option outstanding
immediately prior to the consummation of the Merger shall be cancelled and the
holder thereof shall be entitled to receive as soon as practicable thereafter
from the Company in consideration for such cancellation a cash payment of an
amount equal to (i) the excess, if any, of (A) the Merger Consideration over (B)
the exercise price per share of Common Stock subject to such stock option,
multiplied by (ii) the number of shares of Common Stock for which such stock
option shall not theretofore have been exercised.
(b) All amounts payable pursuant to Section 1.08(a) shall be subject to
any required withholding of taxes and shall be paid without interest.
(c) Prior to the consummation of the Merger, the Board of Directors (or,
if appropriate, any committee administering the Stock Plans) shall adopt such
resolutions or take such actions as are commercially reasonable, subject, if
necessary, to obtaining consents of the holders thereof, to carry out the terms
of this Section 1.08 and to provide that, on and after the Effective Time, no
officer, director or employee of the Company shall have any right to acquire any
interest in, any equity security of the Company or any of its subsidiaries.
Section 1.09. STOCKHOLDERS' MEETING; PROXY STATEMENT. (a) The Company,
acting through the Board, shall in accordance with applicable law and the
Company's Certificate of Incorporation and By-Laws:
(i) duly call, give notice of, convene and hold a special meeting of
its stockholders (the "Special Meeting") to be held as soon as practicable
following the date of this Agreement for the purpose of considering and
taking action upon this Agreement and the Asset Purchase Agreement and the
transactions contemplated hereby and thereby;
(ii) subject to its fiduciary duties as determined in good faith by a
majority of the Board, based upon the written opinion of outside counsel,
include in the Proxy Statement (as amended or supplemented, the "Proxy
Statement") required to be distributed to holders of Common Stock in
connection with the Merger the recommendation of the Board that the
stockholders of the Company vote in fa-
<PAGE>
-6-
vor of the approval and adoption of this Agreement and the Asset Purchase
Agreement and the transactions contemplated hereby and thereby and the
written opinion of PaineWebber Incorporated (the "Financial Adviser") that
the cash consideration to be received by the stockholders of the Company
pursuant to the Merger is fair, from a financial point of view, to such
stockholders; and
(b) The Company shall prepare and file with the Securities and Exchange
Commission (the "SEC") the Proxy Statement and shall use all reasonable efforts
to respond promptly to any comments made by the SEC with respect to the Proxy
Statement and any preliminary version thereof, have the Proxy Statement cleared
by the SEC and cause the Proxy Statement to be mailed to the Company's
stockholders at the earliest practicable time. The Company shall give Parent
and its counsel the opportunity to review the Proxy Statement prior to its being
filed with the SEC and shall consult with Parent and its counsel regarding
comments made by the SEC.
At such meeting, Parent, Newco and their affiliates will vote all Shares
owned by them (or with respect to which such entities exercise voting control)
in favor of approval and adoption of this Agreement and the transactions
contemplated hereby.
Section 1.10. DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, Shares outstanding immediately prior to the Effective
Time and held by a holder who has not voted in favor of the Merger or consented
thereto in writing and who has demanded appraisal for such Shares in accordance
with Section 262 of the Delaware Act ("Dissenting Shares") shall not be
converted into a right to receive the Merger Consideration, unless such holder
fails to perfect or withdraws or loses his right to appraisal, in which case
such Shares shall be treated as if they had been converted as of the Effective
Time into a right to receive the Merger Consideration, without interest thereon.
The Company shall give Parent and Newco prompt notice of any demands received by
the Company for appraisal of Shares and, prior to the Effective Time, Parent and
Newco shall have the right to direct all negotiations and proceedings with
respect to such demands. Prior to the Effective Time, the Company shall not,
except with the prior written consent of Parent or Newco, make any payment with
respect to, or settle or offer to settle, any such demands.
Section 1.11. PAYMENT FOR SHARES. (a) Prior to the Effective Time,
Parent and Newco shall designate a bank or
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trust company reasonably acceptable to the Company to act as exchange agent in
connection with the Merger (the "Exchange Agent"). At or prior to the Effective
Time, Parent or Newco will provide the Exchange Agent with the funds necessary
to make the payments contemplated by Section 1.07(a) hereof (the "Exchange
Fund"). Such funds shall be invested by the Exchange Agent as directed by Newco
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) Promptly after the Effective Time, the Exchange Agent shall mail to
each record holder, as of the Effective Time, of an outstanding certificate or
certificates which immediately prior to the Effective Time represented Shares
(the "Certificates") a form 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 Exchange Agent) and
instructions for use in effecting the surrender of the Certificates for payment
therefor. Upon surrender to the Exchange Agent of a Certificate, together with
a duly executed letter of transmittal and any other required documents, the
holder of such Certificate shall receive in exchange therefor (as promptly as
practicable) the Merger Consideration, without any interest thereon, less any
required withholding of taxes, and such Certificate shall forthwith be
cancelled. If payment is to be made to a person other than the person in whose
name a Certificate so surrendered is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer, that the signatures on the Certificate or
any related stock power shall be properly guaranteed and that the person
requesting such payment shall either pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of the
Certificate so surrendered or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
in accordance with the provisions of this Section 1.11(b), each Certificate
(other than Certificates representing Shares held in the Company's treasury or
by Parent or Newco,
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or by any subsidiary of Parent or Newco, and other than Certificates
representing Dissenting Shares) shall represent for all purposes only the right
to receive for each Share represented thereby the Merger Consideration.
(c) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of the Shares which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be cancelled
and exchanged for the consideration provided for, and in accordance with the
procedures set forth, in this Article I.
(d) From and after the Effective Time, the holders of Certificates
evidencing ownership of Shares outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such Shares except as
otherwise provided herein or by applicable law. Such holders shall have no
rights, after the Effective Time, with respect to such Shares except to
surrender such Certificates in exchange for cash pursuant to this Agreement or
to perfect any rights of appraisal as a holder of Dissenting Shares that such
holders may have pursuant to Section 262 of the Delaware Act.
(e) Any portion of the Exchange Fund (including the proceeds of any
investment thereof) that remains unclaimed by the stockholders of the Company
for six months after the Effective Time shall be repaid to the Surviving
Corporation. Any stockholders of the Company who have not theretofore complied
with this Article I shall thereafter look only to the Surviving Corporation
(subject to abandoned property, escheat or other similar laws) only as general
creditors for payment of their claims for the Merger Consideration for each
Share such stockholders hold, without any interest.
(f) Notwithstanding anything to the contrary in this Section 1.11, none of
the Exchange Agent, Parent or the Surviving Corporation shall be liable to a
holder of a Certificate formerly representing Shares for any amount properly
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF PARENT AND NEWCO
Each of Parent and Newco jointly and severally represents and warrants to
the Company as follows:
Section 2.01. ORGANIZATION. Parent is a corporation duly organized,
validly existing and in good standing under the laws of Ontario. Newco is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Newco has not engaged in any business since it was
incorporated other than in connection with the transactions contemplated by this
Agreement. Parent owns directly or indirectly all of the outstanding capital
stock of Newco.
Section 2.02. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
Newco has full corporate power and authority to execute and deliver this
Agreement and to consummate the Merger and the other transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the Merger and the other transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of each of Parent and Newco and by
Parent as the sole stockholder of Newco and no other corporate proceedings on
the part of Parent or Newco are necessary to authorize this Agreement or to
consummate the Merger or the other transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by each of Parent and
Newco and, assuming the due authorization, execution and delivery hereof by the
Company, constitutes a valid and binding agreement of each of Parent and Newco,
enforceable against each of them in accordance with its terms, except to the
extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally or by general equitable or fiduciary principles.
Section 2.03. NO VIOLATIONS, ETC. (a) Assuming that all filings,
permits, authorizations, consents and approvals have been duly made or obtained
as contemplated by this Section 2.03, the execution and delivery of this
Agreement and the consummation by Parent and Newco of the Merger and the other
transactions contemplated hereby will not (i) violate any provision of the
Certificate of Incorporation or By-Laws or similar organizational document of
either Parent or Newco,
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(ii) assuming that all consents, approvals and authorizations contemplated by
clause (b) below have been obtained and all filings described in such clause
have been made, violate any statute, rule, regulation, order or decree of any
public body or authority by which Parent, Newco or any of their properties is
bound, or (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default under, any license,
franchise, permit, indenture, agreement or other instrument to which Parent or
Newco is a party, or by which Parent, Newco or any of their properties is bound,
excluding from the foregoing clauses (ii) and (iii) violations, breaches and
defaults which, either individually or in the aggregate, would not materially
impair the ability of Parent or Newco to consummate the Merger or the other
transactions contemplated hereby or have a material adverse effect on the
business, operations, assets or financial condition of Parent and its
subsidiaries taken as a whole.
(b) No filing or registration with, or authorization, consent or approval
of, or notification to any governmental entity is required by Parent or Newco in
connection with the execution and delivery of this Agreement or the consummation
by Parent and Newco of the Merger and the other transactions contemplated
hereby, except (i) in connection with the applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) in connection, or in compliance, with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act") or the Exchange Act, (iii) the filing of
appropriate merger documents as required by the Delaware Act, (iv) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under the corporation, takeover or blue sky laws of
various states and (v) such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made, either individually or in the aggregate, would not materially impair the
ability of Parent or Newco to consummate the Merger and the other transactions
contemplated hereby or have a material adverse effect on the business,
operations, assets or financial condition of Parent and its subsidiaries taken
as a whole.
Section 2.04. PROXY STATEMENT. None of the information supplied by Parent
or Newco in writing for inclusion in the Proxy Statement will, at the respective
times that the Proxy Statement or any amendments or supplements thereto are
filed with the SEC and are first published or sent or given to holders of
Shares, and, at the time that it or any amendment or
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supplement thereto is mailed to the Company's stockholders, at the time of the
Stockholders' Meeting or at the Effective Time, contain any statement which, at
the time and in the light of the circumstances under which it is made, is false
or misleading with respect to any material fact, or which omits to state any
material fact necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier Proxy Statement
which has become false or misleading.
Section 2.05. FINANCING. Parent or Newco, at the Effective Time, will
have sufficient funds available to consummate the Merger.
Section 2.06. BROKERS. Except for Furman Selz (a true and correct copy of
whose engagement agreement has been provided to the Company), no broker, finder
or investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by and on behalf of Parent or Newco.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Newco that, except as
disclosed in the disclosure statement (the "Disclosure Statement"), dated the
date hereof, from the Company to Parent:
Section 3.01. ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted. The Company is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or leased or the nature of its activities
makes such qualification necessary, except for failures to be so qualified or in
good standing which would not, individually or in the aggregate, have a Material
Adverse Effect or prevent or materially delay the consummation of the Merger.
When used in connection with the Company, the term "Material Adverse Effect"
means any change or effect that is or is reasonably likely to
<PAGE>
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be materially adverse to the business, operations, assets, financial condition
or results of operations of the Company. The Company is not in violation of any
of the provisions of its Restated Certificate of Incorporation or By-laws. The
Company has previously delivered to Parent accurate and complete copies of the
Company's Restated Certificate of Incorporation and By-laws, as currently in
effect.
Section 3.02. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has full
corporate power and authority to execute and deliver this Agreement and to
consummate the Merger and the other transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the Merger and
the other transactions contemplated hereby have been duly and validly authorized
by the Board of Directors of the Company and no other corporate proceedings on
the part of the Company are necessary to authorize this Agreement or to
consummate the Merger and the other transactions contemplated hereby (other
than, with respect to the Merger and the sale of assets contemplated by the
Asset Purchase Agreement, the approval of a majority of the outstanding shares
of Common Stock (the "Requisite Vote") at the Special Meeting or any adjournment
thereof). 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 Newco, constitutes a legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except to
the extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally or by general equitable or fiduciary principles.
Section 3.03. NO VIOLATIONS, ETC. Except for the filings of the
Certificate of Merger, filings required under the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), filings
required under and in compliance with the HSR Act and as set forth on Schedule
3.03 hereto, no filing with, notification to and no permit, authorization,
consent or approval of, any public body is necessary for the consummation by the
Company of the Merger or the other transactions contemplated hereby, excluding
from the foregoing permits, authorizations, consents, approvals and notices
which (i) if not obtained, made or given, either individually or in the
aggregate, would not materially impair the ability of the Company to consummate
the Merger or the other transactions contemplated hereby or have a Material
Adverse Effect or (ii) are required in connection with the transactions
contemplated by the Asset Purchase Agreement. Neither the execution and deliv-
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ery of this Agreement nor the consummation of the Merger or the other
transactions contemplated hereby nor compliance by the Company with any of the
provisions hereof will (i) subject to obtaining the approval of a majority of
the outstanding shares of Common Stock at the Special Meeting or any adjournment
thereof if and to the extent required by the Delaware Act, conflict with or
result in any breach of any provision of the Restated Certificate of
Incorporation or By-Laws of the Company, (ii) other than as set forth on
Schedule 3.03 hereto or as required in connection with the transactions
contemplated by the Asset Purchase Agreement, result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation, acceleration,
redemption or repurchase or result in the loss of a material benefit) under, any
of the terms, conditions or provisions of any (x) note, bond, mortgage,
indenture, or deed of trust or (y) license, lease, agreement or other instrument
or obligation to which the Company is a party or by which any of them or any of
their properties or assets may be bound or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or any
of its properties or assets, excluding from the foregoing clauses (ii) and (iii)
violations, breaches or defaults which, either individually or in the aggregate,
would not materially impair the Company's ability to consummate the Merger or
the other transactions contemplated hereby or have a Material Adverse Effect.
Section 3.04. BOARD RECOMMENDATION. The Board has approved and adopted
this Agreement, the Merger and the other transactions contemplated hereby,
determined that the consideration to be received by the holders of shares of
Common Stock pursuant to the Merger is fair to the holders of such Shares and
recommended that the holders of such Shares approve and adopt this Agreement,
the Merger and the other transactions contemplated hereby.
Section 3.05. STATE ANTITAKEOVER STATUTES. The Company or the Board, as
applicable, has granted all approvals and taken all other steps necessary to
exempt the Merger and the other transactions contemplated hereby from the
requirements and provisions of Section 203 of the Delaware Act and any other
state antitakeover statute or regulation such that none of the provisions of
such Section 203 or any other "business combination," "moratorium," "control
share," or other state antitakeover statute or regulation (x) prohibits or
restricts the Company's ability to perform its obligations under this Agreement
or its ability to consummate the Merger and the other transac-
<PAGE>
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tions contemplated hereby, (y) would have the effect of invalidating or voiding
this Agreement, or (z) would subject Parent or Newco to any material impediment
or condition in connection with the exercise of any of their respective rights
under this Agreement.
Section 3.06. FAIRNESS OPINION. The Company has received the opinion of
the Financial Adviser to the effect that as of the date hereof the cash
consideration to be received by the stockholders of the Company pursuant to the
Merger is fair, from a financial point of view, to such stockholders.
Section 3.07. PROXY STATEMENT. The Proxy Statement will comply as to form
in all material respects with applicable federal securities laws, except that no
representation is made by the Company with respect to information supplied by
Newco or Parent for inclusion in the Proxy Statement. The information supplied
by the Company in writing for inclusion in the Proxy Statement will not, at the
respective times that the Proxy Statement or any amendments or supplements
thereto are filed with the SEC and are first published or sent or given to
holders of Shares, contain any statement which, at the time and in the light of
the circumstances under which it is made, is false or misleading with respect to
any material fact, or which omits to state any material fact necessary in order
to make the statements therein not false or misleading or necessary to correct
any statement in any earlier Proxy Statement which has become false or
misleading.
Section 3.08. FINDERS OR BROKERS. Except for the Financial Adviser, the
Company has not employed any investment banker, broker, finder or intermediary
in connection with the transactions contemplated hereby who might be entitled to
a fee or any commission the receipt of which is conditioned upon consummation of
the Merger or the Asset Sale. The Company has heretofore furnished to Parent a
complete and correct copy of all agreements between the Company and the
Financial Adviser pursuant to which such firm would be entitled to any payment
relating to the transactions contemplated hereby.
Section 3.09. SEC FILINGS. (a) The Company has filed with the SEC all
required forms, reports and documents required to be filed by it with the SEC
since December 31, 1995 (collectively, the "Company SEC Reports"), all of which
complied as to form when filed in all material respects with the applicable
provisions of the Securities Act and the Exchange Act, as the case may be. None
of the Company SEC Reports (including all exhibits and schedules thereto and
documents in-
<PAGE>
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corporated by reference therein) contained when filed or (except to the extent
revised or superseded by a subsequent filing with the SEC) contains any untrue
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(b) The Company will deliver to Parent as soon as they become available
true and complete copies of any report or statement mailed by it to its
securityholders generally or filed by it with the SEC, in each case subsequent
to the date hereof and prior to the Effective Time. As of their respective
dates, such reports and statements (excluding any information therein provided
by Parent or Newco, as to which the Company makes no representation) will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading and will
comply in all material respects with all applicable requirements of law. The
audited financial statements and unaudited interim financial statements of the
Company to be included or incorporated by reference in such reports and
statements will be prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis throughout the periods
involved and will fairly present the financial position of the Company as of the
dates thereof and the results of operations and cash flow for the periods then
ended (subject, in the case of any unaudited interim financial statements, to
normal year-end adjustments and to the extent they may not include footnotes or
may be condensed or summary statements).
Section 3.10. FINANCIAL STATEMENTS. The audited financial statements and
unaudited interim financial statements of the Company included or incorporated
by reference in the Company's forms, reports and documents filed with the SEC
since December 31, 1995 have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved, and fairly present the financial position of the
Company as of the dates thereof and the results of operations and cash flows for
the periods then ended (subject, in the case of any unaudited interim financial
statements, to normal year-end adjustments and to the extent they may not
include footnotes or may be condensed or summary statements) and such audited
financial statements have been certified as such (without exception) by the
Company's independent auditors.
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Section 3.11. ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no
liabilities or obligations of any nature, whether absolute, accrued, unmatured,
contingent or otherwise, or any unsatisfied judgments or any leases of
personalty or realty or unusual or extraordinary commitments, except the
liabilities recorded on the balance sheet of the Company at December 31, 1996
and the notes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1996, and except for liabilities or obligations
incurred in the ordinary course of business and consistent with past practice
since December 31, 1996 and those that would not individually or in the
aggregate have a Material Adverse Effect.
Section 3.12. ABSENCE OF CHANGES OR EVENTS. Since December 31, 1996:
(a) there has not been any direct or indirect redemption, purchase or
other acquisition of any shares of capital stock of the Company, or any
declaration, setting aside or payment of any dividend or other distribution
by the Company in respect of its capital stock, other than the payment made
by the Company with respect to 500,000 shares of Common Stock put to the
Company by Valcheck Company on June 30, 1997;
(b) except in the ordinary course of business and consistent with
past practice, the Company has not incurred any indebtedness for borrowed
money, or assumed, guaranteed, endorsed or otherwise as an accommodation
become responsible for the obligations of any other individual, firm or
corporation, made any loans or advances to any other individual, firm or
corporation or entered into any commitment or transaction material to the
Company taken as a whole;
(c) there has not been any material change in the accounting methods,
principles or practices of the Company;
(d) there has not been any damage, destruction or loss, whether or
not covered by insurance, except for such as would not, individually or in
the aggregate, have a Material Adverse Effect;
(e) there has been no change in the business, operations, assets or
financial condition of the Company that has had or will have a Material
Adverse Effect;
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(f) there has not been any revaluation by the Company of any of its
material assets, including but not limited to writing down the value of
inventory or writing off notes or accounts receivable, in any case, other
than in the ordinary course of business and in connection with the
revaluation of certain fixed assets as set forth in the Disclosure
Statement;
(g) there has not been any increase in or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including without limitation the granting of stock
options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan or agreement or
arrangement, or any other increase in the compensation payable or to become
payable to any present or former directors, officers or key employees of
the Company, except for increases in base compensation in the ordinary
course of business consistent with past practice, or any employment,
consulting or severance agreement or arrangement entered into with any such
present or former directors, officers or key employees; or
(h) there has not been any agreement by the Company to (i) do any of
the things described in the preceding clauses (a) through (g) other than as
expressly contemplated or provided for in this Agreement or (ii) take,
whether in writing or otherwise, any action which, if taken prior to the
date of this Agreement, would have made any representation or warranty in
this Article III untrue or incorrect.
Section 3.13. CAPITALIZATION. The authorized capital stock of the Company
consists of 10,000,000 shares of Common Stock. As of the date hereof, there are
6,538,802 shares of Common Stock outstanding of which 695,396 shares of Common
Stock held in the Company's treasury. As of the date hereof, no shares of
Common Stock were reserved for issuance upon the exercise of outstanding options
and options which may be granted under the Stock Plans of the Company, all of
which options and plans are listed and described in Schedule 3.13 hereto (the
"Common Stock Equivalents"), and the number of shares issuable upon exercise of
all such options is as previously disclosed to Parent by the Company. Except as
set forth above and except for the Common Stock Equivalents there are not
outstanding any shares of capital stock or other voting securities, any existing
options, warrants, calls, subscriptions, or other rights or other agreements or
commitments obligating the
<PAGE>
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Company to issue, transfer or sell any shares of capital stock or voting
securities of the Company or any other securities convertible into or
exchangeable for or evidencing the right to subscribe for any such shares.
There are no outstanding stock appreciation rights with respect to the capital
stock of the Company. All issued and outstanding shares of Common Stock are
duly authorized and validly issued, fully paid, nonassessable and free of
preemptive rights with respect thereto. The Company has no subsidiaries. There
are no outstanding obligations of the Company to repurchase, redeem or otherwise
acquire any shares of capital stock. The Company does not own, directly or
indirectly, any capital stock or other ownership interest in any corporation,
partnership, joint venture, limited liability company or other entity which is
material to the business of the Company.
Section 3.14. LITIGATION. There is no (i) claim, action, suit,
investigation or proceeding pending or, to the knowledge of the Company,
threatened against or relating to the Company before any court or governmental
or regulatory authority or body or arbitration tribunal, or (ii) outstanding
judgment, order, writ, injunction or decree, or application, request or motion
therefor, of any court, governmental agency or arbitration tribunal in a
proceeding to which the Company or any of its assets was or is a party except,
in the case of clauses (i) and (ii) above, such as would not, individually or in
the aggregate, either prevent or materially delay the Company's ability to
consummate the Merger or the other transactions contemplated hereby or have a
Material Adverse Effect.
Section 3.15. INSURANCE. Schedule 3.15 hereto lists all material
insurance policies in force on the date hereof covering the businesses,
properties and assets of the Company and all claims against such policies. All
such policies are currently in effect and true and complete copies of all such
policies have been delivered to Parent. The Company has not received notice of
the cancellation of any of such insurance in effect on the date of this
Agreement. As of the date hereof, there are no material claims by the Company
under any such policy or instrument as to which any insurance company is denying
liability or defending under a reservation of rights clause. To the Company's
best knowledge, all necessary notifications of claims have been made to
insurance carriers other than those which would not have a Material Adverse
Effect.
Section 3.16. COMPLIANCE WITH LAW. The Company has not violated or failed
to comply with any statute, law, ordinance, regulation, rule or order of any
foreign, federal, state
<PAGE>
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or local government or any other governmental department or agency, or any
judgment, decree or order of any court, applicable to its business or operations
except where any such violation or failure to comply would not, individually or
in the aggregate, have a Material Adverse Effect. The Company has all permits,
licenses and franchises from governmental agencies required to conduct its
businesses as now being conducted, except for such permits, licenses and
franchises the absence of which would not, individually or in the aggregate,
have a Material Adverse Effect or prevent or materially delay the consummation
of the Merger.
Section 3.17. EMPLOYEE BENEFITS. (a) Schedule 3.17 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"), including, without limitation, multiemployer plans within the meaning
of ERISA section 3(37)), stock purchase, stock option, severance, employment,
change-in-control, fringe benefit, collective bargaining, bonus, incentive,
deferred compensation and all other employee benefit plans, agreements,
programs, policies or other arrangements, whether or not subject to ERISA, under
which any employee or former employee of the Company has any present or future
right to benefits or under which the Company has any present or future material
liability, other than any such plan or plans that, individually or in the
aggregate, do not provide for any payment or payments or unrecorded liabilities
in excess of $50,000.
(b) With respect to each Company Plan, the Company has delivered or made
available to Parent a current, accurate and complete copy (or, to the extent no
such copy exists, an accurate description) thereof and, to the extent
applicable: (i) any related trust agreement or other funding instrument; (ii)
the most recent determination letter, if applicable; (iii) any summary plan
description for 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) Except to the extent not reasonably expected to have a Material
Adverse Effect: (i) each Company Plan has been established and administered 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,
<PAGE>
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whether by action or failure to act, that could reasonably be expected to cause
the loss of such qualification; (iii) no event has occurred and no condition
exists that would subject the Company to any material tax, fine, lien, penalty
or other liability imposed by ERISA, the Code or other applicable laws, rules
and regulations; (iv) for each Company Plan with respect to which a Form 5500
has been filed, no material change has occurred with respect to the matters
covered by the most recent Form since the date thereof; and (v) no "reportable
event" (as such term is defined in ERISA section 4043), "prohibited transaction"
(as such term is defined in ERISA section 406 and Code section 4975) 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 within the last five years for which has resulted or is reasonably
likely to result in any material liability that remains unsatisfied;
(d) Except as set forth in the Disclosure Statement, with respect to each
of the Company Plans that is not a multiemployer plan within the meaning of
section 4001(a)(3) of ERISA but is subject to Title IV of ERISA, as of the
Closing Date, the assets of each such Company Plan are at least equal in value
to the present value of the accrued benefits (vested and unvested) of the
participants in such Company Plan on a termination and projected benefit
obligation basis, based on the actuarial methods and assumptions indicated in
the most recent actuarial valuation reports;
(e) Except to the extent not reasonably expected to have a Material
Adverse Effect: with respect to any Company Plan, (i) no actions, suits or
claims (other than routine claims for benefits in the ordinary course) are
pending or threatened, (ii) no facts or circumstances exist that could give rise
to any such actions, suits or claims, and (iii) no written or oral communication
has been received from the PBGC in respect of any Company Plan subject to Title
IV of ERISA concerning the funded status of any such plan or any transfer of
assets and liabilities from any such plan in connection with the transactions
contemplated herein; and
(f) Except as set forth in the Disclosure Statement, no Company Plan
exists that could result in the payment to any present or former employee of the
Company of any money or other property or accelerate or provide any other rights
or benefits to any present or former employee of the Company as a result of the
transaction contemplated by this Agreement, whether or not such payment would
constitute a parachute payment within the
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meaning of Code section 280G and whether or not some other future event is
required to trigger payment or otherwise result in liability to the Company.
Section 3.18. TAXES. Except as set forth in the Disclosure Statement, the
Company and any consolidated, combined, unitary or aggregate group for tax
purposes of which the Company or any former subsidiary is or was a member has
(x) timely filed (or there have been filed on its behalf) with the appropriate
governmental authorities all Tax Returns (as hereinafter defined) required to be
filed by it on or prior to the date hereof, and (y) duly paid in full or made
provision in accordance with United States GAAP (or there has been paid or
provision has been made on its behalf) for the payment of all Taxes (as
hereinafter defined) for all periods ending through the date hereof, except for
any such filings or payments which would not, individually or in the aggregate
have a Material Adverse Effect.
"Taxes" shall mean any and all taxes, charges, fees, levies or other
assessments, including, without limitation, income, gross receipts, excise, real
or personal property, sales, withholding, social security, occupation, use,
service, service use, license, net worth, payroll, franchise, transfer and
recording taxes, fee and charges, imposed by the Service or any taxing authority
(whether domestic or foreign including, without limitation, any state, county,
local or foreign government or any subdivision or taxing agency thereof
(including a United States possession)), whether computed on a separate,
consolidated, unitary, combined or any other basis; and such term shall include
any interest whether paid or received, fines, penalties or additional amounts
attributable to, or imposed upon, or with respect to, any such taxes, charges,
fees, levies or other assessments. "Tax Return" shall mean any report, return,
document, declaration or other information or filing required to be supplied to
any taxing authority or Jurisdiction (foreign or domestic) with respect to
Taxes, including, without limitation, information returns, any documents with
respect to or accompanying payments of estimated Taxes, or with respect to or
accompanying requests for the extension of time in which to file any such
report, return, document declaration or other information.
Section 3.19. CONTRACTS. Each note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which the
Company is a party or by which any of it or any of its properties or assets may
be bound (collectively, the "Contracts") is legally valid and binding
<PAGE>
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against the Company and, to the Company's best knowledge, each other party
thereto and in full force and effect, except where failure to be legally valid
and binding and in full force and effect would not, individually or in the
aggregate, have a Material Adverse Effect, and there are not defaults thereunder
by the Company and, to the Company's best knowledge, any other party thereto,
except those defaults that would not have a Material Adverse Effect on the
Company. The Company has previously made available for inspection by Newco or
its representatives all material Contracts listed on Schedule 3.19.
Section 3.20. RELATED PARTY TRANSACTIONS. Except as set forth in the
Disclosure Statement or in the Company SEC Documents, no director, officer,
partner, employee, "affiliate" or "associate" (as such terms are defined in Rule
12b-2 under the Exchange Act) of the Company has borrowed money from or has
outstanding any indebtedness or other similar obligations to the Company.
Section 3.21. REAL PROPERTY. The Company has sufficient title or leaseholds to
real property to conduct its business as currently conducted with only such
exceptions as individually or in the aggregate would not have a Material Adverse
Effect.
Section 3.22. ENVIRONMENTAL MATTERS. Except as would not result in a
Material Adverse Effect, and except as disclosed in the Disclosure Statement:
(i) The Company holds all Environmental Permits (as defined below),
and the Company is in compliance with all Environmental Laws;
(ii) As of the date hereof, there are no Environmental Claims (as
defined below) pending or, to the knowledge of the Company, threatened
against the Company;
(iii) The Company is not a party to any consent decree, order or
agreement which requires performance of any response or corrective action
to address any Hazardous Material or any violation of Environmental Law;
(iv) To the knowledge of the Company, there are no (A) underground
storage tanks, (b) polychlorinated biphenyls, (C) friable asbestos or
asbestos-containing materials, (D) sumps, (E) surface impoundments, (F)
landfills, or (G) sewers or septic systems present at any facility
currently owned or leased by the Company that is expected
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to give rise to liability of the Company under any Environmental Laws;
(v) To the knowledge of the Company, there are no events or
conditions, including without limitation the release, threatened release,
emission, discharge, generation, treatment, storage or disposal of
Hazardous Materials (as defined below), that would reasonably be expected
to give rise to liability of the Company under any Environmental Laws;
(vi) The Company has not assumed by contract any liabilities or
obligations under any Environmental Laws; and
(vii) For purposes of this Agreement, the following terms shall have
the following meanings:
"ENVIRONMENTAL CLAIM" means any written notice, claim, demand,
suit, complaint, proceeding or other communication by any person
alleging liability or potential liability (including without
limitation liability or potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resource damages,
property damage, personal injury, fines or penalties) under any
Environmental Laws, including without limitation any liability
resulting from the presence, discharge, emission, release or
threatened release of any Hazardous Materials at any location, whether
or not owned, leased or operated by the Company.
"ENVIRONMENTAL LAWS" means all applicable foreign, federal, state
and local statutes, rules, regulations, ordinances, common law, orders
and decrees relating in any manner to pollution or protection of the
environment, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the
Solid Waste Disposal Act, the Clean Air Act, the Clean Water Act, the
Toxic Substances Control Act, the Emergency Planning and
Community-Right-to-Know Act, the Occupational Safety and Health Act
and the Safe Drinking Water Act, all as amended.
"ENVIRONMENTAL PERMITS" means all permits, licenses,
registrations and other governmental authorizations required under
Environmental Laws for the Company to conduct its operations and
businesses.
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"HAZARDOUS MATERIALS" means all hazardous or toxic substances,
wastes, materials or chemicals, petroleum (including crude oil or any
fraction thereof) and petroleum products, asbestos and
asbestos-containing materials, pollutants, contaminants and all other
materials and substances regulated by any Environmental Law.
Section 3.23. INTELLECTUAL PROPERTY. Schedule 3.23 sets forth a list
of all material registered and material unregistered Intellectual Property (as
defined below) owned by the Company and used in the conduct of its business and
all agreements granting any right to use or practice any right relating to the
Intellectual Property currently used in the conduct of the Company's business
(the "Licenses") as of the date hereof. Except as set forth in the Disclosure
Statement (i) the Company is the sole owner of all of its rights under the
Licenses free and clear of any liens, claims, encumbrances or interests; (ii)
the Company is the sole owner of, or has a valid right to use pursuant to a
License, all patents and patent applications, registered and unregistered
trademarks, service marks, trade names, trade dress, logos, company names and
other source or business identifiers, including all goodwill associated
therewith, the names, likenesses and other attributes of individuals, registered
and unregistered copyrights, computer programs and databases, trade secrets,
proprietary technology, know-how, industrial designs and other confidential
information and any pending applications for any of the foregoing (collectively,
the "Intellectual Property") currently used in the conduct of the Company's
business, free and clear of any liens, claims, encumbrances or interests; (iii)
to the Company's best knowledge, the present operations of the Company do not,
and its past operations did not, infringe upon, violate, interfere or conflict
with the rights of others with respect to any Intellectual Property, and no
claim is pending or, to the Company's best knowledge, threatened, to this
effect; (iv) to the Company's best knowledge, none of the Intellectual Property
is invalid or unenforceable, or has not been used or enforced or has failed to
be used or enforced in a manner that would result in the abandonment,
cancellation or unenforceability of any of the Intellectual Property and no
claim is pending or, to the Company's best knowledge, threatened, to this
effect; (v) no License provision or any other contract, agreement or
understanding to which the Company is a party would prevent the continued use by
the Company (as currently used by the Company) of any Intellectual Property
following the consummation of the transactions contemplated hereby; (vi) to the
Company's best knowledge, no person is infringing upon or otherwise violating
<PAGE>
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any Intellectual Property or License; and (vii) there are no claims pending or,
to the Company's best knowledge, threatened in connection with any License, in
all cases in clauses (i) through (vii) of this Section 3.23 with only such
exceptions as would not, individually or in the aggregate, have a Material
Adverse Effect.
ARTICLE IV
COVENANTS
Section 4.01. CONDUCT OF BUSINESS OF THE COMPANY. Except as set forth in
the Disclosure Statement and as expressly agreed to in writing by Parent, during
the period from the date of this Agreement to the Effective Time, the Company
will conduct its operations according to its ordinary and usual course of
business consistent with past practice, and will use all commercially reasonable
efforts to preserve intact its business organization, to keep available the
services of its officers and employees and to maintain satisfactory
relationships with suppliers, distributors, customers and others having business
relationships with it and will take no action which would adversely affect its
ability to consummate the Merger or the other transactions contemplated hereby.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in this Agreement or the Asset Purchase Agreement, prior to
the Effective Time, the Company will not, without the prior written consent of
Parent and except as disclosed in the Disclosure Statement:
(a) amend its Restated Certificate of Incorporation (or other
applicable charter document) or By-Laws;
(b) authorize for issuance, issue, sell, deliver, grant any options
for, or otherwise agree or commit to issue, sell or deliver any shares of
any class of capital stock of the Company or any securities convertible
into or exchangeable or exercisable for shares of any class of capital
stock or any other ownership interest (including, but not limited to, stock
appreciation rights or phantom stock) of the Company, other than pursuant
to and in accordance with the terms of the Common Stock Equivalents
outstanding on the date hereof and listed on Schedule 3.13;
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(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock or purchase, redeem or otherwise acquire any shares of its
own capital stock;
(d) (i) create, incur, assume, maintain or permit to exist any
long-term debt or any short-term debt for borrowed money other than under
existing lines of credit and except for short-term debt incurred in the
ordinary course of business and consistent with past practice; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
person; or (iii) make any loans, advances or capital contributions to, or
investments in, any other person in excess of $50,000 in the aggregate
(other than investments in marketable securities made in the ordinary
course of business of the Company and consistent with past practice);
(e) except as may be required by law, enter into, adopt or amend or
terminate any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, performance unit,
stock equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement,
trust, plan, fund or other arrangement for the benefit or welfare of any
current or former director, officer or employee in any manner, or (except
for normal increases in salary or wages of employees who are not officers
of the Company in the ordinary course of business consistent with past
practice that, in the aggregate, do not result in a material increase in
benefits or compensation expense to the Company, and as required under
existing agreements) increase in any manner the compensation or fringe
benefits of any current or former director, officer or employee or grant
any severance or termination pay or pay any benefit not required by any
plan, agreement, trust, fund, policy and arrangement as in effect as of the
date hereof;
(f) except for sales of inventory in the ordinary course of business
and consistent with past practice, sell, transfer, lease or otherwise
dispose of, or encumber, or agree to sell, transfer, lease, or otherwise
dispose of or encumber, any assets, properties, real, personal or mixed not
in excess of $50,000 individually;
<PAGE>
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(g) enter into any agreements, commitments or contracts, except
agreements, commitments or contracts either (i) for the purchase, sale or
lease of goods or services in the ordinary course of business and
consistent with past practice or (ii) which do not, individually, relate to
the making of payments or the provision of services for consideration in
excess of $50,000 over the term of any such agreement, commitment or
contract;
(h) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into any agreement in principle
or an agreement with respect to, any plan of liquidation or dissolution,
any acquisition (by merger, consolidation or acquisition of assets or
securities or any disposition of any assets or securities) of any
corporation, partnership or other business organization or division thereof
or any change in its capitalization, or any entry into a material contract
or any amendment or modification of any material contract or any release or
relinquishment of any material contract rights not in the ordinary course
of business and consistent with past practice or modify or amend the
contracts between the parties referred to in paragraph 15 of the Disclosure
Letter;
(i) except as previously approved by the Board of Directors of the
Company prior to the date hereof and as identified to Parent prior to the
date hereof, authorize or commit to make capital expenditures in any
calendar month in excess of $100,000; PROVIDED, HOWEVER, that amounts not
authorized or committed in any calendar month may be carried forward to
future calendar months;
(j) permit any material insurance policy naming the Company as a
beneficiary or a loss payee to be cancelled, terminated or materially
altered;
(k) maintain its books and records in a manner not in the ordinary
course of business and consistent with past practice;
(l) enter into any hedging, option, derivative or other similar
transaction;
(m) change any assumption underlying, or method of calculating, any
bad debt, contingency, provision or other reserve;
<PAGE>
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(n) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, contingent or otherwise), other than the payment,
discharge or satisfaction of liabilities in the ordinary course of business
and consistent with past practice;
(o) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
practices or principles used by it;
(p) make any material tax election or settle or compromise any
material federal, state, local or foreign tax liability;
(q) settle or compromise any pending or threatened suit, action or
claim which is material;
(r) collect receivables or pay payables or purchase inventory or make
shipments to customers, other than in the ordinary course of business
consistent with past practice;
(s) modify the amount spent on advertising for the Company as a whole
and the allocation between each of the check business and the P&C Business
from the schedule related thereto previously delivered by the Company to
Parent; or
(t) agree to do any of the foregoing or any action which would make
any of the representations or warranties of the Company contained in this
Agreement untrue and incorrect as of the date when made if such action had
then been taken.
Section 4.02. OTHER POTENTIAL BIDDERS. (a) The Company, its
affiliates and their respective officers, directors, employees, representatives
and agents shall immediately cease any existing discussions or negotiations, if
any, with any parties conducted heretofore with respect to any acquisition or
exchange of all or any material portion of the assets of, or any equity interest
in, the Company or any business combination with the Company other than a sale
of assets and assumption of liabilities pursuant to the Asset Purchase
Agreement. The Company may, directly or indirectly, furnish information and
access, in each case only in response to unsolicited requests therefor made
after the date hereof, to any corporation, partnership, person or other entity
or group pursuant to
<PAGE>
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confidentiality agreements, and may participate in discussions and negotiate
with such entity or group concerning any merger, sale of assets, sale of shares
of capital stock or similar transaction involving the Company or any division of
the Company, if such entity or group has submitted a bona fide written proposal
to the Board relating to any such transaction and the Board by a majority vote
determines in its good faith judgment, based upon the written advice of outside
counsel, that failing to take such action would constitute a breach of the
Board's fiduciary duty under applicable law; PROVIDED, HOWEVER, that the Company
may furnish information and access, and participate in discussing and negotiate,
with respect to a sale of assets and assumption of liabilities pursuant to the
Asset Purchase Agreement. The Board shall notify Parent immediately if any such
proposal is made and shall in such notice indicate in reasonable detail the
identity of the offeror and the terms and conditions of any proposal and shall
keep Parent promptly advised of all material developments in connection
therewith. Except as set forth above, neither the Company or any of its
affiliates, nor any of its or their respective officers, directors, employees,
representatives or agents shall, directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, or provide any
information to, any corporation, partnership, person or other entity or group
(other than Parent and Newco, any affiliate or associate of Parent and Newco or
any designee of Parent and Newco) concerning any merger, sale of assets, sale of
shares of capital stock or similar transactions involving the Company or any
division of the Company (other than with respect to the assets and liabilities
to be transferred pursuant to the Asset Purchase Agreement), PROVIDED, HOWEVER,
that nothing herein shall prevent the Board from taking, and disclosing to the
Company's stockholders, a position contemplated by Rules 14D-9 and 14e-2
promulgated under the Exchange Act with regard to any tender offer, PROVIDED,
FURTHER, that the Board shall not recommend that the stockholders of the Company
tender their Shares in connection with any such tender offer unless the Board by
a majority vote determines in its good faith judgment that, based upon the
written advice of outside counsel, failing to take such action would constitute
a breach of the Board's fiduciary duty under applicable law.
(b) Notwithstanding anything in this Agreement to the contrary, no action
taken by the Board, based upon the written advice of outside counsel, in the
exercise of its fiduciary duties, shall constitute a breach of any provision of
this Agreement.
<PAGE>
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Section 4.03. ACCESS TO INFORMATION. (a) From the date of this Agreement
until the Effective Time, the Company will give Parent and Newco and their
authorized representatives (including counsel, environmental and other
consultants, accountants, auditors, and intellectual property counsel and
agents) full access during normal business hours to all facilities, personnel
and operations and to all books and records of the Company, will permit Parent
and Newco to make such inspections as they may reasonably require and will cause
its officers to furnish Parent with such financial and operating data and other
information with respect to the businesses and properties of the Company as
Parent may from time to time reasonably request.
(b) Parent will permit the Company and its agents, including its counsel
and auditors, to have access to Parent's books and records and personnel for the
purpose of conducting customary due diligence regarding the accuracy of the
Parent SEC Documents.
(c) Each of Parent and Newco will hold and will cause their respective
authorized representatives, including consultants and advisors, to hold in
strict confidence pursuant to the Confidentiality Agreement dated October 21,
1996 between Parent and the Company (the "Confidentiality Agreement") all
documents and information concerning the Company furnished to Parent or Newco in
connection with the transactions contemplated by this Agreement. The Company
will hold and will cause its respective authorized representatives, including
consultants and advisers, to hold in strict confidence pursuant to the
Confidentiality Agreement all documents and information concerning the Parent
and Newco furnished to the Company in connection with the transactions
contemplated by this Agreement.
Section 4.04. COMMERCIALLY REASONABLE EFFORTS; OTHER ACTIONS. Subject to
the terms and conditions herein provided, Parent, Newco and the Company shall
use all commercially reasonable efforts to take, or cause to be taken, all other
actions and do, or cause to be done, all other things necessary, proper or
appropriate under applicable laws and regulations to consummate and make
effective as soon as practicable the transactions contemplated by this
Agreement, including, without limitation, (i) the filing of Notification and
Report Forms under the HSR Act with the Federal Trade Commission (the "FTC") and
the Antitrust Division of the Department of Justice (the "Antitrust Division")
and using all commercially reasonable efforts to respond as promptly as
practicable to all inquiries received from the FTC or the Antitrust Division for
additional
<PAGE>
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information or documentation, (ii) the obtaining of all necessary consents,
approvals or waivers, and (iii) the lifting of any legal bar to the Merger.
Parent shall cause Newco to perform all of its obligations under this Agreement
and shall not take any action which would cause the Company to fail to perform
its obligations hereunder. The Company shall not take any action which would
cause Parent or Newco to fail to perform its obligations hereunder.
Section 4.05. PUBLIC ANNOUNCEMENTS. Before issuing any press release or
otherwise making any public statement with respect to the Merger or any of the
other transactions contemplated hereby, Parent, Newco and the Company will
consult with, and obtain the consent of, which consent shall not be unreasonably
withheld, each other as to its form and substance and shall not issue any such
press release or make any such public statement prior to obtaining such consent,
except as may be required by law or any listing agreement with its securities
exchange.
Section 4.06. NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Parent of any notice of, or other communication relating to, a
default or event which, with notice or lapse of time or both, would become a
default, received by the Company subsequent to the date of this Agreement and
prior to the Effective Time, under any contract material to the business,
operations, assets or financial condition of the Company to which the Company is
a party or is subject. Each of the Company and Parent shall give prompt notice
to the other party of (a) 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 Merger or other transactions contemplated hereby, (b) the
occurrence or existence of any event which would, or could with the passage of
time or otherwise, make any representation or warranty made by such party
contained herein untrue or (c) any failure of such party to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to
this Section 4.06 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
Section 4.07. INDEMNIFICATION. (a) For six years after the Effective
Time, Parent shall cause the Surviving Corporation to indemnify, defend and hold
harmless the present and former directors and officers of the Company,
determined as of the Effective Time, against all losses, claims, damages,
expenses or liabilities (collectively, "Costs") (but only to the
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extent such costs are not otherwise covered by insurance or are not promptly
paid by insurance) arising out of actions or omissions or alleged actions or
omissions occurring at or prior to the Effective Time to the extent permitted or
required under applicable law and the Company's Restated Certificate of
Incorporation and By-Laws in effect at the date hereof (to the extent consistent
with applicable law).
(b) For a period of three years after the Effective Time, the Surviving
Corporation shall use its best efforts to cause to be maintained in effect the
current policies of directors' and officers' liability insurance maintained by
the Company (provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous) with respect to claims arising from
facts or events which occurred before the Effective Time to the extent
available; PROVIDED, HOWEVER, that the Surviving Corporation shall not be
obligated to make annual premium payments for such insurance to the extent such
premiums exceed 150% of the annual premiums paid as of the date hereof by the
Company for such insurance (which the Company represents and warrants to be not
more than $60,000).
(c) Parent hereby agrees to guarantee each and every one of the
obligations of the Surviving Corporation set forth in Sections 4.07(a) and
4.07(b).
Section 4.08. EXPENSES. Except as set forth in Section 6.03, Parent and
Newco, on the one hand, and the Company, on the other hand, shall bear their
respective expenses incurred in connection with the Merger, including, without
limitation, the preparation, execution and performance of this Agreement and the
transactions contemplated hereby and all fees and expenses of investment
bankers, finders, brokers, agents, representatives, counsel and accountants.
Section 4.09. RESIGNATION OF DIRECTORS. Prior to the Effective Time, the
Company shall take all commercially reasonable efforts to deliver to Parent the
resignation of such directors of the Company as Parent shall specify, effective
at the Effective Time.
Section 4.10. ASSET PURCHASE AGREEMENT. (a) The Company shall not amend
the Asset Purchase Agreement or waive any of its rights thereunder without the
prior written consent of Parent.
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(b) The Company shall keep Parent reasonably informed of the status of the
financing related to the Asset Purchase Agreement.
ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF
PARENT, NEWCO AND THE COMPANY
Section 5.01. CONDITIONS TO OBLIGATIONS OF PARENT, NEWCO AND THE COMPANY.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of each of the following
conditions:
(a) this Agreement, the Asset Purchase Agreement, the Merger and the
transactions contemplated by the Asset Purchase Agreement shall have been
adopted by the affirmative vote of the stockholders of the Company by the
Requisite Vote;
(b) any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired; and
(c) there shall not have been any action taken, or any statute, rule,
regulation, judgment, decree, order or injunction proposed, sought,
promulgated, enacted, entered, enforced or deemed applicable to the Merger,
or any other action shall have been taken, proposed or threatened, by any
state or federal government or governmental authority or by any U.S. or
Canadian court, that presents substantial likelihood of prohibiting or
restricting consummation of the Merger.
Section 5.02. CONDITIONS TO OBLIGATIONS OF PARENT AND NEWCO. The
obligations of Parent and Newco to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of each of the following
conditions:
(a) there shall not have occurred any event or circumstances that has
had or is reasonably likely to have a Material Adverse Effect on the
Company;
(b) all representations and warranties of the Company under this
Agreement which are qualified as to materiality shall be true and correct
in all respects and all
<PAGE>
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representations and warranties of the Company under this Agreement that are
not qualified as to materiality shall be true and correct in all material
respects on and as of the Effective Time;
(c) the Company shall have performed in all material respects all
covenants and agreements required to be performed by it prior to the
Effective Time;
(d) Parent shall have received a certificate signed on behalf of the
Company by its chief executive officer to the effect set forth in clauses
(b) and (c) above; and
(e) all conditions under the Asset Purchase Agreement shall have been
satisfied or waived and the transactions contemplated thereby shall have
been consummated.
Section 5.03. CONDITIONS TO OBLIGATIONS OF COMPANY. The obligations of
the Company to effect the Merger shall be subject to the fulfillment at or prior
to the Effective Time of each of the following conditions:
(a) all representations and warranties of Parent and Newco under this
Agreement which are qualified as to materiality shall be true and correct
in all respects and all representations and warranties of Parent and Newco
under this Agreement that are not qualified as to materiality shall be true
and correct in all material respects on and as of the Effective Time.
(b) Parent and Newco shall have performed in all material respects
all covenants and agreements required to be performed by each of them prior
to the Effective Time.
ARTICLE VI
TERMINATION; AMENDMENT, WAIVER
Section 6.01. TERMINATION. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after stockholder approval thereof:
(a) by mutual written consent of Parent, Newco and the Company;
<PAGE>
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(b) by Parent and Newco or the Company if any court of competent
jurisdiction in the United States or Canada or other United States or
Canadian governmental body shall have issued a final order, injunction,
decree or ruling or taken any other final action restraining, enjoining or
otherwise prohibiting the Merger and such order, injunction, decree, ruling
or other action is or shall have become nonappealable; PROVIDED that the
right to terminate this Agreement pursuant to this Section 6.01(b) shall
not be available to any party which has not used its reasonable best
efforts to cause any such order, injunction, decree, ruling or other action
to be lifted;
(c) by either the Parent and Newco or the Company if the stockholders
of the Company fail to adopt and approve this Agreement, the Asset Purchase
Agreement, the Merger and the transactions contemplated by this Agreement
and the Asset Purchase Agreement at the Special Meeting and any adjournment
thereof, by the Requisite Vote;
(d) by the Company if a corporation, partnership, person or other
entity or group shall have made a bona fide offer not solicited in
violation of Section 4.02 that the Board by a majority vote determines in
its good faith judgment and in the exercise of its fiduciary duties (i),
based upon the advice of the Financial Advisor, is more favorable to the
Company's stockholders than the Merger and (ii), based upon the written
advice of outside counsel, must not make or must withdraw or modify its
recommendation of the Merger in order to avoid breaching its fiduciary
duties under applicable law; PROVIDED, HOWEVER, that such termination under
this clause shall not be effective (i) unless Parent or Newco does not,
within 5 business days of receipt of the Company's notification of its
intention to enter into a definitive agreement with respect to a superior
proposal, make an offer that the Board by a majority vote determines in its
good faith judgment and in the exercise of its fiduciary duties, based upon
the advice of the Financial Advisor, is at least as favorable to the
Company's stockholders as the superior proposal and (ii) until the Company
has made payment of the full fee and expense reimbursement required by
Section 6.03;
(e) by Parent and Newco, if (i) there shall have been a breach of any
representation or warranty on the part of the Company that is or will have
a Material Adverse Effect on the Company or which materially adversely
affects the ability of the Company to consummate the Merger, (ii) there
shall have been a breach of any covenant or agreement on the part of the
Company which is or will result in a Material Adverse Effect on the Company
or materially adversely
<PAGE>
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affects the ability of the Company to consummate the Merger, which shall
not have been cured prior to the earlier of (A) 10 days following notice of
such breach and (B) two business days prior to the Closing Date, (iii) the
Company shall engage in negotiations with any entity or group (other than
Parent or Newco) that has proposed a Third Party Acquisition (as defined
below), (iv) the Board (A) shall have withdrawn or modified in a manner
adverse to Newco its approval or recommendation of this Agreement or the
Merger or shall have recommended another offer or transaction or shall have
adopted any resolution to effect any of the foregoing or (B), in response
to any tender or exchange offer for more than 20% of the outstanding Common
Stock, shall not have recommended rejection of such tender offer or
exchange offer within the time periods specified by applicable law, or
shall have adopted any resolution to effect any of the foregoing; (v) the
existing Asset Purchase Agreement shall have become terminable by the
Company and the Company shall not have entered into a substitute Asset
Purchase Agreement with another party within 2 Business Days; or (vi) the
Company shall have failed to mail the Proxy Statement as promptly as
practicable after the clearance thereof by the SEC or the Company has
failed to include in the Proxy Statement the Board's recommendation of the
Merger;
(f) by the Company if (i) there shall have been a breach of any
representation or warranty on the part of Parent or Newco which materially
adversely affects (or materially delays) the consummation of the Merger or
(ii) there shall have been a material breach of any covenant or agreement
on the part of Parent or Newco and which materially adversely affects (or
materially delays) the consummation of the Merger which shall not have been
cured prior to the earliest of (A) 10 days following notice of such breach
and (B) two business days prior to the Closing Date; or
(g) by Parent and Newco or the Company if the Merger shall not have
been consummated on or before the date that is 5 months from the date of
this Agreement; provided that the right to terminate this Agreement
pursuant to this Section 6.01(g) shall not be available to any party which
<PAGE>
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has not used its reasonable best efforts to cause the Merger to be
consummated.
Section 6.02. EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 6.01, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party hereto or its affiliates, directors, officers or stockholders, other
than the provision of this Section 6.02 and Section 6.03 hereof. Nothing
contained in this Section 6.02 shall relieve any party from liability for any
breach of this Agreement.
Section 6.03. CERTAIN PAYMENTS. (a) In the event Parent and Newco
terminate this Agreement pursuant to Section 6.01(e)(i), (ii) or (v) hereof,
Parent and Newco would suffer direct and substantial damages, which damages
cannot be determined with reasonable certainty. To compensate Parent and Newco
for such damages, the Company shall pay to Parent, as liquidated damages
immediately upon such a termination, an amount equal to the reasonable,
documented out-of-pocket third party expenses of Parent and Newco incurred in
connection with the transactions contemplated hereby, not to exceed $600,000 in
the aggregate. It is specifically agreed that the amount to be paid pursuant to
this Section 6.03(a) represents liquidated damages and not a penalty.
(b) If
(i) Parent and Newco terminate this Agreement pursuant to Section
6.01(e)(vi) hereof and, within 18 months thereafter the Company enters into
an agreement with respect to a Third Party Acquisition, or a Third Party
Acquisition occurs, involving any party (or any affiliate thereof) (x) with
whom the Company (or its agents) had negotiations with a view to a Third
Party Acquisition, (y) to whom the Company (or its agents) furnished
information with a view to a Third Party Acquisition or (z) who had
submitted a proposal or expressed an interest in a Third Party Acquisition,
in the case of each of clauses (x), (y) and (z) after the date hereof and
prior to such termination; or
(ii) Parent and Newco terminate this Agreement pursuant to Section
6.01(e)(iii) or (vi), and within 18 months thereafter a Third Party
Acquisition shall occur involving a consideration for Shares (including the
value of any stub equity) in excess of the Merger Consideration; or
<PAGE>
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(iii) (A) the Company terminates this Agreement pursuant to 6.01(d)
hereof or (B) Parent and Newco or the Company terminate this Agreement
pursuant to Section 6.01(c) hereof or (C) Parent and Newco terminate this
Agreement pursuant to Section 6.01(e)(iv),
the Company shall pay to Parent and Newco either prior to termination in the
case of the event described in Section 6.03(iii)(A) or within one business day
following the execution and delivery of such agreement or such occurrence or
termination, as the case may be, in the case of the event described in Section
6.03(i), (ii), (iii)(B) or (iii)(C), a fee, in cash, of $1,300,000, plus
reasonable, documented out-of-pocket third party expenses of Parent and Newco
incurred in connection with the transactions contemplated hereby, PROVIDED,
HOWEVER, that the Company in no event shall be obligated to pay more than one
such $1,300,000 fee with respect to all such agreements and occurrences and such
termination.
"Third Party Acquisition" means the occurrence of any of the following
events (i) the acquisition of the Company by merger or otherwise by any person
(which includes a "person" as such term is defined in Section 13(d)(3) of the
Exchange Act) or entity other than Parent, Newco or any affiliate thereof (a
"Third Party"); (ii) the acquisition by a Third Party of more than 30% of the
total assets of the Company (other than pursuant to the Asset Purchase
Agreement); (iii) the acquisition by a Third Party of 30% of more of the
outstanding Shares; (iv) the adoption by the Company of a plan of liquidation or
the declaration or payment of an extraordinary dividend; or (v) the repurchase
by the Company or any of its subsidiaries of more than 20% of the outstanding
Shares, other than a repurchase which was not approved by the Company or
publicly announced prior to the termination of this Agreement and which is not
part of a series of transactions resulting in a change of control.
Section 6.04. AMENDMENT. This Agreement may be amended by action taken by
the Company, Parent and Newco at any time before or after approval of the Merger
by the stockholders of the Company (if required by applicable law) but, after
any such approval, no amendment shall be made which requires the approval of
such stockholders under applicable law without such approval. This Agreement
may not be amended except by an instrument in writing signed on behalf of the
parties hereto.
Section 6.05. EXTENSION; WAIVER. At any time prior to the Effective Time,
each party hereto may (i) extend the
<PAGE>
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time for the performance of any of the obligations or other acts of the other
party, (ii) waive any inaccuracies in the representations and warranties of
the other party contained herein or in any document, certificate or writing
delivered pursuant hereto or (iii) waive compliance by the other party with
any of the agreements or conditions contained herein. Any agreement on the
part of either party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
The failure of either party hereto to assert any of its rights hereunder
shall not constitute a waiver of such rights.
ARTICLE VII
DEFINITIONS
Section 7.01. TERMS DEFINED IN THIS AGREEMENT. The following capitalized
terms used herein shall have the meanings ascribed in the indicated sections.
Agreement. . . . . . . . . . . . . . . . . . First Paragraph
Antitrust Division . . . . . . . . . . . . . 4.04
Asset Purchase Agreement . . . . . . . . . . 1.07
Board. . . . . . . . . . . . . . . . . . . . Recitals
Certificates . . . . . . . . . . . . . . . . 1.11
Certificate of Merger. . . . . . . . . . . . 1.12
Closing. . . . . . . . . . . . . . . . . . . 1.05
Closing Date . . . . . . . . . . . . . . . . 1.05
Common Stock . . . . . . . . . . . . . . . . Recitals
Company. . . . . . . . . . . . . . . . . . . First Paragraph
Common Stock Equivalents . . . . . . . . . . 3.13
Company SEC Reports. . . . . . . . . . . . . 3.04
Contracts. . . . . . . . . . . . . . . . . . 3.19
Confidentiality Agreement. . . . . . . . . . 4.02
Delaware Act . . . . . . . . . . . . . . . . 1.01
Disclosure Statement . . . . . . . . . . . . Article III
Dissenting Shares. . . . . . . . . . . . . . 1.10
Effective Time . . . . . . . . . . . . . . . 1.02
ERISA. . . . . . . . . . . . . . . . . . . . 3.17
Exchange Act . . . . . . . . . . . . . . . . 3.03
Exchange Agent . . . . . . . . . . . . . . . 1.11
Exchange Fund. . . . . . . . . . . . . . . . 1.11
Financial Advisor. . . . . . . . . . . . . . 1.09
FTC. . . . . . . . . . . . . . . . . . . . . 4.04
HSR Act. . . . . . . . . . . . . . . . . . . 2.03
Intellectual Property. . . . . . . . . . . . 3.23
<PAGE>
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Licenses . . . . . . . . . . . . . . . . . . 3.23
Material Adverse Effect. . . . . . . . . . . 3.01
Merger . . . . . . . . . . . . . . . . . . . 1.01
Merger Consideration . . . . . . . . . . . . 2.07
Newco. . . . . . . . . . . . . . . . . . . . First Paragraph
Parent . . . . . . . . . . . . . . . . . . . First Paragraph
Proxy Statement. . . . . . . . . . . . . . . 1.09
SEC. . . . . . . . . . . . . . . . . . . . . 1.04
Securities Act . . . . . . . . . . . . . . . 2.03
Special Meeting. . . . . . . . . . . . . . . 1.09
Stock Plans. . . . . . . . . . . . . . . . . 1.08
Surviving Corporation. . . . . . . . . . . . 1.01
Tax Return . . . . . . . . . . . . . . . . . 3.18
Taxes. . . . . . . . . . . . . . . . . . . . 3.18
Third Party. . . . . . . . . . . . . . . . . 6.03
Third Party Acquisition. . . . . . . . . . . 6.03
ARTICLE VIII
MISCELLANEOUS
Section 8.01. WAIVER OF COMPLIANCE; CONSENTS. Any failure of Parent or
Newco, on the one hand, or the Company, on the other hand, to comply with any
obligation, covenant, agreement or condition herein may be waived by the Company
or Parent or Newco, respectively, only by a written instrument signed by the
party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
8.01.
Section 8.02. SURVIVABILITY; INVESTIGATIONS. The respective
representations and warranties of Parent, Newco and the Company contained herein
or in any certificates or other documents delivered prior to or at the Closing
shall not be deemed waived or otherwise affected by any investigation made by
any party hereto and shall not survive the Closing.
Section 8.03. NOTICES. All notices and other communications hereunder
shall be in writing and shall be delivered personally, by next-day courier or
mailed by registered or certified mail (return receipt requested), first class
postage
<PAGE>
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prepaid, or telecopied with written confirmation of receipt, to the parties at
the addresses specified below (or at such other address for a party as shall be
specified by like notice; provided, that notices of a change of address shall be
effective only upon receipt thereof). Any such notice shall be effective upon
receipt, if personally delivered or telecopied, one day after delivery to a
courier for next-day delivery, or three days after mailing, if deposited in the
U.S. mail, first class postage prepaid.
(a) if to the Company, to
One Kromer Center
P.O. Box 1999
Elmira, NY 14902-1999
Telephone: (607) 735-4500
Facsimile: (607) 733-5699
Attention: Stuart Komer
with a copy to
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Telephone: (212) 701-3000
Facsimile: (212) 269-5420
Attention: William B. Gannett, Esq.
(b) if to Parent, or Newco, to
45 Hazelton Avenue
Toronto, Ontario
Canada M5R 2E3
Telephone: (416) 960-9000
Attention: Miles S. Nadal
with a copy to
Marni J. Lerner, Esq.
Edward J. Chung, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Telephone: (212) 455-2000
Facsimile: (212) 455-2502
<PAGE>
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Section 8.04. ASSIGNMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
and all of the provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns, but
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto without the prior written consent
of the other parties, except that Parent and Newco may assign all or any of
their respective rights and obligations hereunder to any direct or indirect
wholly owned subsidiary or subsidiaries of Parent, PROVIDED that no such
assignment shall relieve the assigning party of its obligations hereunder if
such assignee does not perform such obligations. This Agreement is not intended
to confer any rights or remedies hereunder upon any other person except the
parties hereto and, with respect to Section 4.07, the officers and directors of
the Company.
Section 8.05. GOVERNING LAW. Except as the laws of the State of Delaware
are by their terms applicable, this Agreement shall be governed by the laws of
the State of New York (regardless of the laws that might otherwise govern under
applicable New York principles of conflicts of law) as to all matters, including
but not limited to matters of validity, construction, effect, performance and
remedies.
Section 8.06. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 8.07. SEVERABILITY. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect against a party hereto, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party and such invalidity, illegality or unenforceability shall only apply as to
such party in the specific jurisdiction where such judgment shall be made.
Section 8.08. INTERPRETATION. The article and section headings contained
in this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. As used in this Agreement, the term "person"
shall mean and include an individual, a partnership, a
<PAGE>
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joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
Section 8.09. ENTIRE AGREEMENT. This Agreement, including the exhibits
hereto and the documents and instruments referred to herein (including the
Confidentiality Agreement and Disclosure Statement), embodies the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and supersedes all prior agreements and the
understandings between the parties with respect to such subject matter. There
are no representations, promises, warranties, covenants, or undertakings, other
than those expressly set forth or referred to herein and therein.
<PAGE>
S-1
IN WITNESS WHEREOF, Parent, Newco and the Company have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
MDC COMMUNICATIONS CORPORATION
By: /s/ Miles S. Nadal
-------------------------------
Name: Miles S. Nadal
Title: President and Chief
Executive Officer
AGI ACQUISITION CO.
By: /s/ Peter Lewis
-------------------------------
Name: Peter Lewis
Title:
ARTISTIC GREETINGS INCORPORATED
By: /s/ Stuart Komer
-------------------------------
Name: Stuart Komer
Title: Chairman of the Board
<PAGE>
Exhibit (c)(2)
STOCKHOLDERS AGREEMENT dated as of December 21, 1997 among MDC
COMMUNICATIONS CORPORATION, an Ontario corporation ("PARENT"), and the
undersigned holders (each a "STOCKHOLDER" and, collectively, the "STOCKHOLDERS")
of shares of common stock, par value $.10 per share (the "COMMON STOCK"), of
ARTISTIC GREETINGS INCORPORATED, a Delaware corporation (the "COMPANY").
WHEREAS, Parent, AGI Acquisition Co., a Delaware corporation and a
wholly owned subsidiary of Parent ("SUB"), and the Company, propose to enter
into an Agreement and Plan of Merger dated as of the date hereof (as the same
may be amended or supplemented, the "MERGER AGREEMENT"; capitalized terms used
but not defined herein shall have the meanings set forth in the Merger
Agreement) providing for the merger of Sub with and into the Company (the
"MERGER"), upon the terms and subject to the conditions set forth in the Merger
Agreement;
WHEREAS, concurrently with the execution of the Merger Agreement, the
Company and Artistic Direct Incorporated, a New York corporation ("ADI"),
propose to enter into an Asset Purchase Agreement dated as of the date hereof
(as the same may be amended or supplemented and together with any other asset
purchase agreement substantially in the form thereof and providing for the
payment of cash consideration of at least $9 million, the "ASSET PURCHASE
AGREEMENT") providing for ADI to purchase certain of the assets, and assume
certain of the liabilities, of the Company (the "ASSET PURCHASE");
WHEREAS, each Stockholder owns the number of shares of Common Stock
set forth opposite its or his name on the signature page of this Agreement (such
shares of Common Stock, the "EXISTING SHARES" and, together with any other
shares of capital stock of the Company acquired by such Stockholder after the
date hereof and during the term of this Agreement, and other than 40,000 shares
of Common Stock which Mr. Komer has transferred, or may transfer, to one or more
charitable entities, being collectively referred to herein as the "SUBJECT
SHARES"); and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent has requested that each Stockholder enter into this Agreement;
<PAGE>
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NOW, THEREFORE, to induce Parent to enter into, and in consideration
of its entering into, the Merger Agreement, and in consideration of the premises
and the representations, warranties and agreements contained herein, the parties
agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. Each
Stockholder hereby, severally and not jointly, represents and warrants to Parent
as of the date hereof in respect of himself or itself as follows:
(a) AUTHORITY. The Stockholder has all requisite legal capacity,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly authorized,
executed and delivered by the Stockholder and constitutes a valid and
binding obligation of the Stockholder enforceable in accordance with its
terms. The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with
the terms hereof will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time or both) under any
provision of, any trust agreement, organizational documents, standstill
agreement, loan or credit agreement, note, bond, mortgage, indenture, lease
or other agreement, instrument, permit, concession, franchise, license,
judgment, order, notice, decree, statute, law, ordinance, rule or
regulation applicable to the Stockholder or to the Stockholder's property
or assets. If the Stockholder is married and the Stockholder's Subject
Shares constitute community property or otherwise need spousal or other
approval to be legal, valid and binding, this Agreement has been duly
authorized, executed and delivered by, and constitutes a valid and binding
agreement of, the Stockholder's spouse, enforceable against such spouse in
accordance with its terms. No trust of which such Stockholder is a trustee
requires the consent of any beneficiary to the execution and delivery of
this Agreement or to the consummation of the transactions contemplated
hereby.
(b) THE SUBJECT SHARES. Such Stockholder is the record holder or
beneficial owner of the number of the Existing Shares as is set forth
opposite such Stockholder's name on the signature page hereto. On the date
hereof, the Existing Shares set forth opposite such Stockholder's
<PAGE>
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name on the signature page hereto constitute all of the outstanding shares
of Common Stock owned of record or beneficially by such Stockholder. Such
Stockholder does not have record or beneficial ownership of any shares of
Common Stock not set forth on signature page hereto. Such Stockholder has
sole power of disposition with respect to all of the Existing Shares set
forth opposite such Stockholder's name on the signature page hereto and
sole voting power with respect to the matters set forth in Section 6 hereof
and sole power to demand dissenter's or appraisal rights, in each case with
respect to all of the Existing Shares set forth opposite such Stockholder's
name on the signature page hereto, with no restrictions on such rights,
subject to applicable federal securities laws and the terms of this
Agreement. Such Stockholder will have sole power of disposition with
respect to Subject Shares other than Existing Shares, if any, which become
beneficially owned by such Stockholder and will have sole voting power with
respect to the matters set forth in Section 3 hereof and sole power to
demand dissenter's or appraisal rights, in each case with respect to all
Subject Shares other than Existing Shares, if any, which become
beneficially owned by such Stockholder with no restrictions on such rights,
subject to applicable federal securities laws and the terms of this
Agreement.
(c) Such Stockholder's Subject Shares and the certificates
representing such Subject Shares are now and at all times during the term
hereof will be held by such Stockholder, or by a nominee or custodian for
the benefit of such Stockholder, free and clear of all liens, claims,
security interests, proxies, voting trusts or agreements, understandings or
arrangements or any other encumbrances whatsoever, except for any such
encumbrances or proxies arising hereunder.
(d) No broker, investment banker, financial adviser or other person
is entitled to any broker's, finder's, financial adviser's or other similar
fee or commission in connection with the transactions contemplated hereby
based upon arrangements made by or on behalf of such Stockholder in his or
her capacity as such.
(e) Such Stockholder understands and acknowledges that Parent and Sub
are entering into the Merger Agreement
<PAGE>
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in reliance upon such Stockholder's execution and delivery of this
Agreement with Parent.
2. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent hereby
represents and warrants to each Stockholder that Parent has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent, and the consummation of the transactions contemplated hereby, have
been duly authorized by all necessary corporate action on the part of Parent.
This Agreement has been duly executed and delivered by Parent and constitutes a
valid and binding obligation of Parent enforceable in accordance with its terms.
The execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby and compliance with the terms hereof will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time or both) under any provision of, the certificate of
incorporation or by-laws of Parent, any trust agreement, loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, notice,
decree, statute, law, ordinance, rule or regulation applicable to Parent or to
Parent's property or assets.
3. COVENANTS OF EACH STOCKHOLDER. From and after the date hereof
and until the termination of this Agreement in accordance with Section 8, each
Stockholder, severally and not jointly, agrees as follows:
(a) At any meeting of stockholders of the Company called to vote upon
the Merger, the Merger Agreement, the Asset Purchase or the Asset Purchase
Agreement or at any adjournment thereof or in any other circumstances upon
which a vote, consent or other approval with respect to the Merger, the
Merger Agreement, the Asset Purchase or the Asset Purchase Agreement is
sought, such Stockholder shall vote (or cause to be voted) the Subject
Shares in favor of the Merger and the Asset Purchase, the adoption by the
Company of the Merger Agreement and the Asset Purchase Agreement and the
approval of the terms thereof and each of the other transactions
contemplated by the Merger Agreement and the Asset Purchase Agreement.
<PAGE>
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(b) At any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which the
Stockholder's vote, consent or other approval is sought, the Stockholder
shall vote (or cause to be voted) the Subject Shares against (i) any merger
agreement or merger (other than the Merger Agreement and the Merger),
consolidation, combination, sale of a material amount of assets (other than
the Asset Purchase Agreement and the Asset Purchase), reorganization,
recapitalization, dissolution, liquidation or winding-up of or by the
Company or any other takeover proposal (collectively, "TAKEOVER PROPOSAL"),
(ii) any action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the
Company under the Merger Agreement, the Asset Purchase Agreement or this
Agreement or (iii) (x) any material amendment of the Company's certificate
of incorporation or by-laws, (y) any change in a majority of the persons
who constitute the Board of Directors of the Company or (z) any other
proposal or transaction involving the Company, which is intended or could
reasonably be expected to impede, frustrate, prevent, delay or nullify (A)
the ability of the Company to consummate the Merger or the Asset Purchase
or (B) any of the transactions contemplated by this Agreement, the Asset
Purchase Agreement or the Merger Agreement. The Stockholder further agrees
not to commit or agree to take any action inconsistent with the foregoing.
(c) Each Stockholder, severally and not jointly, agrees not to (i)
offer to sell, sell, transfer, encumber, pledge, assign or otherwise
dispose of (including by gift) (collectively, "TRANSFER"), or enter into
any contract, option or other arrangement with respect to or consent to the
Transfer of, the Subject Shares or any interest therein to any person other
than pursuant to the terms of the Merger, (ii) except as contemplated
hereby, grant any proxies or powers of attorney with respect to the Subject
Shares, deposit any Subject Shares into a voting trust or enter into any
voting arrangement with respect to the Subject Shares, or any interest in
the foregoing, except with Parent or Sub, (iii) take any action that would
make any representation or warranty of such Stockholder contained herein
untrue or incorrect or have the effect of preventing or disabling the
Stockholder from performing such
<PAGE>
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Stockholder's obligations under this Agreement or (iv) commit or agree to
take any of the foregoing actions.
(d) Each Stockholder hereby irrevocably waives any rights of
appraisal or rights to dissent from the Merger that the Stockholder may
have.
(e) Each Stockholder agrees with, and covenants to, Parent that the
Stockholder shall not request that the Company register the transfer
(book-entry or otherwise) of any certificate or uncertificated interest
representing any of the Subject Shares, unless such transfer is made in
compliance with this Agreement. In the event of a stock dividend or
distribution, or any change in the Common Stock by reason of any stock
dividend or distribution, or any change in the Common Stock by reason of
any stock dividend, split-up, recapitalization, combination, exchange of
shares or the like, the term "Subject Shares" shall be deemed to refer to
and include the Subject Shares as well as all such stock dividends and
distributions and any shares into which or for which any or all of the
Subject Shares may be changed or exchanged and the Purchase Price (as
defined herein) shall be accordingly adjusted. Each Stockholder shall be
entitled to receive any cash dividend paid by the Company during the term
of this Agreement until the Subject Shares are cancelled in the Merger or
purchased hereunder.
(f) Each Stockholder, severally and not jointly, shall not, nor shall
it authorize or permit any partner, officer, director or employee of, or
any investment banker, attorney or other advisor or representative of, such
Stockholder to, directly or indirectly, (i) solicit, initiate or encourage
the submission of any Takeover Proposal or (ii) participate in any
discussions, conversations, negotiations or other communications regarding,
or furnish to any person any information with respect to, or otherwise
cooperate in any way, assist or participate in, facilitate or encourage any
effort or attempt by any other person or entity, to seek to do any of the
foregoing or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or is likely to lead to, any
Takeover Proposal; provided, however, that the foregoing shall not restrict
a Stockholder who is also a director of the Company from taking actions in
such
<PAGE>
-7-
Stockholder's capacity as a director to the extent and in the circumstances
permitted by Section 4.02 of the Merger Agreement. Each Stockholder, in
its capacity as such, will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing.
(g) THE STOCKHOLDER HEREBY GRANTS TO, AND APPOINTS SUB AND ANY
DESIGNEE OF SUB, EACH OF THEM INDIVIDUALLY, STOCKHOLDER'S IRREVOCABLE
(UNTIL THE TERMINATION OF THIS AGREEMENT) PROXY AND ATTORNEY-IN-FACT WITH
FULL POWER OF SUBSTITUTION) TO VOTE THE SUBJECT SHARES OF STOCKHOLDER AS
INDICATED IN SECTION 3(A) AND 3(B) ABOVE. THE STOCKHOLDER INTENDS THIS
PROXY TO BE IRREVOCABLE (UNTIL THE TERMINATION OF THIS AGREEMENT) AND
COUPLED WITH AN INTEREST AND WILL TAKE SUCH FURTHER ACTION AND HEREBY
REVOKES ANY PROXY PREVIOUSLY GRANTED BY STOCKHOLDER WITH RESPECT TO SUCH
STOCKHOLDER'S SUBJECT SHARES.
4. FURTHER AGREEMENTS OF STOCKHOLDERS. If, after termination of this
Agreement pursuant to Section 7 hereof, Stockholder receives any cash or
non-cash consideration in respect of the Subject Shares in connection with a
Third Party Business Combination (as defined below) during the period commencing
on the date of such termination and ending on the first anniversary thereof (the
"SALE PERIOD"), Stockholder shall promptly pay over to Parent one half of the
excess, if any, of such consideration over the product of the Merger
Consideration and the number of Subject Shares with respect to which such
consideration is received by such Stockholder in connection with such Third
Party Business Combination (the "EXCESS CONSIDERATION"); PROVIDED that, (i) if
the consideration received by such Stockholder shall be securities listed on a
national securities exchange or traded on the NASDAQ National Market ("NASDAQ"),
the per share value of such consideration shall be equal to the closing price
per share listed on such national securities exchange or NASDAQ on the date such
transaction is consummated and (ii) if the consideration received by such
Stockholder shall be in a form other than securities, the per share value shall
be determined in good faith as of the date such transaction is consummated by
Parent and the Stockholders, or, if Parent and the Stockholders cannot reach
agreement, by a nationally recognized investment banking firm reasonably
acceptable to the parties. The term "THIRD PARTY BUSINESS COMBI-
<PAGE>
-8-
NATION" of the Company means the occurrence of any of the following events: (A)
the Company is acquired by merger or otherwise by any person or group, including
Parent or any affiliate thereof (a "THIRD PARTY"); (B) the Company enters into
an agreement with a Third Party which contemplates the acquisition of 20% or
more of the total assets of the Company; (C) the Company or Parent enters into a
merger or other agreement with a Third Party which contemplates the acquisition
of more than 20% of the outstanding shares of the Company's capital stock; or
(D) a Third Party acquires more than 20% of the total assets of the Company. If
during the Sale Period, any Stockholder Transfers his or its Subject Shares to
any other person (other than in connection with a Third Party Business
Combination described above) and such other person receives any consideration
for any Subject Shares in connection with a Third Party Business Combination
within the Sale Period, such Stockholder shall continue to be bound by the
provisions of this Section 4 with respect to the payment to Parent of the Excess
Consideration as if such Stockholder received such consideration for the Subject
Shares in such Third Party Business Combination.
5. FURTHER ASSURANCES. The Stockholder will, from time to time,
execute and deliver, or cause to be executed and delivered, such additional or
further consents, documents and other instruments as Parent may reasonably
request for the purpose of effectively carrying out the transactions
contemplated by this Agreement.
6. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, except that Parent may
assign, in its sole discretion, any or all of its rights, interests and
obligations hereunder to any direct or indirect wholly owned subsidiary of
Parent. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
7. TERMINATION. Except for Stockholder's obligations pursuant to
Section 4, this Agreement shall terminate, and no party shall have any rights or
obligations hereunder and this Agreement shall become null and void and have no
further effect upon the earliest of (a) the Effective Time, and (b) the date on
which the Merger Agreement is terminated pursuant to Section
<PAGE>
-9-
6.01 thereof. Nothing in this Section 7 shall relieve any party of liability
for breach of this Agreement.
8. COSTS AND EXPENSES. All costs and expenses incurred in connection
with this Agreement and the consummation of the transactions contemplated hereby
shall be paid by the party incurring such expenses.
9. GENERAL PROVISIONS.
(a) AMENDMENTS. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
(b) NOTICE. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to Parent in accordance
with Section 9.03 of the Merger Agreement and to each Stockholder at its or
his set forth on the signature page of this Agreement (or at such other
address for a party as shall be specified by like notice).
(c) INTERPRETATION. When a reference is made in this Agreement to
Sections, such reference shall be to a Section to this Agreement unless
otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Wherever the words "include", "includes"
or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation".
(d) 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 long as the economic or
legal substance of the transactions contemplated hereby is not affected in
any manner materially 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 a mu-
<PAGE>
-10-
tually acceptable manner in order that the transactions contemplated hereby
may be consummated as originally contemplated to the fullest extent
possible.
(e) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more of the counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that each party need not sign the same counterpart.
(f) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
(including the documents and instruments referred to herein) (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to
the subject matter hereof and (ii) is not intended to confer upon any
Person other than the parties hereto any rights or remedies hereunder.
(g) GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware regardless
of the laws that might otherwise govern under applicable principles of
conflicts of law thereof.
10. STOCKHOLDER CAPACITY. No person executing this Agreement who is
or becomes during the term hereof a director or officer of the Company makes any
agreement or understanding herein in his capacity as such director or officer.
The Stockholder signs solely in his capacity as the record holder or beneficial
owner of, or the trustee of a trust whose beneficiaries are the beneficial
owners of, such Stockholder's Subject Shares and nothing herein shall limit or
affect any actions taken by a Stockholder in his capacity as an officer or
director of the Company to the extent specifically permitted by the Merger
Agreement.
11. ENFORCEMENT. 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 en-
<PAGE>
-11-
force specifically the terms and provisions of this Agreement in any court of
the United States located in the State of Delaware or in a Delaware state court,
this being in addition to any other remedy to which they are entitled at law or
in equity. In addition, each of the parties hereto (i) consents to submit such
party 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 hereby, (ii) agrees that such
party will not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court; (iii) agrees that such party will
not bring any action relating to this Agreement or the transactions contemplated
hereby in any court other than a Federal court sitting in the state of Delaware
or a Delaware state court and (iv) waives any right to trial by jury with
respect to any claim or proceeding related to or arising out of this Agreement
or any of the transactions contemplated hereby. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
<PAGE>
-12-
IN WITNESS WHEREOF, Parent has caused this Agreement to be signed by
its officer thereunto duly authorized and each Stockholder has signed this
Agreement, all as of the date first written above.
MDC COMMUNICATIONS CORPORATION
By: /s/ Peter Lewis
----------------------------
Name: Peter M. Lewis
Title: Executive Vice President,
Corporate Development
Number of Subject Shares: STOCKHOLDER:
2,250,000 AMERICAN GREETINGS CORPORATION
By: /s/ Morry Weiss
----------------------------
Name: Morry Weiss
Title: Chairman and Chief
Executive Officer
Address: One American Road
Cleveland, Ohio 44144
Number of Subject Shares: STOCKHOLDER:
411,786 /s/ Stuart Komer
---------------------------------
Name: Stuart Komer
Address: 850 Euclid Avenue
Elmira, New York 14901
<PAGE>
Exhibit (c)(3)
ASSET PURCHASE AGREEMENT
BETWEEN
ARTISTIC GREETINGS INCORPORATED
AND
ARTISTIC DIRECT INCORPORATED
____________________
DATED AS OF DECEMBER 21, 1997
____________________
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
PURCHASE AND SALE
Section 1.1 The Asset Purchase. . . . . . . . . . . . . . . . . . . . . . .1
Section 1.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . .2
Section 1.3 Assumption of Liabilities . . . . . . . . . . . . . . . . . . .2
Section 1.4 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Section 1.5 Further Assurances. . . . . . . . . . . . . . . . . . . . . . .3
Section 1.6 FMV Schedule. . . . . . . . . . . . . . . . . . . . . . . . . .3
Section 1.7 Intellectual Property LLC . . . . . . . . . . . . . . . . . . .3
Section 1.8 Purchase Price Adjustments. . . . . . . . . . . . . . . . . . .3
Section 1.9 Allocation of Certain Joint Liabilities . . . . . . . . . . . .3
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ADI
Section 2.1 Organization and Qualification . . . . . . . . . . . . . . . .3
Section 2.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Section 2.3 No Violations, Etc. . . . . . . . . . . . . . . . . . . . . . .4
Section 2.4 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Section 2.5 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Section 2.6 No Other Representations or Warranties . . . . . . . . . . . .5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ARTISTIC
Section 3.1 Organization and Qualification . . . . . . . . . . . . . . . .5
Section 3.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Section 3.3 No Violations, Etc. . . . . . . . . . . . . . . . . . . . . . .5
Section 3.4 Board Recommendation . . . . . . . . . . . . . . . . . . . . .6
Section 3.5 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Section 3.6 No Other Representations or Warranties . . . . . . . . . . . .6
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . .6
Section 4.2 Other Potential Bidders . . . . . . . . . . . . . . . . . . . .8
Section 4.3 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . .9
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . .9
Section 5.2 Reasonable Best Efforts . . . . . . . . . . . . . . . . . . . .9
-i-
<PAGE>
PAGE
Section 5.3 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . 10
Section 5.4 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.5 Artistic and ADI Indemnification . . . . . . . . . . . . . . 10
Section 5.6 Public Announcements . . . . . . . . . . . . . . . . . . . . 12
Section 5.7 Sales and Transfer Taxes . . . . . . . . . . . . . . . . . . 12
Section 5.8 Access to Information . . . . . . . . . . . . . . . . . . . . 12
Section 5.9 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.10 Bulk Transfer Laws . . . . . . . . . . . . . . . . . . . . . 13
Section 5.11 Transition Services Agreement, Etc. . . . . . . . . . . . . . 13
Section 5.12 Employee Relations and Benefits . . . . . . . . . . . . . . . 13
ARTICLE VI
CONDITIONS PRECEDENT TO THE ASSET PURCHASE
Section 6.1 Conditions to Each Party's Obligation to Effect the Asset
Purchase . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6.2 Conditions to Obligation of Artistic to Effect the Asset
Purchase . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.3 Conditions to Obligations of ADI to Effect the Asset Purchase 15
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . 17
Section 7.3 Certain Payments . . . . . . . . . . . . . . . . . . . . . . 17
Section 7.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VIII
POST-CLOSING COVENANTS
Section 8.1 Access to Information . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 9.2 Interpretation . . . . . . . . . . . . . . . . . . . . . . . 20
Section 9.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 9.4 Entire Agreement; No Third-Party Beneficiaries . . . . . . . 20
Section 9.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 9.6 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 9.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 9.8 Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 9.9 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 9.10 Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . 21
-ii-
<PAGE>
Annex 1 Description of Assets and Liabilities
Annex 2 List of Assumed Contracts and Leased Property Lease
Agreements
Annex 3 Description of Real Property
Annex 4 List of Assumed Liens
Schedule 1.1 Assumed Balance Sheet Assets
Schedule 1.1A Joint Assets
Schedule 1.1B Excluded Assets
Schedule 1.3 Excluded Liabilities
Schedule 1.3A Joint Balance Sheet Liabilities
Schedule 1.3B Joint Employee Liabilities
Schedule 2.5 Proposal Letters
Exhibit A Assumption Agreement
Exhibit B Transition Services Agreement
Exhibit C Advertising and Fulfillment Agreement
Exhibit D Bill of Sale and Assignment
Exhibit E Warranty Deed
Exhibit F Trademark Assignment Agreement
Exhibit G Limited Liability Company Agreement
Exhibit H Promissory Note
-iii-
<PAGE>
ASSET PURCHASE AGREEMENT (this "Agreement") dated as of
December 21, 1997, between ARTISTIC GREETINGS INCORPORATED, a Delaware
corporation ("Artistic"), and ARTISTIC DIRECT INCORPORATED, a privately-held
New York corporation ("ADI").
Thomas C. Wyckoff has formed ADI (an S election
corporation) in order to acquire certain assets and to assume certain
liabilities described in Annex 1.
Concurrently herewith, Artistic and MDC Communications
Corporation, an Ontario corporation ("MDC"), have entered into an Agreement
and Plan of Merger (the "Merger Agreement"), dated as of even date herewith,
(the "Merger") of AGI Acquisition Co., a Delaware corporation and a wholly
owned subsidiary of MDC, with and into Artistic.
It is a condition to the Merger that the Asset Purchase
(as defined below) shall have been consummated.
Prior to consummation of the Merger, subject to the terms
and conditions of this Agreement, Artistic shall sell to ADI certain assets,
and assign to ADI certain liabilities, of Artistic relating to its
Personalized Product and Catalog businesses (the "P&C Businesses"),
including, without limitation, all related intangible assets, going-concern
value and goodwill, as well as the real property (the "Real Property") and
leased property (the "Leased Property") of Artistic (collectively, the
"Assets") (such transactions being referred to herein as the "Asset
Purchase").
ADI, on the one hand, and Artistic, on the other, desires
to make certain representations, warranties and agreements in connection with
the Asset Purchase and to prescribe various conditions to the Asset Purchase.
Accordingly, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties hereto agree as
follows:
ARTICLE I
THE ASSET PURCHASE
Section 1.1 THE ASSET PURCHASE. Upon the terms and
subject to the conditions of this Agreement, at the Closing (as defined in
Section 1.4), ADI shall purchase and acquire from
<PAGE>
-2-
Artistic, and Artistic shall convey, assign, transfer and sell to ADI, all of
Artistic's right, title and interest in and to the Assets described in Annex 1,
including the assets listed on the balance sheet of Artistic as set forth on
Schedule 1.1 (the "Assumed Balance Sheet Assets"), and including the assets
relating to both the P&C Businesses and the businesses of Artistic other than
the P&C Businesses as set forth on Schedule 1.1A (the "Joint Assets") to the
extent the Joint Assets relate to the P&C Businesses, with such additions,
deletions and replacements as may have occurred between the date hereof and the
Closing Date (as defined in Section 1.4) in the ordinary course of business
consistent with Section 4.1 or as the parties may otherwise agree is necessary
to make any corrections thereto (it being understood that the Assets shall not
include any assets, properties and other rights relating to the check business
of Artistic and those assets, properties and other rights set forth in Schedule
1.1B (the "Excluded Assets")). At the Closing, Artistic shall deliver to ADI
such specific assignments, bills of sale, endorsements, deeds and other good and
sufficient instruments of conveyance and transfer, in form and substance
reasonably satisfactory to ADI and Artistic and their respective counsel, as
shall be reasonably requested by ADI to effectively vest in ADI title to all the
Assets. Simultaneously with the delivery of such instruments, Artistic shall
transfer to ADI originals of all contracts, agreements, commitments, books,
records, files, certificates, licenses, permits, plans and specifications and
other data relating to and reasonably necessary for the continued operation of
the P&C Businesses.
Section 1.2 PURCHASE PRICE. In consideration of the transfer to ADI
of the Assets, ADI shall on the Closing Date (a) deliver to Artistic $9,000,000
(the "Purchase Price") by wire transfer of immediately available funds, into an
account of Artistic designated to ADI at least two Business Days prior to the
Closing Date (provided that at the election of the ADI, up to $250,000 of the
Purchase Price may be satisfied by delivery to Artistic of a Promissory Note
substantially in the form of Exhibit H) and (b) assume the Assumed Liabilities
(as defined in Section 1.3). The Purchase Price shall be subject to adjustment
pursuant to Section 1.8 and Section 5.5(e). "Business Day" shall mean any day
other than a Saturday, Sunday or other day on which banks are authorized to be
closed in New York City or Toronto.
<PAGE>
-3-
Section 1.3 ASSUMPTION OF LIABILITIES.
(a) ASSUMED LIABILITIES. In addition to payment of the Purchase
Price, ADI shall assume at the Closing, and subsequently in due course pay,
honor and discharge, (i) all the obligations, debts and liabilities of Artistic
arising out of or relating to the P&C Businesses or the Assets, (ii) the
employment related liabilities of Business Employees as set forth in Section
5.12, (iii) all environmental liabilities of Artistic, (iv) the obligations,
debts and liabilities set forth on Annex 1, (v) contingent and unknown
liabilities arising out of or relating primarily to the P&C Businesses, the Real
Property or the Leased Property, accruing before, on or after the Closing Date
(as defined in Section 1.4), (vi) the liabilities listed on the balance sheet of
Artistic to the extent set forth on Annex 1(the "Assumed Balance Sheet
Liabilities"), (vii) liabilities which relate to both the P&C Businesses and the
businesses of Artistic other than the P&C Businesses (the "Joint Liabilities")
to the extent provided in Section 1.9 and as shall be set forth on Schedule 1.3A
and (viii) the allocable share of Joint Employee Liabilities set forth in
Schedule 1.3B, determined on the basis of FTE (full time employee) equivalents
(collectively, the "Assumed Liabilities"). Artistic shall retain and ADI shall
not assume any of Artistic's obligations, debts and liabilities set forth on
Schedule 1.3 and any other obligations, debts and liabilities other than the
Assumed Liabilities (the "Excluded Liabilities").
(b) THIRD-PARTY CONSENTS. Any leases, rental agreements, insurance
policies, sales orders, insurance contracts, trust agreements, licenses,
agreements, permits, purchase orders, registered user agreements, commitments
and any and all other contracts or binding arrangements, whether written or
oral, express or implied, which are related to the P&C Businesses and the
Assets, including any entered into between the date hereof and the Closing in
the ordinary course of business, all of which shall be identified on Annex 2
except for contracts entered into between the date hereof and the Closing
(collectively, the "Assumed Contracts"), shall be assumed by ADI at the Closing
Date. To the extent that any Assumed Contract is not assignable without the
consent of another party, this Agreement shall not constitute an assignment or
an attempted assignment thereof if such assignment or attempted assignment would
constitute a breach thereof or of any other Assumed Contract. Artistic agrees
to use its reasonable efforts on or prior to the Closing Date to obtain the
consent of such other party to the assignment to ADI of any such Assumed
Contract in all cases in which such consent is required for such
<PAGE>
-4-
assignment. If such consent cannot be so obtained on or prior to the Closing
Date, Artistic agrees to cooperate with ADI in any reasonable arrangement
designed to provide for ADI the benefits intended to be assigned to ADI under
the relevant Assumed Contract, including enforcement at the cost and for the
account of ADI of any and all rights of Artistic against the other party thereto
arising out of the breach or cancellation thereof by such other party or
otherwise (such Assumed Contracts being the "Deferred Contracts"); provided that
all losses, taxes or other items generated by the relevant Deferred Contracts
shall be for ADI's account; provided further, that, except as otherwise provided
in this Agreement or the Schedules, Exhibits and Annexes hereto, Artistic shall
not have any liability to ADI arising out of such Deferred Contracts and ADI
shall reimburse Artistic and indemnify and hold Artistic harmless from all
liabilities incurred or asserted as a result of Artistic's post-Closing direct
or indirect ownership of the Deferred Contracts.
(c) ASSUMPTION AGREEMENT. On the Closing Date (as defined in Section
1.4), ADI shall execute and deliver to Artistic the Assumption Agreement,
substantially in the form of Exhibit A.
Section 1.4 CLOSING. The closing of the Asset Purchase (the
"Closing") shall take place in the offices of Simpson Thacher & Bartlett, 425
Lexington Avenue, New York, New York, at 10:00 a.m., local time, on the second
Business Day following the date on which all the conditions to the consummation
of the transactions contemplated herein set forth in Article VI have been
satisfied or waived, or such other time, date and place as ADI and Artistic
shall agree (such date being the "Closing Date").
Section 1.5 FURTHER ASSURANCES. From and after the Closing Date,
upon the reasonable request of ADI, Artistic shall do, execute, acknowledge and
deliver all such further acts, assurances, deeds, assignments, transfers,
conveyances and other instruments and papers as may be reasonably required to
sell, assign, transfer, convey and deliver to and vest in ADI, and protect its
right, title and interest in and employment of, all the Assets intended to be
sold, assigned, transferred, conveyed and delivered to ADI pursuant to this
Agreement (including, with respect to any Assets that are licensed or leased to
Artistic, to cause, upon the request of ADI, the assignment of any such licenses
or leases (and any other maintenance, servicing or other agreement specifically
relating to any Asset) to ADI, the expenses of any such action to be borne
<PAGE>
-5-
equally by Artistic and ADI, it being understood that until such assignment, ADI
will reimburse Artistic for charges and lease payments it makes after the
Closing Date (for periods after the Closing Date) in respect of such Assets
under any such licenses or leases), and as otherwise may be appropriate to carry
out the transactions contemplated by this Agreement.
Section 1.6 FMV SCHEDULE. Within 45 days after the Closing Date, ADI
and Artistic will determine the fair market value of the various classes of the
Assets, the Assumed Liabilities and the other rights and benefits conferred
hereunder and will set forth such fair market value upon an agreed schedule (the
"FMV Schedule"). The parties agree that the Purchase Price shall be allocated
for tax purposes among the Assets in a manner consistent with the FMV Schedule
and the provisions of Section 1060 of the Internal Revenue Code of 1986, as
amended (the "Code") and the Treasury regulations promulgated thereunder. The
allocation set forth on the FMV Schedule shall be made in good faith and arrived
at by arm's length negotiation, and each of the parties agrees that it will not
take, without the prior written consent of the other, any position on any
federal or state income or transfer tax return (including Form 8954, Asset
Acquisition Statement under Section 1060 of the Code) or before any governmental
agency, any position or make any allocation inconsistent with that set forth in
the FMV Schedule.
Section 1.7 INTELLECTUAL PROPERTY LLC. Immediately following the
Closing but prior to the Effective Time of the Merger (as defined in the Merger
Agreement), ADI and Artistic will enter into a Limited Liability Company
Agreement (the "Limited Liability Agreement") substantially in the form of
Exhibit G whereby ADI and Artistic shall contribute to a limited liability
company formed by the parties prior to the Closing Date, certain intellectual
property and other interests referred to on the schedules to the Limited
Liability Agreement, and also shall consummate the other transactions
contemplated by the Limited Liability Agreement (including the schedules
thereto).
Section 1.8 PURCHASE PRICE ADJUSTMENTS. (a) Following the Closing,
the parties will in good faith determine the amount, if any, by which Artistic
has made capital expenditures on property, plant and equipment (other than
routine maintenance and servicing) in excess of $100,000 per calendar month
during the period from the date hereof through the Closing Date (provided that
to the extent that in any calendar month less than $100,000 is so expended, such
difference may be
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carried forward to future calendar months), the Purchase Price will be increased
by the amount of such excess expenditure (the "Excess"). Upon final agreement
of the parties as to the amount of the Excess, ADI shall deliver a promissory
note to Artistic in substantially the form of the Promissory Note attached as
Exhibit G with an issue price equal to the Excess.
(b) At Closing, Artistic shall deliver to ADI the sum of (i) the
positive difference between (A) the Komer Severance Payment (as defined in
Section 5.12 (j)) that would have been due Komer if the transactions
contemplated by the Merger Agreement had occurred prior to December 31, 1997,
and (B) the Komer Severance Payment payable at the time of the Merger and (ii)
$333,333. Such payments shall be made by wire transfer of immediately available
funds, at Closing, to an account designated by ADI to Artistic at least two days
prior to the Closing, and shall be considered an adjustment to the Purchase
Price.
Section 1.9 ALLOCATION OF CERTAIN JOINT LIABILITIES. During the
period from the date hereof through the Closing Date, ADI and Artistic shall
endeavor in good faith to allocate between Assumed Liabilities and Excluded
Liabilities the Joint Liabilities which otherwise have not been so allocated.
If any Joint Liability can not be so allocated by the parties, Artistic will be
responsible for 100% of such Joint Liability and ADI will pay to Artistic
amounts necessary to satisfy 55% of such Joint Liability (within five days of
Artistic's satisfaction of such liabilities).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ADI
ADI represents and warrants to Artistic as follows:
Section 2.1 ORGANIZATION AND QUALIFICATION. ADI (i) is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New York and has all requisite corporate power and authority to carry
on its business as now being conducted and to own and operate the properties and
assets it now owns, and (ii) is in good standing in each jurisdiction where the
character of its business owned or held under lease or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified would not, individually or in the aggregate, have a
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Material Adverse Effect on ADI or prevent or materially delay the consummation
of the transactions contemplated hereby. "Material Adverse Change" or "Material
Adverse Effect" means, when used with respect to ADI, Artistic or the P&C
Businesses, any change or effect that is or, is reasonably likely to be
materially adverse to the business, operations, assets, financial condition or
results of operations of ADI, Artistic or the P&C Businesses, as the case may
be.
Section 2.2 AUTHORITY. ADI has all requisite power and authority to
execute and deliver this Agreement, the Bill of Sale and Assignment, the
Assumption Agreement and any other agreement contemplated hereby to which it is
a party, to perform its obligations hereunder and thereunder, and to consummate
the Asset Purchase and the other transactions contemplated hereby. The
execution and delivery by ADI of this Agreement and the consummation by ADI of
the Asset Purchase and the other transactions contemplated hereby have each been
duly and validly authorized by the Board of Directors of ADI and no other
corporate proceedings on the part of ADI are necessary to authorize this
Agreement or to consummate the Purchase and the other transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by ADI
and, assuming the valid authorization, execution and delivery of this Agreement
by Artistic, constitutes a legal, valid and binding agreement of ADI,
enforceable against ADI in accordance with its terms, except to the extent such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws of general applicability
relating to or affecting the enforcement of creditors' rights and by the effect
of general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
Section 2.3 NO VIOLATIONS, ETC. The execution and delivery of this
Agreement do not or will not, as the case may be, and the consummation of the
transactions contemplated hereby and compliance with the provisions hereof do
not or will not, conflict with, or result in any violation of, or default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancelation or acceleration of any obligation or to the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of ADI
under, any provision of (i) the Certificate of Incorporation or Bylaws of ADI,
(ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise or license applicable
to
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ADI, or (iii) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to ADI or any of its properties or assets, other than, in
the case of clauses (ii) or (iii), any such conflicts, violations, defaults,
losses, liens, security interests, charges or encumbrances that, individually or
in the aggregate, would not have a Material Adverse Effect on ADI, materially
impair the ability of ADI to perform its obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby. No filing or
registration with, or authorization, consent or approval of, any domestic
(federal and state), foreign or supranational court, commission, governmental
body, regulatory agency, authority or tribunal (a "Governmental Agency") is
required by or with respect to ADI in connection with the execution and delivery
of this Agreement by ADI or is necessary for the consummation by ADI of the
Asset Purchase, except for such consents, orders, authorizations, registrations,
declarations and filings, the failure of which to be obtained or made would not,
individually or in the aggregate, have a Material Adverse Effect on ADI,
materially impair the ability of ADI to perform its obligations hereunder or
prevent the consummation of the transaction contemplated hereby.
Section 2.4 BROKERS. No broker, investment banker or other person is
entitled to any broker's, finder's or similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of ADI.
Section 2.5. FINANCING. ADI has in hand binding proposal, commitment
or similar letters, which are currently in effect and true and correct copies of
which are attached hereto as Schedule 2.5, with a reputable financial
institution or institutions or Governmental Agencies to obtain, together with
commitments of equity and/or subordinated indebtedness (of no less than $1.25
million in the aggregate, excluding the $250,000 Promissory Note referred to in
Section 1.2 (the "Proposal Letters"), all funds necessary to enable ADI to
finance the Purchase Price and consummate this Agreement (the "Financing").
Section 2.6. NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Article II, neither ADI nor any
other person makes any other express or implied representation or warranty on
behalf of ADI.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ARTISTIC
Artistic represents and warrants to ADI as follows:
Section 3.1 ORGANIZATION AND QUALIFICATION. Artistic (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now being conducted and to own and operate the
properties and assets it now owns, and (ii) is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its business owned or leased or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
or in good standing would not, individually or in the aggregate, have a Material
Adverse Effect on the P&C Businesses, or prevent or materially delay the
consummation of the transactions contemplated hereby.
Section 3.2 AUTHORITY. Artistic has all requisite power and
authority to execute and deliver this Agreement, the Bill of Sale and
Assignment, the Assumption Agreement and any other agreement contemplated hereby
to which it is a party, to perform its obligations hereunder and thereunder, and
to consummate the Asset Purchase and the other transactions contemplated hereby.
The execution and delivery by Artistic of this Agreement and the consummation by
Artistic of the Asset Purchase and the other transactions contemplated hereby
have each been duly and validly authorized by the Board of Directors of Artistic
(the "Board") and no other corporate proceedings on the part of Artistic are
necessary to authorize this Agreement or to consummate the Asset Purchase and
the other transactions contemplated hereby (other than, with respect to the
Merger and the Asset Purchase, the receipt of the "Requisite Vote" (as defined
in the Merger Agreement)). This Agreement has been duly and validly executed
and delivered by Artistic and, assuming the valid authorization, execution and
delivery of this Agreement by ADI, constitutes a legal, valid and binding
agreement of Artistic, enforceable against Artistic in accordance with its
terms, except to the extent such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other similar
laws of general applicability relating to or affecting the enforcement of
creditors' rights and by the effect of general principles of equity
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(regardless of whether enforceability is considered in a proceeding in equity or
at law).
Section 3.3 NO VIOLATIONS, ETC. Subject to receipt of the Requisite
Vote, the execution and delivery of this Agreement do not or will not, as the
case may be, and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof do not or will not, conflict with, or
result in any violation of, or default (with or without notice of lapse of time,
or both) under, or give rise to a right of termination, cancelation or
acceleration of any obligation or to the loss of a material benefit under, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of Artistic under, any provision of (i) the
Certificate of Incorporation or Bylaws of Artistic, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Artistic, or
(iii) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Artistic or any of its respective properties or assets, other
than, in the case of clauses (ii) or (iii), any such conflicts, violations,
defaults, losses, liens, security interests, charges or encumbrances that,
individually or in the aggregate, would not have a Material Adverse Effect,
materially impair the ability of Artistic to perform its obligations hereunder
or prevent the consummation of any of the transactions contemplated hereby.
Except for the filings referred to in Section 3.03 and Schedule 3.03 to the
Merger Agreement, which are incorporated by reference herein, no filing or
registration with, or authorization, consent or approval of, any Governmental
Agency is required by or with respect to Artistic in connection with the
execution and delivery of this Agreement or the Merger Agreement by Artistic or
is necessary for the consummation by Artistic of the Merger, the Asset Purchase
and the other transactions contemplated hereby and thereby, except for such
consents, orders, authorizations, registrations, declarations and filings, the
failure of which to be obtained or made would not, individually or in the
aggregate, have a Material Adverse Effect on Artistic, materially impair the
ability of Artistic to perform its obligations hereunder or thereunder or
prevent the consummation of the transactions contemplated hereby or thereby.
Section 3.4 BOARD RECOMMENDATION. The Board has approved and adopted
this Agreement, the Asset Purchase, the Merger and the other transactions
contemplated by this Agreement and the Merger Agreement, determined that the
consideration to be received by the holders of shares of common stock of
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Artistic pursuant to the Merger is fair to the holders of such shares and
recommended that the holders of such shares approve and adopt the Merger
Agreement, the Merger, the Asset Purchase and the other transactions
contemplated by this Agreement and the Merger Agreement.
Section 3.5 BROKERS. No broker, investment banker or other person is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Artistic.
Section 3.6 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Article III, neither Artistic
nor any other person makes any other express or implied representation or
warranty on behalf of Artistic.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 CONDUCT OF BUSINESS. Prior to the Closing Date,
Artistic shall operate its business (including the P&C Businesses) in the
ordinary course of business and in all respects in accordance with Section 4.01
of the Merger Agreement.
Section 4.2 OTHER POTENTIAL BIDDERS. Artistic, its affiliates and
their respective officers, directors, employees, representatives and agents
shall immediately cease any existing discussions or negotiations, if any, with
any parties conducted heretofore with respect to a transaction or series of
transactions involving the Assets and the Assumed Liabilities to be transferred
or assumed hereunder. Artistic, its affiliates and their respective officers,
directors, employees, representatives and agents, may, directly or indirectly,
furnish information and access, in each case only in response to unsolicited
requests therefor made after the date hereof, to any corporation, partnership,
person or other entity or group pursuant to confidentiality agreements, and may
participate in discussions and negotiate with such entity or group concerning
any transaction involving the Assets and the Assumed Liabilities, if such entity
or group has submitted a bona fide written proposal to the Board relating to any
such transaction and the Board by a majority vote determines that such
transaction would be on sub-
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stantially the same basis as this Agreement and would result in increased
aggregate cash consideration being available to the stockholders of Artistic.
The Board shall notify ADI immediately if any such proposal is made and shall in
such notice indicate in reasonable detail the identity of the offeror and the
terms and conditions of any proposal and shall keep ADI promptly advised of all
material developments in connection therewith. Except as set forth above,
neither Artistic or any of its affiliates, nor any of its or their respective
officers, directors, employees, representatives or agents shall, directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than ADI, any affiliate or associate of
ADI or any designee of ADI) concerning any transaction involving the Assets or
the Assumed Liabilities. Nothing in this Section 4.2 shall prohibit Artistic
from complying with its obligations under the Merger Agreement.
Section 4.3 NO SOLICITATION. Artistic agrees that it will not, from
and after the Closing through and including the fifth anniversary of the Closing
Date, without the prior written consent of ADI, directly or indirectly, solicit
the employment of any person who is at that time an employee, representative or
officer of the P&C Businesses and who was prior to the Closing an employee of
Artistic in connection with any of the P&C Businesses and whose compensation and
benefits were in excess of $50,000 per year; provided that in no event will this
provision limit Artistic in its normal advertising, posting or other general
employment opportunity communication activities.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 FEES AND EXPENSES. Whether or not the Closing occurs, all
costs and expenses (other than fees and expenses of financing sources) incurred
by Artistic in connection with this Agreement and the transactions contemplated
herein, shall be paid by Artistic, and all such costs and expenses (other than
fees and expenses of financing sources) of ADI shall be paid by Artistic at or
prior to Closing. Prior to the Closing or upon termination of this Agreement,
Artistic shall recharacterize the promissory notes, dated October 15, 1997 and
November 7, 1997, of ADI as an expense of Artistic.
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Section 5.2 REASONABLE BEST EFFORTS. Upon the terms and subject to
the conditions set forth in this Agreement, each of the parties shall use all
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other party in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Asset Purchase and the other
transactions contemplated by this Agreement and the prompt satisfaction of the
conditions hereto, including, without limitation, all required consents,
authorizations, orders, exemptions and approvals of any third parties,
including, without limitation, Governmental Agencies.
Section 5.3 INTENTIONALLY OMITTED.
Section 5.4 FINANCING. (a) ADI shall deliver to Artistic on or
before the date (which shall be no later than five Business Days after it has
been cleared by the Securities and Exchange Commission (it being understood that
Artistic will notify ADI of such clearance promptly)) (the "Mailing Date") on
which the Proxy Statement (as defined in the Merger Agreement) is scheduled to
be mailed to the stockholders of Artistic true and correct copies of each
Proposal Letter which shall be in full force and effect at such time.
(b) In the event that all or any portion of the Financing provided
for in the Proposal Letters has become unavailable at or prior to the Mailing
Date, regardless of fault, ADI shall deliver to Artistic within 10 Business Days
of the Mailing Date, proposal, commitment or similar letters from others
providing for the financing necessary for the consummation of the transactions
contemplated hereby, on and subject to terms and conditions no less favorable to
ADI in the aggregate than provided for in the Proposal Letters.
(c) During the period from the Mailing Date through the Closing Date,
in the event that all or any portion of the Financing provided for in the
Proposal Letters becomes unavailable, regardless of fault, ADI shall deliver to
Artistic within 30 days of the date that such financing became unavailable,
proposal, commitment or similar letters from others providing for the financing
necessary for the consummation of the transactions contemplated hereby, on and
subject to terms and conditions no less favorable to ADI in the aggregate than
provided for in the Proposal Letters. ADI shall keep Artistic promptly informed
of all material developments with respect to the Financing.
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(d) ADI intends that the terms and conditions of the Financing shall
be no less favorable taken as a whole than those previously set forth in the
Proposal Letters or any replacement letters. ADI shall use its best efforts to
satisfy at or before the Closing all conditions to the transactions constituting
the Financing and to its drawing down the cash proceeds thereunder.
Section 5.5 INDEMNIFICATION.
(a) ARTISTIC INDEMNITY. On and after the Closing Date, Artistic shall
indemnify and hold ADI and its affiliates harmless against and in respect of all
actions, claims, suits, demands, judgments, costs and expenses (including
reasonable attorneys' fees of ADI) (collectively, "Damages") relating to (i) the
Excluded Liabilities, (ii) the ownership or operation of the Excluded Assets by
Artistic or any other person following the Closing Date, (iii) the Merger
(whether arising from a claim made by a stockholder of Artistic or otherwise)
(iv) the representation by Artistic regarding broker fees set forth in Section
3.5 or (v) the obligations of Artistic regarding AGI employees, including,
without limitation, employee benefit plans and employment liabilities, as set
forth in Section 5.12. The indemnification provided for in this Section 5.5(a)
shall terminate and be of no further force and effect two years from the Closing
Date. Artistic shall not be liable pursuant to this Section 5.5(a) for any
amounts which in the aggregate exceed $9,000,000.
(b) ADI INDEMNITY. On and after the Closing Date, ADI shall indemnify
and hold Artistic and its affiliates harmless against and in respect of all
Damages relating to (i) the Assumed Liabilities, (ii) the ownership or operation
of the P&C Businesses or the Assets by ADI or any other person following the
Closing Date, (iii) the representation by ADI regarding broker's fees set forth
in Section 2.4, (iv) the Deferred Contracts to the extent provided in Section
1.3, or (v) the obligations of ADI regarding AGI employees, including, without
limitation, employee benefit plans and employment liabilities, as set forth in
Section 5.12. ADI shall not be liable pursuant to this Section 5.5(b) for any
amounts, which in the aggregate exceed $9,000,000.
(c) INDEMNIFICATION PROCEDURES. With respect to third-party claims,
all claims for indemnification by each of ADI or Artistic or their affiliates,
as the case may be (an "Indemnified Party") hereunder shall be asserted and
resolved as set forth in this Section 5.5. In the event that any writ-
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ten claim or demand for which ADI or Artistic, as the case may be (an
"Indemnifying Party"), would be liable to any Indemnified Party hereunder is
asserted against or sought to be collected from any Indemnified Party by a third
party (a "Third Party Claim"), such Indemnified Party shall promptly notify the
Indemnifying Party of such claim or demand and the amount or the estimated
amount thereof to the extent then feasible (which estimate shall not be
conclusive of the final amount of such claim or demand) (the "Claim Notice");
provided that failure of such Indemnified Party to give prompt notice as
provided herein shall not relieve the Indemnifying Party of any of its
obligations hereunder, except to the extent that the Indemnifying Party is
materially prejudiced by such failure. The Indemnifying Party shall have 20
days from the personal delivery or mailing of the Claim Notice (the "Notice
Period") to notify the Indemnified Party (a) whether or not the Indemnifying
Party disputes the liability of the Indemnifying Party to the Indemnified Party
hereunder with respect to such claim or demand and (b) whether or not it desires
to defend the Indemnified Party against such claim or demand. All reasonable
costs and expenses incurred by the Indemnified Party in defending such claim or
demand shall be a liability of, and shall be paid by, the Indemnifying Party.
Except as hereinafter provided, in the event that the Indemnifying Party
notifies the Indemnified Party within the Notice Period that it desires to
defend the Indemnified Party against such claim or demand, the Indemnifying
Party shall have the right to defend the Indemnified Party by appropriate
proceedings, through counsel of its own choosing, subject to the reasonable
approval of such Indemnified Party, and shall have the sole power to direct and
control such defense. If the Indemnifying Party shall assume the defense of a
claim or demand, it shall not settle or compromise such claim without the prior
written consent of the Indemnified Party, unless such settlement or compromise
includes as an unconditional term thereof the giving by the claimant of a
release of the Indemnified Party from all liability with respect to such claim
or demand. If the Indemnifying Party shall assume the defense of a claim or
demand, the fees of any separate counsel retained by the Indemnified Party shall
be borne by such Indemnified Party unless there exists a conflict between them
as to their respective legal defenses (other than one that is of a monetary
nature), in which case the Indemnified Party shall be entitled to retain
separate counsel, the reasonable fees and expenses of which shall be reimbursed
by the Indemnifying Party. If the Indemnifying Party does not notify the
Indemnified Party within 20 days after the receipt of the Claim Notice that it
elects to undertake the defense thereof and acknowledges its obligation to
indemnify the Indemnified Party hereunder, the Indemnified
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Party shall have the right to contest, settle or compromise the claim but shall
not thereby waive any right to indemnity therefor pursuant to this Agreement.
(d) NET AMOUNTS. The amount of any indemnification payments made
pursuant to this Section 5.5 shall be computed net of any insurance proceeds
received by the Indemnified Party in connection with such payments. If the
amount with respect to which any claim is made under this Section 5.5 (an
"Indemnity Claim") gives rise to a currently realizable Tax Benefit (as defined
below) to the party making the claim, the indemnity payment shall be reduced by
the amount of the Tax Benefit available to the party making the claim. To the
extent such Indemnity Claim does not give rise to a currently realizable Tax
Benefit, if the amount with respect to which any Indemnity Claim is made gives
rise to a subsequently realized Tax Benefit to the party that made the claim,
such party shall refund to the Indemnifying Party the amount of such Tax Benefit
when, as and if realized. For the purposes of this Agreement, any subsequently
realized Tax Benefit shall be treated as though it were a reduction in the
amount of the initial Indemnity Claim, and the liabilities of the parties shall
be redetermined as though both occurred at or prior to the time of the indemnity
payment. For purposes of this Section 5.5(d), a "Tax Benefit" means an amount
by which the tax liability of the party (or group of corporations including the
party) is reduced (including, without limitation, by deduction, reduction of
income by virtue of increased tax basis or otherwise, entitlement to refund,
credit or otherwise) plus any related interest received from the relevant taxing
authority. Where a party has other losses, deductions, credits or items
available to it, the Tax Benefit from any losses, deductions, credits or items
relating to the Indemnity Claim shall be deemed to be realized proportionately
with any other losses, deductions, credits or items. For the purposes of this
Section 5.5(d), a Tax Benefit is "currently realizable" to the extent it can be
reasonably anticipated that such Tax Benefit will be realized in the current
taxable period or year or in any tax return with respect thereto (including
through a carryback to a prior taxable period) or in any taxable period or year
prior to the date of the Indemnity Claim. In the event that there should be a
determination disallowing the Tax Benefit, the Indemnifying Party shall be
liable to refund to the Indemnified Party the amount of any related reduction
previously allowed or payments previously made to the Indemnifying Party
pursuant to this Section 5.5(d). The amount of the refunded reduction or
payment shall be deemed a payment under this Section 5.5 and thus shall be
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paid subject to any applicable reductions under this Section 5.5(d).
(e) ADJUSTMENT TO PURCHASE PRICE. The parties agree that any
indemnification payments made pursuant to this Agreement shall be treated for
tax purposes as an adjustment to the Purchase Price, unless otherwise required
by applicable law.
(f) MITIGATION. Each Indemnified Party shall be obligated in
connection with any claim for indemnification under this Section 5.5 to use all
commercially reasonable efforts to mitigate damages upon and after becoming
aware of any event which could reasonably be expected to give rise to such
damages.
(g) NOTICE. Whenever any claim for indemnification shall arise under
Section 5.5 other than a Third Party Claim (a "Claim"), the party seeking
indemnification (the "Indemnitee") shall notify in writing the party from which
indemnification is sought (the "Indemnitor") of the Claim within 60 days after
the Indemnitee becomes aware of the Claim's existence, with such notice to
contain the factual basis for the Claim and the amount or an estimate (if known
or reasonably determinable) of the liability that may arise therefrom, provided
that the failure to provide such notice shall not affect the Indemnitor's right
to indemnification hereunder except to the extent that the Indemnitor is
materially prejudiced by such failure.
(h) LIMITATION OF DAMAGES. Neither party hereto nor any affiliate of
either of them shall be liable for any consequential, punitive or special
damages pursuant to this Agreement or any of the agreements contemplated hereby.
(i) SURVIVAL. The indemnities provided in this Section 5.5 shall
survive the Closing.
Section 5.6 PUBLIC ANNOUNCEMENTS. Before issuing any press release
or otherwise making any public statement with respect to the Asset Purchase or
any of the other transactions contemplated hereby, ADI and Artistic will consult
with, and obtain the consent of, each other (which consent shall not be
unreasonably withheld) as to the form and substance of such release or statement
and shall not issue any such release or make any such statement prior to
obtaining such consent, except as may be required by law or the rules and
regulations of the Securities and Exchange Commission or any securities exchange
or national quotation system.
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Section 5.7 SALES AND TRANSFER TAXES. Each of ADI and Artistic shall
pay one-half of any and all domestic and foreign sales, use, excise,
documentary, stamp duties, motor vehicle registration, value added and/or
transfer or similar taxes and filing or recording expenses or fees due with
respect to the Asset Purchase or otherwise required to be paid in connection
with the transfer of the Assets; provided that each party shall be responsible
for any interest charge, penalty or addition to tax applicable to it under
applicable law with respect thereto.
Section 5.8 ACCESS TO INFORMATION. (a) Artistic shall afford to ADI,
and to ADI's accountants, counsel, financial advisers and other representatives,
reasonable access during normal business hours and permit them to make such
inspections during normal business hours as they may reasonably require during
the period from the date of this Agreement through the Closing Date to all
books, contracts, commitments and records relating to the P&C Businesses and the
Real Property and, during such period, Artistic shall furnish to ADI (i) access
to each report, schedule, registration statement and other document filed by
Artistic during such period pursuant to the requirements of federal or state
laws relating to the P&C Businesses and the Real Property and (ii) all other
information concerning the P&C Businesses and the Real Property as ADI may
reasonably request. Except as required by law, ADI will hold, and will cause
its affiliates, associates and representatives to hold, any non-public
information in confidence until such time as such information otherwise becomes
publicly available and shall use its reasonable best efforts to ensure that such
affiliates, associates and representatives do not disclose such information to
others without the prior written consent of Artistic. In the event of
termination of this Agreement for any reason, ADI shall promptly return or
destroy all non-public documents so obtained from Artistic and any copies made
of such documents for ADI. ADI shall not, and shall cause its affiliates,
associates and representatives not to, use any non-public information regarding
Artistic in any way detrimental to Artistic.
(b) No investigation pursuant to this Section 5.8 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
Section 5.9 RISK OF LOSS. All risk of loss to the Assets, including,
without limitation, the Real Property and Leased Assets, shall remain in
Artistic until the transfer of
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the Assets on the Closing Date. In the event of any casualty or loss to the
Assets prior to the Closing and ADI elects to consummate this transaction, ADI
may, at ADI's option, require Artistic at Closing to assign by specific
assignment to ADI all of its claims under and the proceeds of any and all
insurance policies (including proceeds received by Artistic prior to Closing) as
well as claims against any third parties relating to such casualty or loss on
the property subject thereto.
Section 5.10 BULK TRANSFER LAWS. Artistic shall comply with the
provisions of any so-called "bulk transfer" or similar laws of any applicable
jurisdiction concerning the Asset Purchase, and ADI shall reasonably cooperate
with Artistic in connection therewith.
Section 5.11 TRANSITION SERVICES AGREEMENT, ETC. On the date hereof,
Artistic and ADI shall enter into each of a Transition Services Agreement (the
"Transition Services Agreement") and Advertising and Fulfillment Agreement (the
"Advertising and Fulfillment Agreement"), substantially in the form of Exhibit B
and C, respectively.
Section 5.12 EMPLOYEE RELATIONS AND BENEFITS.
(a) BUSINESS EMPLOYEES. For purposes of this Agreement, "Business
Employees" shall mean all employees of Artistic (other than Komer and Joseph
Calabro) as of the Closing Date.
(b) CONTINUITY OF EMPLOYMENT. The parties hereto intend that there
shall be continuity of employment with respect to the Business Employees. ADI
shall offer employment, commencing on the Closing Date, to each Business
Employee (including those on vacation, layoff, leave, short-term or long-term
disability or other permitted absence of employment) with comparable
compensation (including salary, fringe benefits, job responsibility and
location) as that provided to such employees by Artistic prior to Closing.
Nothing in this Agreement, including this Section 5.12 (b) confers upon any
person any right to continued employment by Artistic or ADI as of and after the
Closing Date.
(c) EMPLOYMENT LIABILITIES. On and after the Closing Date, ADI shall
be responsible and liable for all liabilities and obligations (including under
any benefit plans) in connection with the employment before, on or after Closing
(or termination of employment) of the Business Employees hired by ADI including
the assumption of any employment agreements with respect to such Business
Employees.
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(d) SERVICE CREDIT. With respect to the Business Employees hired by
ADI, ADI shall give credit for all service with Artistic for all purposes under
the 401(k) plans assumed by ADI, but only to the same extent credit had been
given under the 401(k) plans assumed by ADI prior to the Closing Date.
(e) WELFARE PLANS. With respect to any ADI plan that is a "welfare
benefit plan" (as defined in Section 3(1) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), or would be a "welfare benefit
plan", if such plan were subject to ERISA, for the benefit of Business Employees
on and after the Closing Date, ADI shall (i) not exclude any Business Employee
previously covered by a similar welfare benefit plan maintained by Artistic from
inclusion in any such plan on the basis of any pre-existing condition
limitations and (ii) give effect, in determining any deductible and maximum
out-of-pocket limitations, to claims incurred and amounts paid by, and amounts
reimbursed to, its employees with respect to the welfare benefit plans as
maintained by Artistic immediately prior to Closing.
(f) 401(K) PLANS. With respect to any 401(k) benefit plan maintained
by Artistic for the benefit of the Business Employees or of former employees of
Artistic (collectively, the "401(k) Plans"), ADI shall assume all the rights,
obligations, duties and sponsorship of Artistic under the 401(k) Plans.
Artistic and ADI shall cooperate to amend all agreements and documents necessary
to permit ADI to assume all such rights, obligations, duties and sponsorship.
(g) ACCRUED VACATION. With respect to any accrued but unused
vacation time to which any Business Employees hired by ADI are entitled,
Artistic shall remain responsible for payments to such Business Employees
relating to such accrued vacation time up through Closing, and ADI shall assume
responsibility for payments for any such accrued vacation time of such Business
Employees thereafter.
(h) BONUSES. With respect to any compensation bonuses to which any
Business Employees hired by ADI are entitled, Artistic shall remain responsible
for such bonuses arising out of employment up through January 1, 1998, and ADI
shall assume responsibility for bonus payments arising out of employment of such
Business Employees thereafter.
(i) POST-RETIREMENT BENEFITS. To the extent that Business Employees
hired by ADI receive (or are eligible to receive) any Post-Retirement Benefits
from Artistic immediately
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prior to the Closing Date, such employees shall receive (or be eligible to
receive) the same Post-Retirement Benefits from ADI following Closing to the
same extent that Artistic would have been obligated therefor, and on and after
the Closing Date, no such Business Employee shall be eligible to receive
"Post-Retirement Benefits" from Artistic (including, but not limited to, retiree
medical benefits).
(j) SEVERANCE OF KOMER AND LIFE INSURANCE POLICY. ADI shall assume
the obligation to pay the severance and other payments and reimbursement
obligations to which Komer is entitled under the Executive Employment Agreement
between Artistic and Komer dated August 3, 1993, (the "Komer Severance
Payment"). With respect to the life insurance policies referred to on Annex 2-G
insuring Artistic in the event of the death of Komer (the "Komer Policies"), ADI
shall acquire the right to receive payment under the Komer Policies in the
amount of their aggregate cash surrender value thereof (the "Artistic Cash
Surrender Value Payment"). In addition, Artistic shall make the payments to ADI
at Closing as set forth in Section 1.8(b).
(k) WARN ACT. To the extent applicable to such party, each party
shall provide any required notice under the Worker Adjustment and Retraining
Notification Act ("WARN") and any other similar applicable law and to otherwise
comply with any such statute with respect to any "plant closing" or "mass
layoff" (as defined in WARN) or similar event affecting their respective
employees and occurring on or after Closing or arising as a result of the
transactions contemplated hereby.
ARTICLE VI
CONDITIONS PRECEDENT TO THE ASSET PURCHASE
Section 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE ASSET
PURCHASE. The respective obligations of each party to effect the Asset Purchase
are subject to the fulfillment or written waiver at or prior to the Closing Date
of the condition that no Governmental Entity or court of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any law, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is then in effect and has the effect
of prohibiting the Asset Purchase or any of the other transactions contemplated
hereby; provided that, in the case of any such decree, injunction or other
order, each of the parties shall have used
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reasonable best efforts to prevent the entry of any such injunction or other
order and to appeal as promptly as practicable any decree, injunction or other
order that may be entered.
Section 6.2 CONDITIONS TO OBLIGATION OF ARTISTIC TO EFFECT THE ASSET
PURCHASE. The obligation of Artistic to effect the Asset Purchase is subject to
the fulfillment at or prior to the Closing of the following additional
conditions; provided that Artistic may waive in writing any of such conditions
in its sole discretion:
(a) PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS AND WARRANTIES. ADI
shall have performed in all material respects each of its agreements
contained in this Agreement required to be performed on or prior to the
Closing, and each of the representations and warranties of ADI contained in
this Agreement shall be true and correct on and as of the Closing Date as
if made on and as of such date.
(b) OFFICERS' CERTIFICATE. ADI shall have furnished to Artistic a
certificate, dated the Closing, signed by the appropriate officers of ADI,
certifying to the effect that to their best knowledge, the conditions set
forth in Section 6.2 (a) have been satisfied.
(c) DELIVERY OF PURCHASE PRICE. ADI shall have made delivery of the
Purchase Price as provided in Section 1.2 of this Agreement.
(d) ASSUMPTION AGREEMENT. ADI shall have executed and delivered the
Assumption Agreement, in the form attached as Exhibit A, covering the
Assumed Liabilities.
(e) MERGER AGREEMENT. All conditions precedent to the consummation
of the Merger (or any merger pursuant to any successor merger agreement)
shall have been satisfied or waived and the parties thereto are ready,
willing and able to consummate such transaction immediately after the
consummation of the transactions contemplated hereby.
Section 6.3 CONDITIONS TO OBLIGATIONS OF ADI TO EFFECT THE ASSET
PURCHASE. The obligation of ADI to effect the Asset Purchase is subject to the
fulfillment at or prior to the Closing of the following additional conditions,
provided that ADI may waive in writing any such conditions in its sole
discretion:
<PAGE>
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(a) PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS AND WARRANTIES.
Artistic shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed on or prior
to the Closing and each of the representations and warranties of Artistic
contained in this Agreement shall be true and correct on and as of the
Closing as if made on and as of such date.
(b) OFFICERS' CERTIFICATE. Artistic shall have furnished to ADI a
certificate, dated the Closing, signed by the appropriate officers of
Artistic, certifying to the best of their knowledge, the conditions set
forth in Section 6.3 (a) have been satisfied.
(c) ABSENCE OF CHANGES. There shall not have occurred any Material
Adverse Change with respect to the P&C Businesses between the date hereof
and the Closing Date.
(d) BILL OF SALE AND ASSIGNMENT. Artistic shall have executed and
delivered the Bill of Sale and Assignment, in the form attached hereto as
Exhibit D, covering the Assets set forth on Annex 1 and the Assumed
Contracts and Leased Property Lease Agreements set forth on Annex 2.
(e) WARRANTY DEED. Artistic shall have executed and delivered the
Warranty Deed covering the Real Property in the form attached hereto as
Exhibit E (or such other form as may be required in the State of New York
for a general warranty deed) relating to the Real Property.
(f) LIMITED LIABILITY COMPANY AGREEMENT. Artistic shall have
executed and delivered the Limited Liability Company Agreement, in the form
attached as Exhibit G, conveying the trademarks and other intellectual
property rights to be conveyed as described in the schedules thereto.
(g) TITLE INSURANCE. ADI shall have obtained title commitments for
title insurance on the Real Property.
(h) TITLES. Artistic shall have endorsed and delivered the title
certificates to the Assets described in Annex 1.
(i) TRADEMARK ASSIGNMENT AGREEMENT. Artistic shall have executed and
delivered the Trademark Assignment Agreement, in the form attached as
Exhibit F, conveying the trademarks to be conveyed as described on Annex 1.
<PAGE>
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ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 TERMINATION. This Agreement may be terminated at any
time prior to the Closing Date as follows:
(a) by the mutual written consent of Artistic and ADI;
(b) by Artistic or ADI if any court of competent jurisdiction in the
United States or other United States governmental body shall have issued a
final order, injunction, decree or ruling or taken any other final action
restraining, enjoining or otherwise prohibiting the transactions
contemplated hereby, and such order, injunction, decree, ruling or other
action is or shall have become nonappealable; provided that the right to
terminate this Agreement pursuant to this Section 7.1(b) shall not be
available to any party which has not used its reasonable best efforts to
cause any such order, injunction, decree, ruling or other action to be
lifted;
(c) by either Artistic or ADI if the stockholders of Artistic fail to
adopt and approve this Agreement and the Merger Agreement and the
transactions contemplated by this Agreement and the Merger Agreement at the
special meeting contemplated by the Merger Agreement by the Requisite Vote;
(d) by Artistic if a corporation, partnership, person or other entity
or group shall have made a bona fide offer not solicited in violation of
Section 4.2 that the Board by a majority vote determines in its good faith
judgment and in the exercise of its fiduciary duties is more favorable to
Artistic's stockholders than the transactions contemplated hereby;
provided, however, that such termination under this clause shall not be
effective until Artistic has made payment to ADI of the full fee and
expense reimbursement required by Section 7.3;
(e) by ADI, if (i) there shall have been a breach of any
representation or warranty on the part of Artistic that is or will have a
Material Adverse Effect on the P&C Businesses or which materially adversely
affects the ability of Artistic to consummate the transactions contemplated
hereby or (ii) there shall have been a breach of
<PAGE>
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any covenant or agreement on the part of Artistic which is or will result
in a Material Adverse Effect on Artistic or the P&C Businesses or
materially adversely affects the ability of Artistic to consummate the
transactions contemplated hereby, which shall not have been cured prior to
the earlier of (A) 10 days following notice of such breach and (B) two
Business Days prior to the Closing Date or (iii) the Board shall have
withdrawn or modified in a manner adverse to ADI its approval or
recommendation of this Agreement, or shall have adopted any resolution to
effect the foregoing;
(f) by Artistic if (i) there shall have been a breach of any
representation or warranty on the part of ADI which materially adversely
affects (or materially delays) the consummation of the transaction
contemplated hereby or (ii) there shall have been a material breach of any
covenant or agreement on the part of ADI and which materially adversely
affects (or materially delays) the consummation of the transaction
contemplated hereby which shall not have been cured prior to the earliest
of (A) 10 days following notice of such breach and (B) two Business Days
prior to the Closing Date; or
(g) by Artistic or ADI if the Merger Agreement shall have been
terminated unless Artistic shall have entered into another merger agreement
substantially in the form of the Merger Agreement and approved by the Board
of Directors of Artistic.
Section 7.2 EFFECT OF TERMINATION. In the event of the termination
and abandonment of this Agreement pursuant to Section 7.1, this Agreement shall
forthwith become null and void and have no further force and effect, without any
liability on the part of any party hereto or its affiliates, directors, officers
or stockholders, other than the provisions of Sections 5.1, 7.2, 7.3 and 9.10,
and the third sentence of Section 5.8 (a), all of which shall survive such
termination. Nothing contained in this Section 7.2 shall relieve any party from
liability for any material and willful breach of this Agreement.
Section 7.3 CERTAIN PAYMENTS. If:
(i) ADI terminates this Agreement pursuant to Section 7.1(e)(iii)
hereof and, within 12 months thereafter Artistic enters into an agreement
with respect to a Third Party Acquisition, or a Third Party Acquisition
occurs,
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involving any party (or any affiliate thereof) (x) with whom Artistic (or
its agents) had negotiations with a view to a Third Party Acquisition, (y)
to whom Artistic (or its agents) furnished information with a view to a
Third Party Acquisition or (z) who had submitted a proposal or expressed an
interest in a Third Party Acquisition, in the case of each of clauses (x),
(y) and (z) after the date hereof and prior to such termination; or
(ii) ADI terminates this Agreement pursuant to Section 7.1(e)(iii),
and within 18 months thereafter a Third Party Acquisition shall occur
involving a consideration in excess of the Purchase Price; or
(iii) Artistic terminates this Agreement pursuant to 7.1(d) hereof,
Artistic shall pay to ADI either prior to termination in the case of the event
described in clause (iii) above or within one Business Day following the
execution and delivery of such agreement or such occurrence or termination, as
the case may be, in the case of an event described in Section 7.3(i) or (ii),
$360,000 plus the unreimbursed, reasonable documented out-of-pocket third party
expenses of ADI incurred in connection with the transactions contemplated by
this Agreement as liquidated damages immediately upon such termination (the
"Termination Fee"), in cash; provided, however, that Artistic in no event shall
be obligated to pay more than one such Termination Fee with respect to all such
agreements and occurrences.
"Third Party Acquisition" means the acquisition by any person (which
includes a "person" as such term is defined in Section 13(d)(3) of the
Securities Exchange Act of 1934) or entity other than ADI of all or a material
portion of the Assets or the P&C Businesses.
Section 7.4 WAIVER. At any time prior the Closing Date, the parties
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 contained herein or in any document delivered
pursuant hereto; and (iii) waive compliance with any of the agreements or
conditions contained herein which may legally be waived. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party. The
failure of either party hereto to assert any of its rights hereunder shall not
constitute a waiver of such rights.
<PAGE>
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ARTICLE VIII
POST CLOSING COVENANTS
Section 8.1 ACCESS TO INFORMATION.
(a) Artistic agrees that it will (i) maintain the pre-closing
financial records of the P&C Businesses in the offices of Artistic in Baltimore,
Maryland following the Closing Date and (ii) permit ADI and its respective
financial and tax advisors access to such records during normal business hours
on two-days' prior written notice to Artistic, as set forth in Section 9.1
hereof.
(b) If at any time it is necessary that a party be furnished with
additional information, documents or records relating to the Assets or the P&C
Businesses in order properly to prepare or support its tax returns or other
documents or reports required to be filed with governmental authorities or any
securities exchanges or otherwise for any purpose in connection with the
performance or discharge by the parties of their obligations hereunder, and such
information, documents or records are in the possession or control of another
party, such other party agrees to use all reasonable efforts to furnish or make
available such information, documents or records (or copies thereof).
(c) Each party to this Agreement hereby agrees that it shall
cooperate with the other by executing and/or filing or causing to be executed
and/or filed any required documents (including any real property transfer tax
returns required to be filed with respect to the transactions contemplated by
this Agreement and any forms or reports required to be filed pursuant to Section
1060 of the Code, the Treasury Regulations promulgated thereunder or any
provisions of state or local law) and by making available to the other, without
limitation, all work papers, records and notes of any kind, at all reasonable
times, for the purpose of allowing the appropriate party to complete tax
returns, forms and reports, respond to audits, obtain refunds, make any
determination required under this Agreement, verify issues and negotiate
settlements with tax authorities or defend or prosecute tax claims. In the case
of income taxes relating to the P&C Businesses, Artistic shall be exclusively
responsible for handling the compliance and audits for income taxes for periods
prior to and including the Closing Date and ADI shall be exclusively responsible
for handling the compli-
<PAGE>
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ance and audits for income taxes for periods after the Closing Date.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, sent by
overnight courier or telecopied (with a confirmatory copy sent by overnight
courier) to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) If to ADI, to:
Artistic Direct Incorporated
One Komer Center
PO Box 1999
Elmira, NY 14902
Attention: Thomas C. Wyckoff
Title: Chief Executive Officer and President
Facsimile: (607) 733-5782
Telephone: (607) 735-4555
with copies to:
Roberts, Sheridan & Kotel
Tower 49
12 East 49th Street
New York, NY 10017
Attention: Rory M. Deutsch, Esq., and
Ira L. Kotel, Esq.
Facsimile (212) 299-8686
Telephone: (212) 299-8600
(b) If to Artistic:
Artistic Greetings Incorporated
One Komer Center
P.O. Box 1999
Elmira, NY 14902
Attention: Joseph A. Calabro
Title: President
Facsimile: (607) 733-5699
Telephone: (607) 735-4508
<PAGE>
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with copies to:
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005-1702
Attention: William B. Gannett, Esq.
Facsimile: (212) 269-5420
Telephone: (212) 701-3000
and
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: Marni I. Lerner, Esq., and Edward J. Chung, Esq.
Facsimile: (212) 455-2502
Telephone: (212) 455-2000.
Section 9.2 INTERPRETATION. When a reference is made in this
Agreement of a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated, and the words "hereof," "herein" and "hereunder" and
similar terms refer to this Agreement as a whole and not to any particular
provision of this Agreement, unless the context otherwise requires. The table
of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
Section 9.3 COUNTERPARTS. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 9.4 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement, and the Transition Services Agreement, the Joint Marketing Services
Agreement, the Escrow Agreement, the Trademark Assignment Agreement and the
other agreements, documents and instruments referred to herein, (i) constitute
the entire agreement between the parties hereto and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof and (ii) are not intended to confer upon
any person
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(including, without limitation, any employees of Artistic) other than the
parties any rights or remedies hereunder; provided, however, that legal counsel
for the parties hereto may rely upon the representations and warranties
contained herein and in the certificates delivered pursuant to Sections 6.2 (b)
and 6.3 (b).
Section 9.5 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 9.6 ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by operation of law
or otherwise by any of the parties without the prior written consent of the
other party in its sole and absolute discretion, and any such purported
assignment without the express prior written consent of the other party shall be
void ab initio. Subject to the preceding sentence, this Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
Section 9.7 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 long as the economic or legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect he original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions be consummated as originally contemplated to the
fullest extent possible.
Section 9.8 ENFORCEMENT. The parties agree that if all the
conditions set forth in Article VI are satisfied on or prior to the Closing
Date, and this Agreement shall not have otherwise been terminated, and Artistic
shall breach its obligation to consummate the transactions contemplated hereby,
including, without limitation, the provisions of Article I, that irreparable
damages would occur to ADI, that money damages would not be an adequate remedy
at law, and, accordingly, that ADI shall be entitled to specifically enforce the
terms and
<PAGE>
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provisions of this Agreement in any court of competent jurisdiction in the
United States or any state thereof or any place that the Assets are located, in
addition to any other right or remedy to which it is entitled at law or in
equity. Artistic shall not assert, and hereby knowingly waives any defense in
any such action that money damages would be an adequate remedy at law.
Section 9.9 DEFINED TERMS. 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; and
(b) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act).
Section 9.10 CONSENT TO JURISDICTION. In the event that any legal
proceedings are commenced in any court with respect to any matter arising under
this Agreement, the parties hereto specifically consent and agree that the
courts of the State of New York and/or the Federal Courts located in the State
of New York shall have jurisdiction over each of the parties hereto and over the
subject matter of any such proceedings, and the venue of any such action shall
be in New York County, New York and/or the U.S. District Court for the Southern
District of New York.
<PAGE>
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IN WITNESS WHEREOF, ADI and Artistic have executed this Agreement as
of the date first written above.
ARTISTIC DIRECT INCORPORATED
By: /s/ Thomas C. Wyckoff
----------------------------
Name: Thomas C. Wyckoff
Title: Chief Executive
Officer and President
ARTISTIC GREETINGS INCORPORATED
By: /s/ Joseph A. Calabro
----------------------------
Name: Joseph A. Calabro
Title: President
<PAGE>
Exhibit (e)
TEXT OF SECTION 262 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
Section 262, APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of
this section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in writing
pursuant to Section 228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of the stockholder's shares of stock
under the circumstances described in subsection (b) and (c) of this section.
As used in this section, the word "stockholder" means a holder of record of
stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is
ordinarily meant by those words and also membership or membership interest of
a member of a nonstock corporation; and the words "depository receipt" mean a
receipt or other instrument issued by a depository representing an interest in
one or more shares, or fractions thereof, solely of stock of a corporation,
which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date
fixed to determine the stockholders entitled to receive notice of and to
vote at the meeting of stockholders to act upon the agreement of merger
or consolidation, were either (i) listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or (ii) held of record by more than 2,000 holders; and
further provided that no appraisal rights shall be available for any
shares of stock of the constituent corporation surviving a merger did
not require for its approval the vote of the stockholders of the
surviving corporation as provided in subsection (f) of Section 251 of
this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class
or series of stock of a constituent corporation if the holders thereof
are required by the terms of an agreement of merger or consolidation
pursuant to Sections 251, 252, 254, 257, 258, 263 and 264 of this title
to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting
from such merger or consolidation, or depository receipts in
respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the
effective date of the merger or consolidation will be either listed
on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
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c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts
and cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a., b. and c. of
this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under Section[nb]253 of this
title is not owned by the parent corporation immediately prior to the
merge,r appraisal rights shall be available for the shares of the
subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation of the sale of all or substantially off of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is not to be submitted for
approval at a meeting of stockholders, the corporation, not less than 20
days prior to the meeting, shall notify each of its stockholders who was
such on the record date for such meeting with respect to shares for
which appraisal rights are available pursuant to subsections (b) or (c)
hereof that appraisal rights are available for any or all of the shares
of the constituent corporations, and shall include in such notice a copy
of this section. Each stockholder electing to demand the appraisal of
his shares shall deliver to the corporation, before the taking of the
vote on the merger or consolidation, a written demand for appraisal of
his shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of his shares. A proxy or vote
against the merger or consolidation shall not constitute such a demand.
A Stockholder electing to take such action must do so by a separate
written demand as herein provided. Within 10 days after the effective
daye of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that
the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to
Section[nb]228 or Section[nb]253 of this title, each constituent
corporation, either before the effective date of the merger or
consolidation or within ten days thereafter, shall notify each of the
holders of any class or series of sock of such constituent corporation
who are entitled to appraisal right of the approval of the merger or
consolidation and that appraisal rights are available for any or all
shares of such class or series of stock of such constituent corporation,
and shall include in such notice a copy of this section; provided that,
if such constituent corporation, and shall include in such notice a copy
of this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be
given by the surviving or resulting corporation to all such holders of
any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after
the effective date of the merger or consolidation, shall, also notify
such stockholders of the effective date of the merger or consolidation.
Any stockholder entitled to appraisal rights may, within 20 days after
the date of mailing of such notice, demand in writing from the surviving
or resulting corporation the appraisal of such holder's shares. Such
demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby
to demand the appraisal of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such holder's
shares. If such notices did not notify stockholders of the effective
date of the merger or consolidation , either (i) each such constituent
corporation shall send a second notice before
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the effective date of the merger or consolidation notifying each of the
holders of any class or series of stock of such constituent corporation
that are entitled to appraisal rights of the effective date of the
merger or consolidation or (ii) the surviving or resulting corporation
shall send such a second notice to all such holders on or within 10 days
after such effective date; provided, however, that if such second notice
is sent more than 20 days following the sending of the first notice,
such second notice need only be sent to each stockholder who is entitled
to appraisal rights and who has demanded appraisal of such holder's
shares in accordance with this subsection. An affidavit of the secretary
or assistant secretary or of the transfer agent of the corporation that
is required to give either notice that such notice has been given shall,
in the absence of fraud, be prima facie evidence of the facts dated
therein. For purposes of determining the stockholders entitled to
receive either notice, each constituent corporation may fix, in advance,
a record date that shall be not more than 10 days prior to the date the
notice is given, provided that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be
such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of
business on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise
entitled to appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the
merger or consolidation, any stockholder who has complied with the
requirements of sub-sections (a) and (d) hereof, upon written request, shall
be entitled to receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate number of
shares not voted in favor of the merger or consolidation and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after his written request for such statement is
received by the surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper or
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the Court, and the costs thereof
shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder.
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(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of
any element of value arising from the accomplishment or expectation of the
merger or consolidation, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. In determining such
fair value, the Court may consider all relevant factors, including the rate
of interest which the surviving or resulting corporation would have had to
pay to borrow money during the pendency of the proceeding. Upon application
by the surviving or resulting corporation or by any stockholder entitled to
participate in the appraisal proceeding, the Court may, in its discretion,
permit discovery or other pretrial proceedings and may proceed to trial upon
the appraisal prior to the final determination of the stockholder entitled to
an appraisal. Any stockholder whose name appears on the list filed by the
surviving or resulting corporation pursuant to subsection (f) of this section
and who has submitted his certificates of stock to the Register in Chancery,
if such is required, may participate fully in all proceedings until it is
finally determined that he is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceedings may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances.
Upon application of a stockholder, the Court may order all or a portion of
the expenses incurred by any stockholder in connection with the appraisal
proceedings, including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata against the value of
all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or
to receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of his demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger
or consolidation as provided in subsection (e) of this section or thereafter
with the written approval of the corporation, then the right of such
stockholder to an appraisal shall cease. Notwithstanding the foregoing, no
appraisal proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval may be
conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation.
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